Professional Documents
Culture Documents
In This Issue
July 2006 | Vol. 9 No. 7
Whats Wrong with the Fourth of July . . . . . . . . . . p. 3 Defensive Investing with Global Titans . . . . . . . . . . . p. 5 Worse than Worthless: 3 Asset Protection Scams Exposed . . . . . . . . . . . . . . . p. 7 The New Offshore BankNo Longer Just for Millionaires. . . . . . . . . . p. 9 Your New Country In a Matter of Months: Economic Citizenship for Sale. . . . . p. 10 The Scourge of Exit Taxes . . . . . . . . . . . . . p. 11 Four of the Best Ways to Profit in the Global Marketplace . . . . . p. 12 The World of The Sovereign Society . . . . . . p. 13 Global Correction to Create Eventual Bargains . . . . . . p. 14 TSI Portfolio . . . . . . . . . . . p. 15 Come Explore Four Ancient Regions of Wealth . . . . . . p. 16
Website Password
The password for the members- only section of The Sovereign Societys website at www.sovereignsociety.com is: zurich (no quotes).
A Constitution of Government once changed from Freedom, can never be restored. Liberty, once lost, is lost forever. John Adams
A P U B L I C AT I O N O F T H E S OV E R E I G N S O C I E T Y
Continued from page 1: The Baby Boomer Emergency Retirement Repair Plan
lastly, you can increase contributions to 31% of your income. So clearly, most of us do not contribute enough for retirement. Please, max out on your IRA, SEP and or 401k contributions if at all possible. But now lets talk about the greatest savings plan available called a Defined Benefit Plan. I mentioned Defined Benefit Plans recently and was surprised to learn how few people know about them. I was even more shocked how little these life saving plans are actually discussed. A DB plan is a plan designed to pay a target level of benefits at retirement age. These benefits can be based upon a fixed percentage of your average salary, a flat monthly dollar amount or a formula based on years of service in a business. Most DB plans I have seen simply state the maximum allowable contribution limit based upon the participants age. Going back to the example we were using, a 50-yearold who wants to retire at age 60 can contribute approximately US$168,000 per year. Compare this US$168,000 to the garden variety retirement plans contributions. With a 401k, you can only contribute up to US$15,000 (and if youre over 50, you can add an extra US$5,000 a year to catch-up). SEP retirement plans are far more generous. You can contribute US$44,000 or 25% of your income up to US$220,000 to your SEP. But that still only leaves you with a maximum of only US$55,000 a year. Lets take a look at some real life examples.
P.S. If youre concerned about your retirement, Larry Grossman will be attending our next Permanent Wealth Protection Summit in October. Hed be happy to sit down with you and look over your personal retirement plan. See the conference corner page for more information.
Erika Nolan has been Executive Director of The Sovereign Society since its inception. She travels extensively and focuses on the development of new business partnerships and marketing opportunities in order to strengthen and expand the Societys network.
The Sovereign Individual is published monthly (12 times a year) for $145 per year by The Sovereign Society, 5 Catherine Street, Waterford, Ireland. POSTMASTER: Send address changes to: The Sovereign Society, PO Box 925, Frederick, MD 21705. For information about your membership in The Sovereign Society, contact Member Services at 888-358-8125 or fax 410-2301253. Our e-mail address is: info@sovereignsociety.com. Managing Director: Erika Nolan. Associate Publisher & Marketing Director: Shannon Crouch. Editor: Mark Nestmann. Legal Counsel & Editor: Robert Bauman. Investment Director: Eric Roseman. Ecommerce Manager: Matthew Barrett. Membership Director: David Newman. Graphic Designer: Jennifer Costigan. Contact the editor through the Society or by e-mail at info@sovereignsociety.com. All contents of this issue are copyright 2006 by The Sovereign Society. All rights reserved: reproducing any part of this document is prohibited without the express written consent of The Sovereign Society. Protected by U.S. Copyright Law {Title 17 U.S.C. Section 101 et seq., Title 18 U.S.C. Section 2319}: Infringements can be punishable by up to 5 years in prison and $250,000 in fines. LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what weve learned as financial journalists. It may contain errors and you shouldnt make any investment decision based solely on what you read here. Its your money and your responsibility. The Sovereign Society expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. All The Sovereign Societys (and affiliated entities) employees and agents must wait 24 hours after an initial trade recommendation is published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought. Chairman John A Pugsley, U.S. Medical Expert Jonathan Wright, M.D., U.S. Council of Experts Mary Anne Aden, Costa Rica Pamela Aden, Costa Rica Colin Bowen, Isle of Man Michael Chatzky, U.S. Michael Checkan, U.S. Thomas Fischer, Denmark Neil J. George, Jr., U.S. Stuart Goldsmith, UK Ed Gunther, France, U.S. Larry Grossman, U.S. Adrian Hartmann, Canada Doug Hendler, Canada Ron Holland, U.S. Hubert Jongen, Belgium Rita Jongen, Belgium Christian H. Kalin, Switzerland Rainelda Mata-Kelly, Panama Michael Ketcher, U.S. Pierre Lemieux, Canada David S. Lesperance, Canada Kathy Lien, U.S. Leon Louw, So. Africa David Melnik QC, Canada Vince Miller, U.S. Brian OKane, Ireland Humberto Pacheco, Costa Rica Dr. Jose V. Pascar, Uruguay Norman Rentrop, Germany Eric Roseman, Canada Gideon Rothschild, U.S. Rick Rule, U.S. Derek Sambrook, Panama Boris Schlossberg, U.S. Timothy Scrantom, U.S. Marc Sola, Switzerland Dr. Erich Stoeger, Austria Robert Vrijhof, Switzerland Hans C. Weber, Switzerland William Woods, Bermuda Peter Zipper, Austria
Just a decade after the Declaration liberated individuals from one powerful central government, the Constitution created another.
Yet, to paraphrase Rousseau: Man frees himself, but everywhere he is in chains. If independence is cherished and celebrated worldwide, why isnt man free? Why do people rebel, free themselves from tyranny, then fall victim again, in an endless cycle? I submit the seed of the problem may lie within that great template for independence, the Declaration of Independence itself. No doubt you can quote its stirring words: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. And then the muted but ominous conclusion: That to secure these rights, Governments are instituted among Men[W]henever any Form of Government becomes destructive of these ends, it is the Right of the People to institute new Government. New government? Aye, as Shakespeare would say, theres the rub. Consider the American Revolution. Just a decade after the Declaration liberated individuals from one powerful central government, the Constitution created another. And so it has been around the world throughout history. Today, govern-
Whats wrong with the Fourth of July? It celebrates a pyrrhic victory. People think they will be free if they exchange one set of rulers for another. Yet, it hasnt worked. The failure is people celebrate a nations independence from foreign rule, rather than their own individual independence from the rule of any other person. No man (or woman, Hillary) has a mandate from God or from the universe to rule over others, whether he or she be king, queen, czar, fuehrer, or president. No one is endowed with rights superior to anyone else. This is the true heart of the American credo. When the ultimate declaration of independence is drafted, tested and in place, it will not refer to the independence of one nation within a world of sovereign nations, but to the independence of each individual within a world of sovereign individuals. While nations will continue to pass in and out of the revolving door of independence and subjugation, a personal declaration of independence is for all time. When you make your declaration that you are a sovereign individual, that truly will be the day for remembrance and celebration.
John Pugsley is Chairman of The Sovereign Society and the author of many books on economics, investing and politics. John is also the editor of The Sovereign Society's elite investment trading service, Stealth Investor. 3
WEALTH PRESERVATION
Continued from page 2: The Baby Boomer Emergency Retirement Repair Plan
S.W. makes a nice living with just over US$350,000 per year. And S.W. was shocked when I told him he could be contributing approximately US$177,000 into a DB plan. Most of us wont be quite as lucky as S.W. Well either have other employees to deal with or we wont make his high income. But, amazingly, a DB plan can work nearly as well for most business owners. Here is another example:
Example: Owner Grabs 90% of the Businesss Retirement Funds Employee Owner Emp 1 Emp 2 Emp 3 Emp 4 Total Age 60 40 35 30 25 Comp. $205,000 $40,000 $35,000 $30,000 $25,000 Contributions $144,034 $7,074 $4,371 $2,707 $1,656 $159,842 % of Total 90.1% 4.4% 2.7% 1.7% 1.1% 100.0%
talking about the traditional mutual funds you see in a 401k were talking about a world of investments available at your finger tips. You can invest in real estate, both domestic and foreign, precious metals, foreign bank accounts, nonU.S. currencies and many, many other investments you have read about here in The Sovereign Individual. If properly structured, its actually quite easy to allocate and invest your retirement plan assets anywhere in the world. Plus, these assets grow on a tax-deferred basis until you start to withdraw them at retirement. That means the law of compounding work is working in your favor as you continue to save assets you would normally have to pay taxes on. A Defined Benefit plan allows you to maximize your retirement savings in a way no other retirement plan does. This plan reduces your income tax and gives you the freedom to invest your retirement plan anywhere in the world. If you are one of the fortunate ones who are in a position to implement a DB plan, I would urge you to consider it today. For more information on DB plans, including a custom designed plan for you, please contact my office for additional information.
Yes, the owner still has to pay out-of-pocket to cover his employees, but the owner still ends up with over 90% of the total contributions. And these are very simple examples. Far more complex plans allow you to target highly compensated employees while excluding others. These plans, called Tiered Defined Benefit Plans, let you assume different benefit levels for each participant. That means you can make greater contributions for some employees while minimizing contributions for others. This factor alone was once one of the biggest deterrents to DB plans. What does this mean to you? This means if you own your own business or can influence your retirement plan in any way, then it may not be too late to save for retirement with a defined benefit plan. Now that I have scared the heck out of you, lets talk about a DB plans other benefits.
A DB plan is the number one legal way to reduce your taxes (because) the contributions you make to your DB plan are all pre-tax.
Authors Note: The development and implementation of a custom designed retirement plan can be a complex task, as it is with all areas of financial planning, requiring a high degree of technical expertise. For the sake of simplicity in trying to explain a highly complex subject, I have made certain assumptions and have rounded numbers. A full explanation of this topic or any assumptions made are available upon request.
Larry C. Grossman, CFP, CIMA is one of approximately 1,500 CIMAs nationwide. He is also the Managing Director of Sovereign International Asset Management. In 2006, he established Sovereign International Pension Services to further help his clients liberate their retirement plans for greater asset protection and investment opportunities. He can be contacted at 727-784-4841. Email: lgrossman@worldwideplanning.com. Website: www.worldwideplanning.com.
GLOBAL INVESTMENTS
Bigger is Better in 06
Over the last three years, small and mid-sized stocks around the world have literally gone ballistic while large-cap stocks have lagged (see enclosed chart). This divergence has recently reached its highest level since 1973, when large-caps began their long-term decline relative to small stocks. Since 1926, large-cap stocks have outpaced small-caps during only one performance periodfrom 1926 to 1957. Small Caps Have Soared While Cheap Large Caps Lagged
80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40%
Small stocks have skyrocketed since 2002, but now look expensive compared to large-caps.
May 01
S&P 600 Small-Cap Index versus S&P 500 Index (Large-Caps): May 2001 to June 2006 ---- Large Caps Small Caps
Small stocks have historically posted fatter returns than their large-cap cousins for several reasons. Namely, short stocks provide faster growing corporate earnings and greater agility to meet the changes facing the global marketplace. Since 2001, small stocks have gained 12.6% per annum
GLOBAL INVESTMENTS
in fact, exceeds the total gross domestic product value of many emerging market countries! The Dow Jones Global Titans Index currently holds 19.8% in financial services; 17.4% in health care; 16.4% in energy; 14.5% in information technology, and 11.8% in consumer staples. The remaining 20% are diversified across cyclical, telecommunication and consumer discretionary large-caps. Assets are heavily weighted towards U.S. companies with substantial foreign earnings exposure at 62% of the index, followed by 16.5% in the United Kingdom, 7.2% in Switzerland, 3.2% in the Netherlands, and 2.7% in Japan. late May. Valued at approximately US$96 million, the cashbased purchases are certainly a positive omen for future earnings growth. The average insider purchase in the United States is US$60,000. When two powerful executives spend almost US$100 million of their own cash as the stock hits a 52-week low, its worth noticing. But insider buying doesnt stop at Dell, either. AIG, the worlds largest insurance company by market capitalization, saw two insiders purchase US$200,000 worth of shares in late May following the market sell-off. Another high-value Global Titan, Johnson & Johnson, recently increased their dividend for the 43rd consecutive year, raising the latest annual payout by 15%. Many of the Global Titans have also raised their payout ratios since the bear market low of 2002, including stock buybacks, special cash distributions and even bold compensation plans for executives. At Coca-Cola, the worlds largest soft-drinks company, the Board of Directors recently voted to tie corporate compensation and options to performance targetsone of the first schemes now in place at a Fortune 500 company. Like all ETFs, the Global Titans in the United States and Germany are inexpensivecertainly much cheaper than actively-managed funds. At 0.5% per annum, a global investor accesses many of the worlds most profitable conglomerates, all in one convenient ETF.
Source: Globeinvestor.com
A declining dollar combined with a major shift in earnings momentum for large-cap stocks is very bullish for Global Titans.
Nov Jan05 Mar May Jul Sep Nov Jan06 Mar May
Although certainly not a guarantee to future profits, insider buying is usually a very bullish signal for investors looking to ride the coattails of several directors or executives. With many of the Global Titans now trading at multi-year or 52-week lows, its no surprise several companies insiders are stepping up to the plate and buying stock with cash. For example, Dell Incorporateds founder and chairman, Michael Dell, along with the companys chief executive officer, acquired a total of about four million company shares in
6
hub for exchange-traded-funds denominated in euros. Assets of German-listed ETFs have leapt 64% year-over-year through December 31, 2005, to 26.9 billion or US$31.9 billion. As of March 31, 2006 (latest data available), German ETF assets have grown a further 20% to 32.3 billion or US$39 billion. If an investor wants to play sectors, countries or even commodities, Frankfurt is by far the best and most liquid destination for exchange-traded products. A total of 117 ETFs now trade in Frankfurtall denominated in euros. As the U.S. dollar heads into the foreign currency basement once again this year versus most international units, indexing in non-dollar currencies continues to gain universal appeal among global investors.
OFFSHORE SOLUTIONS
11
Four of the Best Ways to Profit in the Global Marketplace: Global Mutual Funds, Currencies, Commodities, and Small Caps
By David Newman You wont find a lot of The Sovereign Societys investment recommendations in Money magazine. You cant read about our best performing offshore funds in Wall Street Global. And youre not likely to read about our best way to play the Japanese yen against the British sterling even on the front page of the Financial Times. Thats because our investment experts tend to stray away from the mainstream media. Instead they dig deeper to discover the unpublicized investment opportunities. They often seek out undiscovered trends your broker cant even predict. And our investment editors are doing it again this month.
Continued from page 9: The New Offshore BankNo Longer Just for Millionaires
more than 40% (with returns of 42%, 41%, 51%, 44%, and 60%). But Denmark doesnt offer the same level of banking privacy as Austria or Switzerland because theres no bank secrecy law. And at the end of each year, under the EU tax directive, all Danish banks must turn over clients information to the Danish tax office, which is free to share that data with foreign tax authorities.
matter how large. However, this level of sophisticated asset protection doesnt come cheap. Liechtensteins banks have no official minimum, but they try to attract high net-worth individualswhich means fees are high. So as you can see, even with higher fees, banking offshore can definitely pay off in the end (sometimes in double-digit returns). You can bank in regions where your bankers are bound by law to keep your assets safe. You can maintain a level of complete financial privacy where no onefrom exspouses to creditors to settlement-seeking lawyers can discover your assets. Plus, you can keep your wealth in a host of currencies to protect yourself should your native currency ever plummet. Everyone should have some money outside their home countrys banking system. Even if its just as a safety net. You never know when you might need it.
Kathlyn Von Rohr is the new managing editor of The Sovereign Society. She manages the content of both The Sovereign Individual and the daily Offshore A-Letter. 13
PORTFOLIO UPDATE
Global Correction to Create Eventual Bargains Buy Precious Metals and Energy on Intermittent Weakness
By Eric Roseman In May, The Sovereign Individual (TSI) portfolio suffered its worst monthly loss in over a year as global commodities and stocks plunged. The good news is we correctly prepared for a major decline two months agojust emerging markets and the majority of industrialized bourses posted significant losses. From a universe of 38 open positions, the TSI portfolio has posted a 95.3% total return based on our equally-weighted strategy. Returns include dividends, if any, and foreign currency conversions. This month, were pruning the TSI portfolio and selling two positions at hefty gains. The Jyske-Invest Emerging Markets Bond Euro Fund has gained a cumulative 61.3% in U.S. dollars since May 2003. With emerging markets coming undone since mid-May, its time to book our gains and close-out our fixed-income positions in this asset class. Effective June 1, TSI no longer holds emerging market bond positions, except Russias Mobile Telesystem, which pays a 9.75% yield and matures in November 2008. In May, this bond only declined 1%. On May 22, members received a special TSI Profit Alert to sell Indias Tata Motors ADR at a 72% profit since April 2005. India, the emerging markets flavor of the year, has corrected heavily so were ejecting Tata Motors, our last emerging markets equity position. and commodities, especially beaten-up gold and silver at these very low levels. As the U.S. approaches the end of this monetary tightening cycle later this summer or fall, the dollar will head sharply lower. Remember to sell dollars on any intermittent strength and add to your precious metals holdings.
ProFunds Ultra Bear Service URPIX Goldcorp Merrill Lynch World Energy GG
TSI Asian Currency Sandwich None Pall Corporation Zurich Financial PLL ZURN
For Best Buys in July, TSI is heading to Frankfurt, Germany, for euro-denominated, low-cost global indexing. The Dow Jones Global Titans 50 SM EX exchange-tradedfund is the best value in the world right now among major market indices. Over the last five years, the average global blue-chip stock has gone nowhere. Yet this index fund, denominated in euros, offers a host of compelling high-value attributes, including a low multiple (13 times price-toearnings, 2.8% yield), while trading at a significant 35% discount to the MSCI World Index based on relative p/e ratios. The Dow Jones Global Titans 50 should hold its own as global money managers shift capital to defensive companies with reliable earnings. Over the next several years, blue-chip stocks should return en vogue as investors search for reliable revenues amid a slowing world economy. Theres no doubt Canadas Goldcorp is the best-managed gold-mining company this decade. Goldcorps average production cost is just US$180 per ounce. With every incremental rise in gold bullions price, her profits are multiplying. The current gold correction offers an excellent entry point for new and existing investors seeking exposure to this tremendous mining company. Add to your positions below US$30.
Buy up to C$13.50
TSI 1/06
CURRENCIES, BONDS, & ALTERNATIVE INVESTMENTS TSI Asian Currency Sandwich (5 currencies) Man-AHL Diversified PLC Jyske Euro Emerging Market Bond Fund Mobile Telesystem 9.75%, 11/30/08 [USD] 100% Capital Protected Notes Based on the American Stock Exchange China Index Pioneer-Momentum Emerald PIMCO Foreign Bond Unhedged ProFunds UltraBear Investor Class Principal Protected Notes (Basket of Asian Currencies) GLOBAL EQUITY FUNDS iShares FTSE/Xinhua China 25 Index Fund Orbis Global Equity Fund Pictet PF-Biotech P Fund Polaris Global Value Fund AVERAGE RETURN BUY THE FOLLOWING NEW POSITIONS Dow Jones Global Titans 50 SM EX (euro) SELL THE FOLLOWING POSITIONS Jyske Bank Emerging Markets Bond Fund Euro Class; Tata Motors ADR. Notes: The TSI Portfolio is an equally-weighted strategy and does not include dealing charges to purchase or sell securities, if any. Taxes are not included in total return calculations. Total return includes gains from price appreciation, dividend payments, interest payments, and stock splits for securities listed on non-U.S. exchanges, total return also includes any change in the value of the underlying currency versus the U.S. dollar. Anglo-American ADR stock-split 2 for 1 on March 6, 2006; entry price reflects stock-split; Oppenheimer Real Assets Class A paid distribution of $0.04 per share on March 16, 2006; Class C paid $0.04 on March 16, 2006. Stop-losses: The TSI Portfolio maintains a 15% stop-loss on every stock and bond recommendation; stop-losses are not exercised for mutual funds. Sources for price data: Yahoo! Finance (finance.yahoo.com), Financial Times Portfolio Service (www.ft.com), TradeNet (www.trade-net.ch/EN), Jyske Bank Private Banking Denmark (www.jbpb.com), and Web sites maintained by securities issuers. DE006289382 Frankfurt TSI 6/01 21.47 21.47 New Buy Buy up to 23.00 FXI NYSE BMG6766G1087 Bermuda LU0090689299 Luxembourg PGVFX USA TSI TSI TSI TSI 8/05 1/06 11/04 1/06 60.54 94.46 211.40 16.20 72.88 99.40 240.91 17.60 20.38% 5.23% 13.95% 8.64% 95.26% Hold Hold Hold Hold Closed to investors Everbank IE0000360275 Ireland A0B726 Denmark XS0162126287 CAX BMG6198G3123 PFBDX URPIX CAQ AMEX Bermuda USA USA AMEX TSI TSI TSI TSI TSI TSI TSI TSI 3/06 2/04 5/03 3/04 12/05 11/98 6/05 4/06 34.36 50.21 108.00 109.69 9.11 102.80 10.47 16.52 9.43 33.60 64.94 158.70 104.00 9.52 206.28 10.36 17.34 9.70 2.26% 29.34% 61.34% 11.79% 4.50% 100.66% 0.92% 4.96% 2.86% Buy Buy SELL Hold Hold Buy Hold Buy Hold Inverse Index Long-term Buy
TSI 11/05
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CONFERENCE CORNER
nce again, The Sovereign Society will tour four of the best banking and asset protection havens in the world: Switzerland, Austria, Liechtenstein, and Denmark. As you tour these majestic old-world nations, youll be joined by our top international financial experts, who will reveal their best banking and asset protection secrets during this nine-day event. This group of leading European experts will include our Convenient Account Program banking professionals and other preferred financial services providers including Thomas Fischer of Denmarks second largest bank, Jyske Bank; Peter Zipper of Anglo Irish Bank in Austria; Robert Vrijhof of Weber, Hartmann, Vrijhof & Partners; and Marc Sola of NMG International Financial Services. Among the European money secrets they will reveal to you Confidential Banking: the Swiss, Austrian and Liechtensteinian Way, where your assets are concealed from prying eyes under penalty of law. First Class Estate Planning: Learn how you can access the Liechtenstein-conceived and created financial vehicle that is completely creditor-proof and can only be accessed by your beneficiaries.
Secret Currency Investments: How you could make double-digit profits trading the nine highest yielding currencies in the world through a Danish bank. Tools to Retire Abroad: Little-known residency and retirement programs that can dramatically reduce your estate tax billand help you transform your dream of living or retiring abroad into reality. Taking Your Retirement Plan Offshore for asset protection, investment diversification and greater profits. Plus, youll meet and hear from European visa and residency experts, international tax attorneys, investment specialists, privacy experts, and more. While touring these ancient wealth havens, youll stay at the best European hotels and enjoy 5-star amenities in every city. Youll enjoy VIP treatment with dinner on an old steamboat cruising on the Lake Zurich, a tour of the art museum in Vaduz, a Gala Dinner event in Copenhagen, and much more. Unfortunately, The Sovereign Society can only accommodate 40 attendees for the European Banking Tour and seats are filling up fast. Call today to reserve your spot: 561-272- 0413 ext. 122. Or you can email conferences@sovsoc.com.
Please note: While investing or doing business offshore is perfectly legal for U.S. citizens and residents, there are a few legal formalities you should keep in mind. The most important of these is that you are responsible for paying taxes on your worldwide income. In addition, many types of offshore investments are subject to separate reporting requirements. Also, transfers of US$10,000 or more in cash or cash equivalents across U.S. borders must be reported, as well as the formation and funding of a foreign corporation, trust or partnership. While its easy to comply with some of these requirementssuch as the annual filing of the foreign bank account reporting (FBAR) Form TD F 90-22.1, other forms (such as those necessary to report a foreign trust relationship) are more complex. To assist you in complying with these more complex reporting requirements, we recommend the services of a qualified tax attorney.