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| INVESTMENT
NEWS UPDATE:
. . October 2002 – Do you know where your money is? Better yet, how are your investments doing? With the S&P 500 down 29% year to date, the following do not look so bad: . The Appleton Fund Group out of Dublin, Ireland Reports: The Liffey Fund 2002 year to date: negative .13% (less than 1% down) The Global Currency Fund 2002 year to date: positive 5.34% The Shannon Fund 2002 year to date: positive 6.11% . Also, the new Guardian US Dollar Tax-Free Money Market Series offers an estimated annualized return for the month of October at 8.22%. As we mentioned earlier, investors who have expressed an interest should be receiving a prospectus and application form sometime within the next two weeks. . . PANAMA UPDATE: . . We have had quite a few people ask us recently about these teak farm promotions in Panama, and after recently getting back from Panama to investigate for ourselves, we have some thoughts on the matter. But first, one of the more important issues to discuss is the current banking environment in Panama. . After some personal visits with some local banks and law firms, it would seem that getting a bank account open in Panama is like getting dental work done without anesthesia. Where it was the case in the past that many banks would accept referrals from a local attorney, even that is not acceptable anymore. My opinion on this is that the situation is more economic than political. Which is to say, many banks world-wide seem to have made the account opening process even more difficult these days, under the auspices of anti-terrorism and so on. We heard of one case whereby an American Gentleman that sold his business (and had all of the documentation to prove it, including three years worth of tax returns with him and a mountain of banking referrals) could not get an account open after trying for three months. But the real issue is that when we discuss Panama, the banks simply have too much money. In other words, there is more money in the Panamanian banking system than there are places to invest it. We still have a tremendous amount of confidence in the Panamanian banking system, but the banks generally already have too much business. However, we did find a few reputable brokerage firms that are accepting new clients and would be glad to provide this information to interested clients. .. On the subject of the teak farm promotions going on, on the surface, while possibly an interesting idea, the real problem seems to be both the outrageous cost and the integrity of some people involved. Notice that I did say some as I am sure there are some people involved with these type of projects that are on the up and up, but from what we heard about one company, the escrow account seems to have disappeared. So, beware! . However, the real issue I have with many of these programs is the cost, and the contracts you must sign with a so-called management company. Many of these deals ask for payment ranging from about US$80,000 to well over US$120,000 for just 20 acres. The truth is that you can purchase some very nice farmland in Panama (twenty acres) in the US$20,000 to US$25,000 category and even that might be a high estimate. Doing so enables the buyer to gain clear title and take on the role of planting trees themselves. When you consider that trees really do not take much tending after they have been planting, and also considering you can hire someone for less than US$1,000 per month to manage the property for you, the numbers for these other programs are no bargain, in my opinion. In addition, just as it touted, you can use such an investment to qualify for the residency program in Panama that is tied in to reforestation. In other words, one of the residency programs allows you to qualify if you make an investment of US$40,000 into a reforestation project, but the regulation is certainly open ended to an extent that this is something you can do yourself (through the direct purchase of farmland, etc.). . Panama is still a wonderful place to consider as a relocation or retirement destination, although I will say that the negative is the long wait for naturalization (citizenship and a passport), which is six years. This of course is in contrast to the much quicker, less restrictive and easier process in the Dominican Republic. However, as I have said earlier, it is not the case that one place is better than the other, but rather which jurisdiction has more of the kind of things you are looking for personally. Our office does handle and assist with the residency - second citizenship process in both Panama and the Dominican Republic, and we would be glad to any questions accordingly. . . IN THE NEWS: . . The Following News Item regarding JP Morgan Bank was sent in by one of our readers. As we reported earlier, the US Banking system appears to be in very sorry shape, unbeknownst to the general public. In addition, we were tipped off some time ago about some major problems at JP Morgan, including huge losses from derivatives trading. Read the story from the link below: . http://biz.yahoo.com/rc/021004/financial_jpmorgan_2.html . . Another article sent in by another client discusses how to tell if you are living under, what is essentially a totalitarian government or not (Fascist government to be exact). An interesting read, if for no other value: . http://www.counterpunch.org/leupp1003.html . . In the Unbelievable but True Corner, US Military personnel have been cited for using US Government issued credit cards to pay for prostitutes, gambling and a litany of other forms of so-called official government job related expenditures. Read the on-line story from CNN here: . http://www.cnn.com/2002/ALLPOLITICS/10/07/pentagon.plastic.ap/index.html . . Many American clients have written in, asking what the heck is wrong with the US economy? Some have taken a more long-term skeptical view, indicating that they feel as though, after twenty years (or more) or working hard and paying taxes, that they really do not feel any better off economically. In fact, some economists predict a long-term recession similar to what has and is now going on in Japan. . One of the long-term problems, in my opinion, has to do with the outrageous debt of the US government and their relationship with the Federal Reserve Corporation (not to mention major industries relocating outside of the US, decline of real tax revenue income, and personal consumer debt as well). Which is to say, the Federal Reserve has created money out of thin air to appease the politicians appetite for borrowing, by basically creating a book keeping entry (and not printing more physical money, which for sure would lead to even worse decline in value of the US dollar). . To examine this a bit further, it is important to note that the US Federal Reserve is not a government owned entity, but instead is a private company, which was licensed by the US government in 1913 to operate as a central bank. The following links offer some insight into this arrangement, although I would suggest that readers try to disregard some of the articles that highlight a Jewish Bankers Conspiracy theory, as this is not the reason I am offering this information. I am putting it forward however, so readers can understand what is reality and what is not when it comes to the technical aspects of just who the Federal Reserve Corporation actually is, who owns it, and what they do (it's not what most Americans think). . Article One: . http://land.netonecom.net/tlp/ref/federal_reserve.shtml . Article Two: . http://home.hiwaay.net/~becraft/mcfadden.html . Article Three: . http://www.sonic.net/sentinel/naij2.html . . My criticism of the Federal Reserve is not that it is a private institution, but rather the pandering to politicians who do not always understand economic realities or results of what they do. For example, The Total Amount or Monetary Value of Federal Reserve Notes in Circulation As of July 31, 2000 - US$ 539,890,223,079.00 . In simple terms, there is US$500 Billion Dollars floating around in physical paper money (as of July 2000), which is supposed to represent the Gross National Product of the US (since the US, like many other nations, went off the gold or silver standard, paper money then is in theory meant to represent or be backed by the economic strength of the country printing such money - as opposed to having physical gold or silver behind it). Of this amount, it is estimated that US$300 Billion is in the form of US$100 Federal Reserve Notes (one hundred dollar bills), and of this amount, anywhere from 60% to 74% is physically outside of the US. An important point that many highlight is, that the US Government does not even issue it's own currency - A Private Corporation known as the Federal Reserve Corporation does. The system works as long as people believe in it, but a very technical and legal point to consider none the less. . http://www.bep.treas.gov/document.cfm/18/94 . . To make as close of a comparison as possible to the July 31, 2000 figures, here is the amount of US Government debt on 9/29/2000: . 5,674,178,209,886.86 . (The actual number today is well over US$6 Trillion Dollars). . http://www.publicdebt.treas.gov/opd/opdpenny.htm . . So, let us do the math for a quick analysis: 5,674,178,209,886.86 (the amount of ALL US Government Debt) minus 539,890,223,079.00 (the amount or monetary value of ALL US Federal Reserve Notes in existence in the world today, or the total amount of US Currency that actually exists - as of the year 2000 for illustration purposes). Do you see the problem? How is it possible that anyone or any entity, government or private person, can borrow more money that the total amount of money that actually exists in the world today? . As a bank, the Federal Reserve Corporation has lent out more money than ALL of the US currency in print and in circulation. This is like your local bank, which has let us say US$100 Million on deposit from all the combined account holders, and them loaning out more than US$100 Million in car loans, home mortgages, etc. Physically such an idea is impossible, unless of course you are the Federal Reserve Corporation. What does this have to due with anything? Well, if every single US Dollar bill, in all denominations was collected today and deposited on the steps of capital hill in Washington, D.C. - - there still would remain 5.5 Trillion Dollars in unpaid debt. Why is that important? Problem number one is that the debt of US Federal Government can never be paid off even if the IRS took every single penny you earned and had in your bank account. Problem number two is that the actual erosion of the value of the US currency, and your standard of living over time is far greater than the inflation numbers reported on the news as a result. One must say a hidden form of inflation that does not get reported. . Couple that with the idea of many US companies moving manufacturing outside of the US, which means less jobs and less local tax revenues - and individual citizens now moving themselves and their money outside of the US, and you can make the analogy of a nurse cutting off the oxygen of a man who is already slowly dying (which means he will die that much quicker). So, in my opinion, it is not about terrorists or drug dealers. In addition, offshore banks are not evil and are also not to blame. It is of course about that 60 to 74 percent of US$100 notes that are outside the country and the fact that many Americans are getting out of dodge before things get any worse (and the authorities would very much like to turn that trend around, if they can). . However, many Americans certainly feel wealthier and more comfortable living in Ecuador, Panama, Thailand, etc., because US dollars still buy more in those countries, even though their capital has not changed (the amount of money they have). I do not know if that is saying much, but in the least, it would seem to be the reason many American especially are expatriating (to live a better life economically if not for other reasons). . . READERS WRITE IN: . . John, . You often speak of the US tax laws and situations. The laws are very good if people would just read them, and demand they be followed by the US government. Please read TaxableIncome.net and you will find that very few US Citizens are in receipt of taxable income and therefore owe no income tax. It is so written and doesn't take a rocket scientist to read and understand it if the time is taken and the mind applied. I think this site would be a rather large wake up call and education tool for your readers. You might want to review givemeliberty.org for more interesting movements in the US to correct the so-called income tax hoax. . EDITORS REPLY: Well, first and foremost thank you for your comments and the information. However, as I have stated time and time again, you are assuming that the powers that be want to make changes to the status quo and want to act in accordance with whatever laws exist (including the argument that the income tax is unconstitutional, which may very well be true). My observation has been that they will take your house, your bank account and anything else they can get their hands on regardless. Being right and correct in your facts and arguments will not save you from the guys that have the keys to the jail cell. In addition, with respect to the vast majority of people in the US, it would seem that nobody cares - which might be another argument for expatriation. . Another Reader Writes: . John, . I've been enjoying your newsletter for quite some time now. My wife and I are staunch libertarians that want out of the USA. We're still young and being able to run a business is an important concern. . I just got back from a 3 weeks tour of Costa Rica with 3 days in Panama. By tour I mean I put on 3200km between our rental cars. I did not hang out in any tourist areas. From all this time I believe I have a pretty good feel for Costa Rica. Overall what I saw was much different then the picture painted by the (senile?) gang of retirees posting about CR on the Internet. . I was hoping it would be a place I'd jump to move to. I was let down quite a bit. I'd still consider it. The wife will not. The wife got very excited about Panama...until the 3rd police check point. . We're planning a trip to the DR next, but I don't have high hopes. If the DR doesn't work out for us, can you recommend any other places to look at? Below I've written an overview of my experience. All of it is 'my opinion' and others may vary. Feel free to post it to the list. I think some of your readers may find it interesting. Better yet comment on any points if you'd so like. . Costa Rica: . Lots of Police in San Jose. Very few around in outside areas. Watching 2 cops share a ride on a beat-up up motorcycle can be funny. Pulled over twice in 3 weeks. One $14 bribe. (If my Spanish was good probably $0) One $18 speed trap. I never felt threaten by the cops...even as much as I hate all cops. (Go figure...) Small, but socialist govt with very high taxes. They run all major services and competition is illegal. 13% inflation. More people and taxes then Panama, but no where close to on par with industry; the govt. is robbing the people blind. Many tico's come to deal with this by making bribes and tax evasion a normal part of doing business. In many ways CR is the 'Wild West' with the govt. playing the role of the Robber Barons. Firearms are quite easy to get and for the most part legal. You'll find every business in San Jose with an armed guard. The attitude is 'you are responsible to protect your property'. A pinnacle libertarian principal. I liked seeing it. The taxes make CR disappointing for business. Costs are close to that in the US. Few businesses enter CR due to the red tape and tax hit. San Jose is not a modern city, and few places besides San Jose are sizeable or modern at all. Again, the government's fault. Phone and Internet communications are decent, but under government monopoly. However, this year 10% of the CR government was taken over by Libertarians. Unlike the US, there IS still hope for CR should the Libertarians surge further in the 2006 elections, which they realistically can due as CR has a Proportional Democracy. (IE 20% total vote for a party means they control 20% of the government) FYI: http://libertario.org/ . If they don't win CR is well on it's way to becoming another Argentina. The current government runs a 30% yearly deficit. You'll see a lot of 'dirt shacks' along the side of the road. I saw none in Panama. Many Tico's are quite poor. My friend who is cab driver said he take's home about $300/month. Hard to believe he survives with costs being so high. . The people, however, seem to generally be happy and friendly. The country is beautiful and most roads are not bad. (Some roads still defy description, however) Property taxes are still low and if you look hard you can still find good property buys. You'll get good to excellent most anywhere...though it's difficult to find good beef. The tico's in Quepos were arrogant as hell. In general they seemed to have the attitude the local Gringo's were for the taking. Not surprising it is a high crime area. From outer San Jose east to Limon should just be blown up. . Panama: . Police. More Police. Police check points demanding your 'paper's'. Government is 'questionably' freely elected. I read some blurbs about silencing political dissidents and lack of a free press. In a word: Police State. In a blurb: Like the US, but the policing is more obvious. Ugly people. Many have a heavy 'Indian' look. (In 2 days and 900 kilometers I saw one mildly attractive woman...a Columbian hooker.) Horrible food. Less rain then Costa Rica. Quite cheap prices on most anything. Excellent shopping: Blockbuster, PriceSmart, etc, etc. Panama City is basically a scaled back Miami with more cops. The people seem less happy then Costa Ricans. Panama is a good place to come shop but I wouldn't want to live there. . Nicaragua: Did not get time to visit. Wish I could have. I've read it's dirt poor, but then much of what I've read about CR and Panama was not 100% on target. . EDITORS REPLY: As always, thank you for your letter and your comments. In regards to Costa Rica, I would say that they have become a victim of their own success, meaning that inflation has gotten the best of the economy there. The number one comment I hear from Americans relocating from Costa Rica to the Dominican Republic is that the cost of living has gotten out of hand, so I can concur with that. The coastal port town of Limon is a dump, no argument from me. Although on the whole, Costa Rica is still a very beautiful country (cost of living aside). . Panama City is best described as a scaled down version of Miami, and why I often suggest Panama to clients who might never have traveled to Latin-America before and do not want to be hit with culture shock. Although, on the police comment, my experience has been that there are police checkpoints, usually on the highways outside of the city, but I have never had a problem. In the city, I have never had a problem with the police at all, and so my experiences have been different that yours I guess. Panama has had an influx of Columbians trying to escape the bad economic situation in Columbia at the moment (also known as illegal immigrants), so that in part might be the reason of increased spot checks. . The shopping, availability of stores and prices are one reason many people from other countries in Latin America do in fact shop in Panama, so I would concur with that as well. Overall, as I have said, some clients absolutely love Costa Rica and some other places that would not necessarily be my number one choice, for one reason or another, but of course everyone is different and must find a place that suits them best. . Another Reader Writes: . John: . Roger Gallo and you were right on this!!! It seems that the U.S. Government is getting hysterical over the idea that U.S. citizens and corporations are using offshore strategies to protect their money from the IRS Gestapo. I found this story via reading http://www.worldnet.daily on Thursday, September 26, 2002. . It linked to the story via this link below. . http://www.nytimes.com/2002/09/26/business/26TAX.html?ex=1033099200&en=2d5b9c75368fb202& ei=5030&partner=PRESSDEMO . Keep that newsletter coming. Your web site and newsletter are great. . EDITORS REPLY: Thank you for your letter and the article link. Roger is usually right most of the time, but don't tell him I said that. I don't want him to get a swelled head (just kidding Amigo, just kidding) . Another Reader Writes: . Hey John, . My buddy says that he deposited $5000 in a German Bank in the Dominican. The interest rate he receives is 10% per month. In other words, he receives $500 per month return on his $5000 investment. Is he for real? . EDITORS REPLY: Well, to be perfectly blunt, either your buddy is telling you some tall tales to make you jealous or he is investing with dope dealers. First of all, there are no German owned or German affiliated banks in the entire Dominican Republic, at least not ones officially licensed by the Central Bank that I am aware of. Second, it is quite possible to earn an ANNUAL yield of 10% on US Dollar commercial paper or perhaps a bank certificate of deposit, but not for US$5,000. . Keep in mind there are always a bunch of wise guys in many countries, who claim to have a banking entity to accept deposits. What they have is an office possibly somewhere (maybe in the Dominican Republic) and a banking license from Yugoslavia, Togo-Togo or wherever. However, this does not mean that they are officially licensed by the Central Bank in that country where the office is located to conduct banking operations. They get away with it, at least for a while, but it is an old trick in a new suit. Personally, I would be very leery about banking with any financial institution that is not taking in local depositors and subject to the same restrictions and scrutiny as every other bank in the country (such as banking audits). There are a few that operate like this that might do a good job, but ALWAYS ask where the bank is licensed from (not where they have an office). . Why? Because it would be very easy for the nice folks at the so-called representative office to close down, turn off the lights and disappear. Who are you gong to complain to? The government of Togo-Togo, for example, that issued the banking license for perhaps US$50,000 or less? There is no money there and the central bank in that country does not have a clue. By the way, the top two counties issuing cheap-o banking licenses of this kind are: Macedonia and Nauru. Banking licenses cost about US$40,000, there are no real banking regulations to speak of, there are no real banking insurance reserve requirements to speak of (if you think US$40,000 is much money, then you are already lost) and the money is collected and deposited somewhere else anyway (for example in a nice office in Costa Rica, The Dominican Republic or where-ever and invested in yet another place, like Mexico or Argentina). . To illustrate this, let us say you visit Mexico. In Mexico you encounter a friendly private banker, who offers a bank account with Pocus Bank. You ask where is Pocus Bank licensed? He says Nigeria. OK, but aren't you also licensed in Mexico? No, says he, for privacy reasons and because a local banking license costs too much. Exit the door quickly, say I. Why? Every bank legitimately doing business in another country MUST by law obtain a local banking license in that foreign jurisdiction. This is true for Citibank in Greece, Chase Manhattan in Germany, Deutsche Bank in Panama, Barclays Bank in Hong Kong and so on, and so on. Most countries have a licensing review process and require some amount of start up capital, for example US$2 Million. US$2 Million is not a lot of money, not for someone serious with the expertise and resources to operate a bank. For three plumbers from Bulgaria that want to start a bank, it's a lot of money. For anyone else that been around the banking world, it is not. . Again, I only mention all of this because I am the guy people call after these other guys from the so-called super secret private bank are already on the plane to Rio. And in addition, because there might be a few crooks out there, it paints a negative picture across the board and makes it harder for licensed and regulated legitimate banks to convince people to the contrary (that they are not bad guys). . Just be careful and learn to ask the right questions. If you know what you are getting into from the start and accept the risks involved, that's one thing. If you THINK you are dealing with a legally licensed local private bank, and are not, then that is another issue. . On the subject of higher interest, the only situations I have heard of are private money lenders who might lend out in Pesos, not Dollars, and they charge the borrow say 5% per month (legal loan-sharking) and pay the investors say 3%. Apart from that, if you find a legitimate conservatively run bank that pays 10% per month, let me know. Not a bank that claims to be investing in home foreclosures, sheep hair futures, or some other baloney that supposedly allows them to pay 10% per month. Personally, I think you will have an easier time finding a three-legged chicken. . Another Reader Writes: . Hello, John! . I just received the article below and thought that your readers, especially Canadians, should be aware of what could happen to them and to open their minds to realize how bad and dangerous the situation has become in Canada. I am sure the same applies to the United States, as both countries are tied together, Canada being a vassal of the US. We either drift into total and absolute enslavement, or we all must fight to retain and regain our freedom. The last resort would be to leave the scene and go somewhere else. This is not the country and home I had envisioned 42 years ago, when I came to Canada. The thieves have come into our home and are robbing our rights and freedom while we are sound asleep. . EDITORS REPLY: Thank you for your letter and the article, although I did not reprint it because it looked more like an angry protest than an article that might have appeared in a publication. No byline, author or reference to the on-line link or publication. However, in general, the theme of it was that civil liberties have gone with the wind in Canada. Which leads me to say, I'm with you. Get your money out, get yourself out, and tell them to have a nice day. . . This information has been compiled and presented by John Schroder of Ascot Advisory Services, for the benefit of clients and readers. Ascot Advisory Services provides assistance with such matters as offshore company formation, Panama Foundations, offshore banking, and special services in the Dominican Republic regarding residency, free zone applications, etc. For more information: |