Why the Well-to-Do Are Escaping America

Today's comment is by Bob Bauman, our Legal Counsel and offshore expert.

Dear A-Letter Reader,

In spite of the many disturbing trends I often write about in America, I still maintain a small glimmer of hope that our nation will endure and prosper.

But that won't happen if we don’t clearly recognize our problems and address them. Unfortunately, that doesn’t seem likely with the current crop of American presidential wannabes.

While many Americans are still willing to stay and fight the good fight, many Americans have had enough. And they’re leaving.

Millions of Americans Say “I’ve Had Enough!”

A 1999 U.S. State Department survey suggested 4.1 million Americans lived overseas. Every year, about 250,000 U.S. citizens and resident aliens leave America to make a new home in some other nation.

In 2005, the U.S. Bureau of the Census upped this estimate. They guessed that over 350,000 U.S. citizens and resident aliens would leave the United States permanently.

Many of these emigrants are wealthy people who want to escape what they see as the excessive taxes and political tyranny of the United States government.

John Gaver of Action America.org notes: "The problem is that increasingly, the wealthy perceive 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."

Figures Don't Lie

The well-known pollster, Zogby International, recently conducted in-depth surveys on this subject. They asked adult Americans if they had ever considered moving outside the United States.

With more than 115,000 respondents, the remarkable survey excluded anyone relocating offshore for less than two years. They also excluded anyone who relocated because of government requirements, the military or their jobs.

The Zogby results are shocking – especially compared to the entire U.S. population (now about 303,116,000). The numbers below are for households, not individuals.

• 1.6 million U.S. households already decided to move offshore and are headed in that direction.
  
  
• Another 1.8 million households are seriously considering moving and are likely to do it. Many have taken preliminary steps.
  
  
• 7.7 million households are "somewhat seriously" considering moving and "may" do it.
  
  
• Nearly 3 million households are seriously considering buying a vacation home or other property outside the United States. Another 10 million are "somewhat" seriously considering it.

This means that almost 10% of U.S. households are considering leaving the country. Another 10% are considering living outside the country part-time. Most analysts are ignoring this silent massive emigration.

These would-be emigrant households plan to spend an average of US$260,000 on buying or building a house. They’re also planning to spend at least US$36,000 annually on living expenses outside the United States.

In total, they represent hundreds of billions of dollars leaving the U.S. economy each year.

One eye-opening fact: These emigrants include younger Americans. In fact, the single largest group that already made the decision to relocate offshore is households where the adults are 25 to 34 years old.

The Soaked Rich

The severe tax burden is just one of reasons why wealthy Americans want to live offshore.

Yet, U.S. politicians and their allies in the news media continue the constant false drumbeat of class warfare that "rich" Americans do not pay their fair share of taxes.

Only last week, would-be president Hillary Clinton proposed increasing estate and other taxes on wealthy Americans. She wants to transfer money to individuals who earn less by setting up government sponsored retirement accounts.

The late U.S. Senator Huey P. Long of Louisiana used to call this type of calculated “robbing the rich to pay the poor” his plan to "redistribute the wealth."

You often hear the myth that the rich don’t pay their fair share of taxes. In reality, the IRS’s latest figures reveal that the top-earning 1% of U.S. taxpayers earned 21.20% of the income, but they still managed to pay 39.38% of the taxes collected. In other words, the rich paid almost double their share, based upon the income they earned.

In addition to paying double their share of taxes, there are other good reasons for this offshore exodus of the wealthy.

Well-to-do Americans face frivolous lawsuits by the greedy, in ever growing numbers. They, like all Americans, have lost any semblance of privacy in their personal and business transactions.

Their business dealings are saddled with onerous PATRIOT Act and Sarbanes-Oxley Act requirements that consume time and money. And they have little defense against having their property confiscated under civil forfeiture by the government money police.

We Can Help

The Sovereign Society exists to give advice and direction to those interested in "going offshore."

With a decade of experience, we can offer a roadmap to offshore freedom, including legal ways to protect assets, lower taxes, expand investments and how (and where) to move your residence and/or citizenship offshore.

If a move offshore interests you, whether older or younger, we can help.

BOB BAUMAN, Legal Counsel

P.S. Are you fed up with how the U.S. penalizes you for working hard and making a larger income? Ready to seek your fortunes elsewhere? Click here for some more accommodating locations offshore.

Global Bull Market Turns Five This
Month – and It’s Getting Over-the-Hill

This month marks the fifth year of the bull market in global equities. And what a ride it’s been since the market low on October 9, 2002.

Over the last five years, the S&P 500 Index has gained a cumulative 101.5% while the Russell 2000 Index of small stocks have rocketed 132.3%.

But those returns literally pale compared to the MSCI World Index, which has shot up 165% since October 2002. The MSCI World Index is based in local currency but it’s also available in U.S. dollars and euro. We can thank the dollar’s decline against major currencies for roughly half of that 165% total return.

If you think that return is impressive, wait a minute…

The MSCI Emerging Markets Index, which also bottomed five years ago, has gained a spectacular 441% over the last five years. Driven by booming economies that are commodity-rich, surging export growth, and the strongest global economic cycle since the early 1970s, the emerging markets are the best-performing equity class this decade.

Currencies in the index have also rallied since 2002. But they have rallied far less than the euro, mainly because their central banks have intervened to keep their exports competitive with China.

However, all bull markets must come to an end. The current stock market cycle is already long in the tooth at 60 months. Historically, bull markets average 56 months dating back to 1942. If it’s any solace, the last bull market, which ended in March 2000 also defied history, lasting 113 months.

The good news this time around is global money-supply growth is booming around the world. Also, interest rates are generally low compared to 10 and 20 years ago. Despite the sub-prime crisis and the real estate bear market in the United States, stocks have continued to hit new highs worldwide this fall because bank credit has remained largely buoyant and available to most borrowers. Compared to stocks, most asset classes, except commodities, offer poor alternatives.

But heading into 2008, more stock-market turbulence is likely as sub-prime returns to the fore with about US$500 billion worth of resets. That event will cause more market volatility because investors are under the impression the Treasury is cleaning up the mortgage-backed mess. That’s especially the case with Friday’s announcement of a US$100 billion bailout fund created by several banks. But the fact is that amount won’t do the job.

The fourth quarter is historically the best three-month period for stocks. This year might be more muted because of September’s strong performance. Heading into 2008, the party won’t be as frisky as more mortgage woes come back to haunt global investors. Keep your assets allocated and remember – cash is not trash.

ERIC ROSEMAN, Investment Director

EDITOR’S NOTE: All good things must come to an end – including bull markets. But whereas equity bull markets tend to last only 56 months, commodity bull markets can last up to 18 years. The current commodity bull market started in 2001, so you still have time to add a few well-chosen commodity plays to your portfolio. Click here for some ideas on what to add to your portfolio now.

Privacy & Rights

Your Cell Phone May Be Bugged...

Bluetooth is a short-range communications standard that replaces the cables that would normally connect your laptops, cell phones, etc.

Just about everyone seems to have a Bluetooth device these days. When they first became popular, I would see individuals walking down the street and apparently talking to themselves. At the time, I thought I was witnessing an outbreak of mental illness. Then, I noticed the small blue device hooked to their ear. This is a Bluetooth device - one of the hundreds on the market.

Because Bluetooth has been so successful, hackers have naturally tried to get around its security protocols. Bluetooth has had some spectacular security failures in its short lifetime. The best known was the so-called "Bluesnarfing" attack. It allows a hacker to remotely download your Bluetooth phone's contacts list, diary and stored pictures. While cell phone companies say they've closed this security flaw, older Bluetooth phones (certainly those manufactured before 2004) may remain vulnerable.

Now, researchers have discovered another weakness. When your Bluetooth device is activated, an eavesdropper may be able to listen to your conversations - but only when you're NOT using the phone. Hackers just need a modified radio scanner to listen in on your conversations. Someone can simply drive down the street with such a scanner. When it detects a conversation broadcast by a Bluetooth device, that eavesdropper can listen to whatever you're saying. Essentially, the Bluetooth device acts as a microphone and transmitter, picking up whatever you say and broadcasting to anyone with the equipment to monitor it.

It's not clear how far away the scanner can be from the Bluetooth device to monitor conversations on it. It's at least 30 feet and I've seen one study that claims that broadcasts from more powerful Bluetooth devices can be monitored from 300 feet away, perhaps further. But again, the attack works only when you're not using your phone.

To protect yourself, don't use a Bluetooth device any more powerful than you really need. Small over-the-ear wireless devices have very low power and are difficult to monitor. But beware of larger units that connect to your vehicle's cigarette lighter or are dashboard-mounted.

If you're in the market for a Bluetooth device, look for one that requires you to press a button or otherwise manually synchronize the device before it's used. Also, look for one that requires a PIN code and that allows you to change the PIN.

Finally, if you're not sure whether your Bluetooth device can be monitored, turn it off when you're not using it.

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

• UTS Energy Corporation 647%
  
• Staitoil ASA ADR 146%
  
• Petrobas 2005 30 calls 113%
  
• Crude Oil March 2005 calls 199%