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Freedom, Privacy and Prosperity in the Offshore World
Where to Find Freedom in an Unfree World
March 9, 2007


The
            Sovereign Society Offshore A-Letter

 


Friday, March 9, 2007
Vol. 9 No. 59
In Today's Letter:
Comment: Where to Look for Freedom in an Unfree World
Wealth: Managed Futures Get Walloped as Global Markets Slump 
Offshore: Easy Opening Offshore Accounts - Outside the U.S.
Where to Look for Freedom in an
Unfree World

Today's comment is by John Pugsley, Chairman of The Sovereign Society, best-selling author, and long-time libertarian.

Dear A-Letter Reader,

March 1st was a day of nostalgia and sadness for many advocates of individual liberty. It marked the first anniversary of the passing of Harry Browne. Harry was one of the late 20th century's most articulate champions of personal freedom.

Harry burst onto the national radar in 1970 with the publication of his prescient bestseller, How You Can Profit from the Coming Devaluation. In this book, he predicted that in the wake of 35 years of government manipulation in gold prices, the U.S. would be forced to default on the Bretton Woods Agreement, stop selling gold to foreign central banks at US$35 an ounce, and devalue the all-powerful U.S. dollar.

Harry's explanations of money and economics were brilliant in their simplicity. He accurately predicted the consequences of devaluation. He urged readers to buy gold, silver and the Swiss franc as a hedge against devaluation. Those who followed his advice reaped fortunes. His book rocketed to the top of the national best-seller lists, seeding a new 'hard-money' industry of books, newsletters and conferences that flourished and linger to this day.

While Harry's investment books (he wrote eight more) and newsletters enjoyed wide success over the following two decades, his most important and longest-lived work was not about investments at all. His 1978 best-seller, How You Can Find Freedom in an Unfree World, spoke to all who struggle against the over-arching walls of government, the legal system, the social customs and mores of our cultures, and the interpersonal relationships that seem to restrict our personal freedom.

Harry's "How You Can Find Freedom in an Unfree World"
Now Available Online

Harry's lovely and beloved wife Pamela has kept his work alive through his website, www.harrybrowne.org. To commemorate the anniversary of his passing, last week she announced that How You Can Find Freedom in an Unfree World, which has been out of print for the past few years, is now available for download. For those who struggle to achieve individual sovereignty, it is an opportunity to add a very perceptive and compelling work to their library of libertarian thought.

Defining freedom as "the opportunity to live your life as you want to live it," Harry guided readers through the turmoil each of us struggles with in our daily lives. These struggles included social restrictions, family problems, high taxes, bad relationships, the work treadmill and the ever-present incursions of government. You are not free for two reasons, he said: you're unaware of the many alternatives available, and you've accepted assumptions that restrict your freedom.

In our personal relationships with our mates, friends, families, and our business relationships, Harry argued that most are bound by oppressive emotional and identity traps and boxes which are no more than the imaginary barriers of a belief system.

Harry defined these traps and pointed out that you can explore alternative choices-say in the job you hold, the moral precepts you accept, and the relationships you feel bound by-can free you from these self-imposed boundaries. His explanations of how to break free of our false assumptions led thousands of readers to count the book among the most important and life-changing they had ever read.

For those who consider taxation, regulation, and the myriad other intrusions of government to be the greatest challenge to individual liberty, the alternatives may seem far less obvious. Yet only misconceptions about the nature and power of government stop most individuals from enjoying true freedom. The belief that governments perform socially useful functions, that you have a duty to obey laws, that government can be counted upon, and that the government is so powerful that it can prevent you from being free, are all mistaken beliefs.

Resist the Chains of Government... Quietly

"So many people live in chains of their own making," he wrote. "They cry out for freedom from political policies they don't like; they complain about the villains who prevent them from being free. And all the time they voluntarily tolerate boxes that reduce their freedom..." Most people seem to think of the government as an all-powerful giant with unlimited resources, super powers of control and surveillance, and the ability to keep every citizen in line.

"No matter what happens, you're smarter than the government. You're more flexible than the government. And you have more incentive to make your life work well than government employees have to make government work well - or even to make it work at all."

His first principle in dealing with government, then, is: Don't be awed by it. What little the government achieves depends on the voluntary participation of its citizens. The second principle is: Don't confront the government. A sure way to make your life miserable is to attack the government head on. Its resources are limited, and it can't waste them tracking down every violator of every law. But it will certainly aim its power at anyone who publicly defies it. So keep to yourself, do what you have to do.

"It can take time to accept the fact of your own sovereignty," he concludes. "It can seem natural to assume that your future will be decided by others, that your purpose in life is to serve society, your country, or the world - as determined by others...But you are sovereign. You rule one life - and you rule it totally."

Harry was a close friend and mentor to me and to The Sovereign Society. I miss him, and stand in total agreement with the principles he set down. "Take a look at your own life," he wrote.

"What could you do today that would give you more freedom tomorrow morning?"

JOHN PUGSLEY, Chairman

P.S. Harry Browne spoke at hundreds of conferences over his life, one of the most important being Mark Skousen's annual FreedomFest. This year's FreedomFest will be held at the Bally's/Paris Resort in Las Vegas, July 5-7. I'll be speaking along with some of the brightest advocates for personal freedom. In memory of Harry Browne's contributions, one of the rooms will be dedicated to him.

The Sovereign Society offers guidance to the most sophisticated international legal structures to help members achieve individual sovereignty. From privacy to minimizing taxes to a world of international investment opportunities, joining The Sovereign Society is something you could do today to give yourself more freedom tomorrow.


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Wealth

Managed Futures Get Walloped as Global Markets Slump

Since the late 1960s, volatile managed futures (or Commodity Trading Advisors  - CTAs) have made more impressive returns amid market carnage than any other asset class. 

In almost every sell-off, crash or bear market over the last 37 years, managed futures logged big gains while other asset classes tanked. And that includes during the 1987 stock market crash, 1990 bear market, 1997-98 Asian financial crisis/Long Term Capital Management collapse and most recently, the 2000 to 2002 bear market.

Futures offer a truly negative correlation to traditional investments like stocks and bonds. So they are usually the ideal products to diversify your portfolio.

But starting on February 27th, when global markets began to slump, futures traders got walloped.

I track some of the best-performing CTAs in my investment trading service, Global Mutual Fund Investor (GMFI). I follow two in particular that have never suffered a losing calendar year. But since February 27, both of these star managers have suffered major draw-downs in excess of 10%. That's quite alarming for such a short period of time. More disappointing, however, is the high degree of correlation logged by CTAs since the market selloff began last month. These products are supposed to zig when stocks zag - but not this time around.  

So why did they manage to disappoint? Trend-following CTAs failed to protect capital in the latest sell-off because they were hugely long global stock indices, and to a lesser extent, gold and the Japanese yen.

Starting on February 27, emerging market stocks, aka the strongest-performing assets since the bear market low of October 2002, suffered a mini-crash, along with most global equity markets. Meanwhile, the yen and gold prices violently reversed. Those are two other trades that have been immensely profitable for long-term traders over the last few years.

So in one day, many existing trends that had been highly profitable for CTAs, literally crashed. Trend-followers saw massive reversals in a short period of time and therefore were caught wrong-footed. This was certainly not the case in previous market events or stock-market crashes over the last 20 years, which beckons me to believe that many CTAs have grown too highly correlated to stock indexes over the last four years. That's a bearish development.

I still invest in managed futures and historically, they've been great performers in all markets. But as they eventually recover from this draw-down cycle, I'll be reducing my stake to a more manageable level and increasing my allocations to managers that harbor a short-bias in stocks to protect my portfolio from downside risks.

ERIC ROSEMAN, Investment Director


Offshore

Easy Opening Offshore Accounts - Outside the U.S.

Offshore banks don't like doing business with U.S. residents, a consequence of extraterritorial laws such as the USA PATRIOT Act, "qualified intermediary" (QI) rules, and securities regulations bent on excluding foreign securities. 

But the problems lessen considerably if you're living outside the United States. During the 2-1/2 years I lived in Austria, for instance, I was able to purchase any securities I wanted to in my Austrian bank account. But, as soon as I moved back to the United States, the bank began applying substantial restrictions and would no longer permit me to purchase non-U.S. registered stocks (although offshore bonds were OK).

The converse is also true. If you're a foreign citizen but have permanent residence in the United States, you may find it difficult to transact business with an offshore bank. That's especially true if you don't already have an established relationship.

If you're a U.S. resident and want to invest offshore, you can still do so, but you'll find banks increasingly unwilling to accommodate you.

MARK NESTMANN, Wealth Preservation & Tax Consultant and
President of The Nestmann Group 
www.nestmann.com


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