Don`t Settle for a Generic
Transcription
Don`t Settle for a Generic
Learn the Secrets to Avoid Overpaying for Offshore Legal Advice. See page 8 for details. October 2010 In This Issue: 4 Keep Your Overseas Dream Home from Becoming an International Nightmare Owning an offshore home can be a dream come true, but it can also have adverse tax consequences for U.S. investors. 6 Norway Becomes Investment Beacon This Viking Giant is home to one of Europe’s best-managed economies, with low debt, a strong currency and a great banking system. 8 The Secrets to Avoid Overpaying for Offshore Legal Advice What’s a reasonable amount to pay an attorney for helping you with your offshore needs? You may be surprised, depending on the jurisdiction. 10 Beauty, Privacy, and Appreciation Rare colored diamonds offer a portable store of wealth for generations, and prices are on the rise. 12 The “Enron Spinoff” that Pays You and Lowers Your Tax Bills This type of alternative investment offers the liquidity of stocks, but with lower taxes on the juicy dividend payments. Best of all, you get an infrastructure investment with predictable cash-flow! 14 A Powerful One-Two Punch: TSI Portfolio Boosts Yields and Removes Laggards Check out the latest buys — and sells — as we focus on quality income at a reasonable price, and sell off some underperforming positions. Feel The Freedom of Total Wealth Vol. 13 No. 10 Don’t Settle for a Generic This Big Pharma Holds the Patent for Paying Income Now and for Years to Come Generating more wealth starts with income. After all, income means keeping your existing assets while getting paid — preferably handsomely — for your ownership. In the world of stocks, that means finding strong dividend plays. Most of the big dividend-payers are outside the U.S., where companies are more inclined to pay a dividend to begin with. In many cases, Americans are buying up the products and services these companies provide. And as investors, we need to continually look abroad not just for places to store our Jeff Opdyke wealth, but also to invest in the companies that will pay us well while we wait for their stocks to climb. Speaking of climbing — mountains, that is — our investment journey today takes us to Switzerland. That country may conjure up images of posh ski resorts, decadent chocolates and a financial sanctuary for those looking to bank offshore with privacy and convenience. But what many don’t realize is that not only is there a Swiss company whose products are in medicine cabinets around the world, but it also has some new treatments in the late stages of development for currently incurable diseases. And even though this Big Pharma players isn’t a U.S. name, you can easily add the shares to your portfolio. Even better, it pays nice income now and is set to generate steady returns for a long time to come. If I look out over the next 12 to 18 months, I would expect this company to approach $50 a share — and throw in the dividends the company will pay along the way and you’re looking at a total return in excess of 50%. Like the Song Says, ‘I Want a New Drug’ Investors have largely disliked Big Pharma for years. They worry about the patent “cliff” that exists in 2011 and 2012 for many of the big players. As patents end and generics made by competitors invade, profits for suddenly patent-less blockbuster drugs shrivel. In other words, many companies’ medicine cabinets are looking increasingly bare. Where, investors rightly wonder, will replacements come from to restock Big Pharma’s drug pipeline? Because of the patent worries, pharma shares globally have now fallen into what many analysts call “deep value” territory. They’re trading at valuations well-below both market averages and their own historic averages. Continued on Page 2 A Publication of The Sovereign Society ® Cover Story | Continued Don’t Settle For Generic Continued from Page 1 Though Avastin’s FDA setback is clearly a shortterm negative for the company, Roche has one of the stronger growth profiles in Pharma. And because of that, you now have the chance to own pharma at deeply discounted prices… which means we’re locking in fat yields that can beat cash in the bank, Treasuries or the average dividend yield on the stock index of your choice. Deep Value Investing, Plus a Generous Yield Swiss drug-giant Roche Holding (RHHBY.PK) has a fairly decent stable of pending drugs, some with blockbuster potential, in macular degeneration, gastric cancer, melanoma, etc. In fact, it’s fair to say Roche is one of the kings in the drug industry. You’ll have to put up with some temporary stagnation as the institutional-investor community awaits proof that Roche’s medicine chest will produce new blockbusters. But better to be positioned now and get paid a nice dividend than to sit on the sidelines and jump in only after the good news is priced into the shares. Blockbusters in Development: Roche’s Moat to Fuel Profitability for Decades At current prices of about $34 a share, Roche will pay you a healthy 4.9% a year in dividend payments — a good 22 times richer than the laughably lousy 0.22% you’d earn sticking your money in a one-year Treasury note. From the beginning, I want to make it clear that Roche is not a short-term play. Pharma trends evolve over time as companies navigate the drug-approval process in the U.S. and Europe. Roche Shares in “Deep Value” Territory! If you’ve listened to the financial news of late, Roche has suffered a string of setbacks. The most meaningful came in July, when an FDA panel recommended withdrawing government approval of Avastin as a treatment for metastatic breast cancer. 90 80 70 60 50 40 30 The drug had received prior approval and had documented evidence of its efficacy in delaying the onset of symptoms for this incurable disease. One industry take is that the FDA, under the new Obama Care doctrines, lashed out against Roche because of the drug’s $88,000 annual cost. 2008 Apr Jul Oct 2009 Apr Jul Oct 2010 Apr Jul And I’m willing to bet a beaten-down share of Roche holds more intrinsic value at $34 than does a euphorically priced Treasury note priced so high that its yield is essentially 0%. Whatever the case, the market reacted badly, lopping off about 10% of Roche’s market cap quickly. Swiss-based Berenberg Bank recently noted its belief that Roche’s earnings growth will “outpace the sector’s growth rate.” Helvea, another Swiss bank, estimates Roche will grow its bottom line at a compounded annual rate of nearly 17% out to 2012. But over the next few months, investors will get a feel for where Roche is headed with several key drugs, including another first-line metastatic breast-cancer med and one for multiple sclerosis, both blockbuster candidates. At today’s prices, we’re buying that growth for about 11 times expected 2010 earnings, and at singledigit multiples going forward. That’s not a bad price to pay for a global leader in a key global industry. Even troubled Avastin could be a big contributor. FDA approval or not, Avastin will still likely play a role with metastatic breast cancer as a second-line treatment, and because oncology docs already familiar with its success will likely continue prescribing it off-label as a first-line treatment. Roche: Buy this Big Pharma for Income Now Plus, it has other potential uses with ovarian and colon cancers, among others. It’s not just Big Pharma that’s been beaten-up lately. Investors have been shunning some of the 2 Alternative Investment Opportunities world’s most-stable and necessary industries. Over the last three years, utilities, energy, and parts of the healthcare sector have generated some of the worst returns globally, according to MSCI Barra data. The Role of Gold in a Low-Yield World The role of gold in a low-yield world is different than a strategy of grabbing safe income. It’s a way of hedging against inflation. Central bankers are adamant about throwing money into the system—and that means inflation down the road as more money goes into circulation. We’re not there yet, but the writing is on the wall: gold broke through $1,250 in mid-September. It’s got more room to run. Reasons exist, sure, and some are more relevant than others. But at the end of the day, these are industries the world needs. They’re not going away anytime soon. The challenges that companies face individually and as a group are, broadly speaking, ultimately surmounted by their necessity. For the moment, however, gold remains a hold. Gold will sell back off in the next market rally, with a potential bottom of around $1,000 per share. That’ll be the best time to stock up in large quantities for the next leg of gold’s bull market. Also, bullion reporting requirements are set to come in January of 2012. Mining companies, however, have a bit of leverage to the actual price of gold, and could see larger percentage gains, as well as a modest dividend. In the meantime, though, the bloodletting in these necessary industries has pushed stock prices so low for many firms that annual dividend yields now offer far-greater payouts than Treasury bills and notes. Likewise, those yields are well in excess of yields delivered by increasingly questionable municipal bonds (and just recently Harrisburg, Penn., defaulted on some of its debt — not a good omen for the muni-bond market). Either way, avoiding government bonds backed only by the “full faith and credit” of a nation with a history of “default through inflation” still leaves gold as the ultimate safe-haven. In other words, companies in irreplaceable industries have become, in many cases, today’s safest income plays. We’ve already played that in TSI with food companies like Nestle, Unilever and McDonald’s. But other industries stand out as well, such as the drug industry. Generating income and returns can be futile if you don’t know how to protect them. In this issue, Mark Nestmann helps you explore offshore real estate. He has some advice for you on avoiding the fraud that can plague this industry, and on understanding the tax consequences of overseas real estate holdings. And Bob Bauman covers the expected legal costs of going offshore. For that reason, Roche is a fine addition to your long-term portfolio. It’s underloved by the investment community, yet provides necessary products that have growth opportunities. Special guest writer Steven Hershoff reveals the “hidden jewels” available in an alternative asset class that’s quickly rising in popularity: the colored diamond market. Roche trades as an ADR in the U.S., under the symbol RHHBY on the Pink Sheets. Each ADR represents four Swiss-traded shares (it’s one of the few companies on the Pink Sheets that I like). Any price below $38 is a good entry point for a long-term stake in Roche. Eric Roseman leads you to the great white north this month. Discover banking that offers substantial protections, a history of privacy and better interest rates than are currently available in U.S. — this and more is available to you in Norway. Expose Your Portfolio to Even More Global Income Finally, if you’re looking for better returns than stocks, better income and even tax advantages, then you won’t want to miss Andrew Packer’s in-depth look at this often-overlooked asset. TSI Income matters. And income from safe assets that aren’t backed by a printing press, but rather by real, tangible business assets that can continue to deliver, is the kind of income we want to have in the pages of TSI. But the first way to help you obtain that income is to bring you up to speed on asset protection. A lifelong world traveler, Jeff Opdyke has been investing directly in international markets since 1995. He is the editor of Emerging Market Strategist. Contact Jeff at [email protected]. 3 Alternative Investment T Oechniques pportunities Wealth Preservation Keep Your Overseas Dream Home from Becoming an International Tax Nightmare Many Countries Restrict Foreign Real Estate Ownership By Mark Nestmann Owning real estate in another country provides many benefits for U.S. investors: • A non-reportable offshore asset (if owned individually). • A refuge in times of political or economic uncertainty. • The possibility for profit from rental income or if the value of the property appreciates. • In one country (St. Kitts and Nevis), purchase of “qualifying” real estate entitles you to acquire a second passport. • Protection against foreign exchange controls. It’s impossible for the U.S. government (or anyone else) to forcibly repatriate offshore real estate. Foreigners often pay more than locals for available real estate, driving up prices. Eventually, real estate may become so expensive that it’s beyond the means of most local residents to buy it. And no country wants to be literally “owned” by foreign investors. For those reasons, many countries impose restrictions on foreign purchases of real estate. For instance, Mexico prohibits foreign nationals from owning certain categories of real estate within 100 kilometers of the country’s borders or 50 kilometers of the coast. Austria and Panama extend tax advantages to local companies (which may be beneficially owned by foreigners) that don’t exist for foreign owners. A local lawyer can help you overcome restrictions or tax biases against foreign ownership. For instance, in Mexico, you may take title to real estate through a Mexican trust (Fideicomiso). In Panama, your attorney may create a corporation (Sociedad Anónima) (S.A.) for this purpose. And that’s just the measurable aspect. You can supply dozens of reasons of your own about the particular area you choose, the friends you make, the home that perhaps you never could have found in your home country, and all the other amenities that give you the quality of life you’ve always desired. Forming a Foreign Trust Has Profound U.S. Tax Consequences! (Offshore Home) Buyer Beware If you’re a U.S. citizen or resident, when you form a foreign entity, you must inform the IRS about it. Naturally, failure to do so subjects you to draconian penalties. However, there are numerous possible missteps when you acquire real estate offshore. Among them are overpayment, fraud, bad title, conflicts of interest, problem tenants, squatter’s rights, and developer bankruptcy. The best way to avoid these missteps is by dealing with a knowledgeable local real estate lawyer. For instance, when you fund a trust, you become its “grantor.” As a U.S. grantor, when you fund a foreign trust, you must submit IRS Forms 3520 and 3520-A annually. (Technically, your trustee is supposed to file Form 3520-A, but you’re ultimately responsible.) Expect to pay a minimum of $3,000$5,000 each year for this service. But that covers just the purchase, not the biggest ongoing pitfall: taxes. Even if you avoid local tax, you may still be subject to tax in your home country. This is almost always the case for U.S. citizens and residents who own offshore real estate. If your trust has an offshore bank account, you’ll probably need to file a “foreign bank account report” or FBAR with the U.S. Treasury each year (Form TDF 90-22.1). Both you individually and the trust itself may need to file the FBAR. I’ll address the U.S. tax consequences of owning offshore real estate momentarily. But first, let’s examine how other countries deal with real estate ownership by foreign investors. 4 Provided you meet these requirements, you generally pay tax on the trust’s income (or gain) as if the trust didn’t exist. For instance, if you hold offshore real estate for more than one year through an offshore trust and sell it for a profit, you generally pay long-term U.S. capital gains tax (currently 15%) on your returns. Unfortunately, many foreign corporations are ineligible for this election. That includes most varieties of the Sociedad Anónima, including those in Panama and Uruguay. You must also file IRS Form 5471 each year for any CFC (and for certain transactions in non-CFCs) in which you hold a 10% or greater ownership stake. In addition, you must file IRS Form 926 when you transfer property to a foreign corporation (CFC or otherwise) if you own 5% or more of its stock. Separate filing requirements apply if your CFC is taxed as a foreign partnership or foreign disregarded entity. Fortunately, you can credit the payment of any foreign CGT against your U.S. tax obligation. As long as you pay at least 15% CGT locally (or whatever rate applies in the United States when you sell), you’re unlikely to owe additional U.S. CGT. Hidden Traps in Foreign Corporations The Answer? It Depends on your Situation U.S. persons who form foreign companies become enmeshed in a labyrinth of tax laws and regulations designed to prevent multinational corporations from deferring income. Here’s a highly simplified summary: No “one size fits all” solution exists for purchasing offshore real estate. First, you need to understand how foreign buyers typically take title to real estate in the country where you’re buying property. Then you need to tailor whatever structure you create for maximum tax efficiency in both that country and the United States. “U.S. shareholders” are U.S. natural persons, partnerships, corporations, trusts, and estates that own, respectively, 10% or greater interests in a foreign corporation. If such U.S. shareholders own more than 50% of the shares in an entity classified as a foreign corporation (e.g., a Panamanian S.A.), by vote or value, that entity is a controlled foreign corporation (CFC). Where local law permits, you may decide to purchase offshore real estate in your own name, rather than through a foreign entity. This avoids the ongoing expense and complexity of holding it through a foreign entity. Merely owning offshore real estate also doesn’t trigger U.S. reporting requirements. But, be certain to create a legally binding local will or testament to convey the property to your heirs as simply and inexpensively as possible. In general, U.S. shareholders in a CFC can’t defer U.S. tax on its passive income. This may include rental income from real estate, although not what the IRS calls “actively managed” real estate. In addition, in a CFC: Finally, however you decide to purchase offshore real estate, be sure to get expert advice, both in the country you purchase it and in your home country. That way, you’ll avoid unnecessary taxes, reporting penalties—and even criminal sanctions. • The 15% tax rate on capital gains and dividends isn’t available. All gains are taxed at your marginal rate. • Investment losses can’t be allocated against gains until the CFC is liquidated. By doing your due diligence ahead of time, you’ll be able to fully enjoy your offshore home without some of those additional hassles. TSI One way to avoid these unfavorable tax consequences is to elect to have the CFC taxed as a U.S. Ccorporation. However, like a domestic C-corp, this results in double taxation. Another option is to file Form 8832 with the IRS and elect to have the CFC treated as a disregarded entity (if there is only one owner) or a partnership (if there are multiple owners). That way the gains and losses of the CFC flow through to the U.S. owners as if the CFC didn’t exist. Mark Nestmann is president of The Nestmann Group, Ltd., a consultancy assisting high net worth individuals with wealth preservation solutions. Link: www.nestmann.com. Contact Mark at [email protected] or by phone or fax at +1 (602) 604-1524. 5 Alternative Investment Opportunities As PIIGS Roll Over, Norway Becomes Investment Beacon This Viking Giant is Home to Europe’s Largest Budget Surplus, a Strong Currency and Europe’s Strongest Banks… And Now You Can Profit From it! By Eric Roseman In fact, several countries across Europe are teetering on the brink of insolvency in the absence of the European Central Bank’s (ECB) and International Monetary Fund’s (IMF) $900 billion bailout announced in May. Credit spreads remain elevated and at historically high levels in Greece, Ireland, Spain and Portugal as markets fear an eventual sovereign default. I’m a big fan of Scandinavia. Since 1996 when I made my first visit to Copenhagen, Denmark, I’ve visited the region more than 35 times. Last year alone, amid a Norwegian romance, I flew to Oslo seven times in three months. Talk about jet-lag! Unfortunately, my Norwegian flame fanned out several months later. But my connection to Norway certainly wasn’t lost. Since then, I’ve visited numerous banks, insurance companies, brokerages and even a fish-farm. I’ve also traveled along the Norwegian coast visiting small villages and towns. Norway, however, doesn’t have these problems. A Sea of Stability: Norway a Net External Creditor Norway, population 4.8 million, is not only a beautiful country, but a prime destination for global investors. Norway has emerged relatively unscathed from the financial crisis and is the strongest national economy in Europe in 2010. Norway is the only country in Europe with a budget surplus that equals 10% of gross domestic product (GDP). That’s an impressive statistic because virtually everyone else on the continent is suffering from big budget deficits as a result of the 2008–2009 financial crises. And that’s why Norway may be one of the world’s best banking opportunities outside Switzerland and Hong Kong. I’ll tell you why, and show you one of the best banks in the world worth owning right now. Norwegian banks didn’t require a bailout and still remain strong. The financial system is properly regulated and consumers don’t borrow beyond their means. On the Brink: Deficits Out-of-Control in Most of Europe Norway also maintains a strong trade surplus thanks to bulging oil and gas exports and other natural resources, including hydroelectric power, fisheries and shipping. Norway doesn’t spend its income on frivolous projects. As a global investor, you want to make investments in those countries that are economically sound, provide free markets and harbor strong balance-sheets. Specifically, you want to isolate a country sporting a budget and trade surplus, low relative debt and a high savings rate. In a nutshell, this nation attracts direct foreign investment because it’s a beacon of prudent fiscal management. Norway is a net external creditor. Not too many countries in the world today can claim to be an external creditor. As a global investor, that’s the sort of designation you’re looking for when making an investment in a foreign market. Today, it’s almost impossible to find a country that meets the above criteria. Countries like Switzerland, Germany, the Netherlands, Denmark and Sweden provide investors with sprinkles of positive economic criteria and warrant some of your international investment capital. But most of the region is deeply in the red and under pressure to cut spending in order to reduce bloated deficits. The economy has been on the mend for almost a year as the Norges Bank (Norway’s central bank) continues to raise rates. In 2009, Norwegian GDP 6 fell by 1.4% — its first annual decline in 20 years as a result of sharply lower oil prices and a crash in global trade. But the economy has since recovered and GDP is expected to expand by more than 1% in 2010, according to Global Finance. DnB NOR’s funding is well-diversified and remains supported by a stable base of retail customer deposits in Norway, which represent some 40% of the bank’s funding. Interbank funding accounts for 15% and the rest is derived from market funding. 100 Krone Outruns the Credit Crisis, Outpaces the USD by 30% 80 60 50 40 30 The Norwegian krone (NOK) remains a popular currency among global investors since the mid-2000s as a direct currency proxy to crude oil. The currency has shadowed the EUR to an extent because of important trade-flows between European trading partners. 20 Shares Back on Steady Uptrend Following ’08-’09 Market Crash 2006 2007 2008 2009 10 2010 DnB NOR’s stock has been on a tear and though it literally crashed in the midst of global financial turmoil in late 2008, it has since recovered more than threefold and sits 16% below its all-time high in February 2007. But even with that recovery in stock price, shares are still cheap. But Norway is ultimately tied to oil. In 2008, as world markets plunged, the NOK suffered an 11.5% decline against the U.S. dollar. But that’s not always the case. Over the past 10 years however, marked by a 200% rise in crude oil prices, the NOK has gained a cumulative 30% vis-àvis the dollar. DnB NOR now trades at just 10 times trailing earnings compared to 11.7 times earnings for the Oslo Stock Exchange and pays a 2.3% trailing 12-month dividend in NOK. The 1 Norwegian Bank Worth Owning DnB NOR: Getting Positioned The best and most-liquid way to invest in the broader Norwegian economy for the long term is to buy the country’s largest financial services group. My pick is DnB NOR (DNBNOR.OL). To trade on the Oslo exchange, most brokers can accommodate you. The stock symbol in Oslo is DNBNOR. The ISIN code is NO001003479. Current price: NOK 74.60 ($11.95). Historically, buying the biggest bank or banks in a strong foreign market has been a winning ticket for investors. You buy, hold and collect those dividends and let your investment compound in a stronger foreign currency like the NOK. Norway is rapidly emerging as the leading economy in Scandinavia and has all the important attributes of a fiscally responsible nation. That’s paramount amid today’s ongoing environment of credit stress and fears of European government defaults. You’ll also get capital gains too, as banks will generally tend to grow in tandem with GDP (a faster rate may imply an unhealthy lending environment). The best way to ride the long-term Norwegian growth story is via DnB NOR as profits continue to rise from a hugely diversified earnings base and rising commodity prices. TSI DnB NOR is Norway’s largest financial services group, with total combined assets of NOK 2 076 billion or $330 billion). I personally visited DnB NOR in Olso in 2009 and was impressed by the group’s vast operations. The bank is a pillar of strength in Norway, involved in most facets of the economy, including commercial lending, insurance, asset management, investment banking and shipping. Its balance sheet is strong and cash-flow continues to grow. Eric Roseman is the Investment Director for The Sovereign Society. He is also the editor of the weekly trading service Commodity Trend Alert. Email Eric at [email protected]. 7 Alternative Investment T Oechniques pportunities Wealth Preservation The Secrets to Avoid Overpaying for Offshore Legal Advice By Robert E. Bauman JD It’s easy to overpay because American clients usually are unfamiliar with offshore legal fees. In fact, we always have advised that the costs, immediate and long term, of any intended offshore financial or legal activity should be calculated fully before final decisions are made. What is a reasonable fee for you to pay a domestic or foreign attorney for their professional work in any given case? It’s not as simple as price shopping for your next new car; however, there are some simple guidelines you should know. If not, those fees can sometimes make a potential offshore solution more expensive than not having one at all! Keep in mind that your personal situation may end up costing more or less than the amounts I’m about to outline. But here is a guide to use when determining whether your offshore legal costs are warranted or overinflated. Overcharges: More Common than You Think First, though, let’s set the stage with words of wisdom I was told in my very first minutes at the Georgetown University Law Center (from which I graduated in 1964). My teacher was the distinguished editor of the standard eight-volume treatise on American contract law, Prof. Walter H.E. Jaeger. Those who have been burned argue that far too many lawyers view their clients primarily as a nearly endless revenue stream, rather than as individuals to whom they owe a sworn duty of scrupulous service. “Billable hours” too often replace the concept of personal trust and un-conflicted devotion to the client. “Ladies and gentlemen,” said the silver-haired, bow-tied Prof. Jaeger with an impish smile on his face, “the first and most important lesson you must learn in law school — and never forget this — is always get your fee.” Laurence Tribe, noted Harvard University law professor and frequent television “legal expert,” billed a client $625 for a one-sentence letter actually written by one of his law students. “It was a very long sentence,” Tribe explained. The overbilling trend has gotten worse in recent years. Several prominent attorneys have been charged with cheating clients this way. In Dispute: Is the Fee Reasonable for the Service? Maureen Fairchild, a former partner in the leading Chicago law firm of Chapman & Cutler, was accused by attorney-discipline authorities of overbilling clients more than $1.3 million by inflating time sheets for herself and lawyers she supervised. That basic lesson in economic survival is certainly a truism. But when it comes to disputes involving attorneys, what constitutes reasonable fees is one of the most-contentious issues — especially as measured by malpractice claims and lawsuits against attorneys. Her husband, Gary Fairchild, was dismissed as managing partner of Winston & Strawn in Chicago after that firm accused him of padding his expense account more than $500,000. Based on questions I’ve been asked over the years by Sovereign Society members, I would say that contention extends to legal fees charged for offshore legal matters in general, including trusts, private interest foundations, international business corporations, banking matters and official reporting requirements. The point of taking your money overseas is to protect and grow it. And today, I’ll show you how to keep more of it so that your returns can become even more impressive instead of starting from a deficit. 8 Get a Lawyer, but Set a Fee Arrangement Upfront But what should an offshore APT cost? It depends on the trust objectives and the complexity of carrying them out — and the jurisdiction you choose. Americans have traditionally held a lawyer’s assistance to be essential when faced with a legal problem of almost any kind. “After all,” a layman’s prudence suggests, “what does the average person know about the mysteries of the law?” Obviously, the more-complex a trust is the higher the cost. One U.S. attorney quotes a current fee for creation of a domestic trust of $2,000 to $4,000, based on answers to the above questions. On the other hand, a leading trust officer in Panama with whom we work, charges $1,500 for a simple APT, with $1,000 for one year’s maintenance, payable in advance. Compare “It’s easy to overpay that to the same basic trust-creation fee because American clients charged by a leading Liechtenstein trust company — $30,000. And what do you as a non-lawyer know about legal fees, especially those for offshore services? Attorney fees are the costs of legal representation that a client incurs. Ideally, the fee arrangement should be agreed upon in writing between lawyer and client at the time of agreement for services. usually are unfamiliar with offshore legal fees.” Another example: The Panama fee for a private interest family foundation is $3,320 including the first-year registration, maintenance and government costs. The cost of same entity and services from the Liechtenstein firm is over $30,000. Most attorneys do not charge for a brief initial consultation. An upfront fee is called a retainer. Money within the retainer amount often is used to pay for a certain set volume of work, as for the creation of an asset protection trust, or for hours as needed. Some contracts provide that when the retainer money runs out, the fee is renegotiated. As you can see, it pays to shop and compare. The Fee’s Just the Start! A dozen years after our founding, The Sovereign Society has established a network of legal and financial professionals, both domestic and offshore. Other fee methods include billable hours, flat fees or contingent fees. No good attorney, barrister or solicitor will allow a new client to leave his or her office without a fee agreement and a work description in writing. We’ve done the due diligence on each and every one. And if you ask us, we can recommend them with one reservation — you must negotiate and fully understand and agree to any fee arrangement upfront. But when it comes to offshore legal work, we advise that in most cases you consult not only a foreign attorney, but a U.S. attorney as well. That is because the offshore lawyer may not know all the U.S. tax and reporting laws that must be observed. While the fee is just one component — you’ll also want knowledgeable legal counsel — it’s a very important one to determine the true costs of meeting your offshore needs. Many attorneys are out to take as much of your money as they can, but your job is to keep as much as possible. There are plenty of opportunities to be able to get the best service for the fairest price, and you don’t literally have to go to the ends of the earth to find them. 1 Asset Protection Trust, 2 Wildly Different Prices An offshore asset protection trust (APT) is one of the most effective asset protection devices because it is formed and registered in a trust-friendly foreign jurisdiction, such as Panama, Belize, Bermuda, Hong Kong, Singapore, one of the Channel Islands or the Isle of Man — all of them outside the immediate reach of your home country claims and courts. A former member of the U.S. House of Representatives from Maryland, Robert Bauman now is a senior writer and legal counsel for The Sovereign Society. Email questions and comments to Bob at [email protected]. 9 TSI Alternative Investment Opportuni pportunities ties Beauty, Privacy and Appreciation: Rare Colored Diamonds Offer a Portable Store of Wealth for Generations By Steven Hershoff Overall, high net worth individuals allocated 23% of their passive investment funds for the jewelry, gems and watches category in 2009, up from 18% in 2006, the last full year before the financial crisis. There is nothing quite like seeing the brilliance and beauty of a beautifully cut diamond in deep, rich shades of forest green, pumpkin or rose. Their beauty and rarity have captivated the wealthy for centuries. But in the last decade, they’ve taken the global jewelry market by storm. High net worth individuals from the Middle East and Asia in particular were most heavily invested in the jewelry category, at 35% and 31%, respectively. Colored diamonds are the world’s most concentrated form of wealth. Millions of dollars can fit into one stone that can be transported and transferred privately and easily anywhere in the world. These aspects of privacy and portability are increasingly important during these times of increased government control and capital movement restrictions. Auction Market Activity is Heating up for Colored Diamonds! Activity at the major auctions around the world in the spring confirms these results. As you can see in the table below, auction sales reached a new high of over $280 million in Hong Kong, New York and Geneva in 2010. Colored diamonds have also held their value during recessions and economic downturns and have proven to be a consistent long-term growth vehicle. Since formal records were first kept in the early 1970s, dealer-offering prices for the highest grades of colored diamonds have spiked, on average, 10%-15% per year. Compared to 2006’s $170 million, this represents an increase of 64% in the last four years. The final sales totals dramatically topped the presale estimates of total prices. This appreciation has not been connected to price movements in stock and bond markets, an important consideration for investors seeking a balanced portfolio of assets. This last point is becoming increasingly important. 2010 Spring Auctions Emerging Markets Spur Diamond Demand Growth Location Sotheby’s Christie’s New York $39.6 Million $41.2 Million Geneva $53.9 Million $33.9 Million Hong Kong $52.4 Million $60.4 Million 2006 Spring Auctions Undoubtedly, growing demand from China, India and other emerging markets has contributed to the rise in polished prices. These factors, combined with the shortages within the diamond pipeline have now commenced to push colored diamond prices higher. Rough diamond prices increased 40% in the last two years as diamond production declined over 32%. Location Sotheby’s Christie’s New York $17.5 Million $39.1 Million Geneva $25.3 Million $22.6 Million Hong Kong $28.3 Million $38 Million The auctions were sold close to 90% by lot and 93% by value, which is well above the historical averages of 80% by lot and 85% by value, confirming buyers desire for this ultra-rare asset class. This is evidenced by the fact that high-net-worth individuals increased their demand for more tangible assets, according to a recent report from Cap Gemini. At the New York auctions, results were equally impressive. The salesroom was packed with dealers bidding on stones. 10 Sotheby’s stayed true to its winning strategy of selling rare and beautiful jewelry. Most noteworthy was a rectangular, modified brilliant cut 7.67-carat fancy intense pinkish-orange diamond. This was the second top-selling lot of the sale, going to an anonymous buyer for $3.1 million, or $405,019 per carat — a true connoisseur’s stone. around the world, predominantly from South Africa, which is almost mined out. Sales at the auction, dealer and retail level continue to grow, so the blue diamond market should continue to grow dramatically while supply contracts. • Pink Diamonds — The Argyle mine in Australia is expected to close in the next few years, where 90% of the world’s pink diamonds come from. The parent company, Rio Tinto, is bringing pink diamonds to the Asian markets and doing a lot of work introducing investors to pink diamonds, so demand for these stones continues to rise. At the Geneva Auctions, bidding was intense on most of the lots, with fully three-quarters selling for more than the high estimate. The sale attracted worldwide attention, as 34 countries were on the buyer’s list. The room was packed with privates and dealers from four continents, with nearly 400 people eager to bid and buy. • A charming necklace by Cartier, set with an ovalshaped fancy light pink diamond weighing 2.8 carats was sold for $715,500, more than double the high estimate, to a member of the Swiss trade. Jewels from the private-owner collection, which was 99% sold, were bid for fiercely, especially by women. What’s the safest way to participate in this lucrative market? Pastor-Genève has three important suggestions. What’s the culprit for this increased auction activity? The Asian growth story is the biggest driver of sales growth and higher pricing. Asians were bidding and buying in Geneva and New York, and were very important buyers in those sales. Asian collectors have become more competitive. 1. Purchase colored diamonds from a specialist dealer. 2. Buy only certified diamonds. This protects you against purchasing counterfeit diamonds or stones that have been artificially colored. Certificates issued by the Gemological Institute of America (GIA) or a Stephen Hofer Report should accompany any purchase. Protect Your Wealth With Rare Colored Diamonds 3. View colored diamonds as a mid- to long-term investment. For long-term wealth preservation and growth, colored diamond should be held for at least five years. With central governments running up enormous debts, Arnaud Mares of Morgan Stanley predicts that the problems with sovereign debt may lead to a soft default in the form of devalued currencies resulting from faster rates of inflation. Colored diamonds are far more than a gem of an alternative asset. They offer you the ultimate form of concentrated wealth, beauty that will span generations, and a fantastic opportunity at today’s prices. TSI During this type of economic environment, tangible assets have always been the best vehicle to preserve your wealth over the long-term. Colored diamonds in particular cater to the wealthy, who have the means to own unique, beautiful and rare collector items. Steven Hershoff is the managing director of Pastor-Genève bvba, based in Belgium. For more information about colored diamonds, contact: Tel.: (866) 774-7723. Tel.: +(32) 3 2441871. E-mail: info@pastor-geneve. com. Website: www.pastor-geneve.com.) Pastor-Genève has three compelling recommendations for rare-colored-diamond buyers: • Orange Diamonds — These extremely rare pumpkin- and tangerine-colored diamonds only come from a few places around the world. There are several retailers looking to use orange diamonds in jewelry lines and they sell at a fraction of the price of a red or violet diamond, making them a good long-term value play in the market as wealthy buyers look for rare, undervalued collectibles. Blue Diamonds — These rare steel- and oceancolored stones only come from a few mines 11 Alternative Investment Opportuni pportunities ties The “Enron Spinoff” that Pays You and Lowers Your Tax Bills By Andrew Packer high as 90%), are considered a “return of capital.” In other words, you not only get a great yield, you don’t have to pay taxes on that income, because it’s considered simply a return of your money, rather than a capital gain. That’s going to be critical come January should the Bush tax cuts expire and taxes on capital gains and dividends start rising again. I’ve always loved high-yielding stocks. It’s always a treat to get my brokerage statement each month and see the cash rolling in. Unfortunately, in today’s lowyield world, simply sitting on cash isn’t going to cut it. Sitting on cash is the best, no-risk way to ensure a negative return especially as our current borderline deflation gives way to higher rates of inflation. So you have the advantage of company ownership, combined with the liquidity and yield of a publiclytraded security. That’s why this month I’m going to walk you through a stellar stock investment that will not only boost your income, it’ll give you some tax advantages as well! Obviously, the downside to this tax advantage is that you can’t take advantage of it in tax-deferred accounts like IRAs. But with the average yield of an MLP near 6%, it’s also better than cash in the bank. It’s not a convertible security, or a hybrid, or even a real estate investment trust (REIT). It’s a Master Limited Partnership (MLP). Cash Flow is King Let’s Start at the Very Beginning: MLPs 101 Most MLPs invest in infrastructure, so you also get consistent cash flow. A company that owns a pipeline simply charges a fixed fee for using its properties, no matter what the underlying price of oil or natural gas is. In other words, a pipeline is a fantastic way to play the world’s need for oil and gas without having to worry about fluctuating commodity prices. In many ways, an MLP is like a REIT, only MLPs focus on natural resources and infrastructure rather than real estate. This includes things like mining operations, oil and gas properties, but most MLPs invest in pipelines and other infrastructure. As a partnership, your share receives “quarterly distributions” that act like a dividend yield. That’s the income side. But here’s the kicker: the company’s depreciation expense is also pro-rated, so you can essentially “write-off” your share of the company’s depreciation. I love consistent cash flow, because it translates into consistent earnings. In this case, it means the shares of MLPs generally don’t have the kind of volatile moves that other stocks do. (Naturally, if there’s a major market correction, all bets are off.) Depreciation allows an asset to be written off over time, to reflect reduced economic value. So, a pipeline may have a useful life of 20 years before it has to be replaced, so depreciation deducts 1/20th the price of the pipeline each year from net income. If you own 1% of an MLP, each year, 1% of whatever that depreciated amount is shows up on your tax returns, not the company’s. And since the market bottom in 2009, MLPs across the board have begun to raise their distribution — at a time when many other companies have been slashing dividends and declaring bankruptcy. Ah, the power of investing in real assets! MLPs have mostly been under the average investor’s radar. That’s unfortunate, as MLPs, have managed to outperform stocks in the past 10 years while delivering lower volatility and higher cash payouts! And there’s more! A large amount of the distributions you receive (usually upwards of 75% and as 12 But interest is starting to pick up. The first ETF tracking a basket of MLPs just started in June. But it’s a trend that will pick up steam when investors start to look for a solid dividend and a way to avoid higher dividend tax rates. With natural gas scraping near record lows, it’s easy to see the advantage of owning the pipelines instead. By charging a fixed rate, Williams can turn a profit no matter what happens to the price of natural gas. But don’t tell the market — shares have been flat in the past six months. Size Isn’t Everything: A Small Cap, Hidden Gem in the MLP Business Williams Shares Flat in Past Six Months as Paychecks Keep Rolling In! There are some major players in the MLP field, and if you’re income inclined you’ve probably heard of Enron-spinoff Kinder Morgan Partners. As the “blue-chip” in the MLP sector, Kinder Morgan is a bit pricey — but at least something good came from Enron! 48 46 44 42 40 38 36 As an investor, size isn’t everything. In fact, it’s often detrimental to returns. Readers of my latest service Exit Alert Strategist know that I like dividends from smaller companies with a market cap of $10 billion or less (this gives us a great range of small and mid cap companies with value and growth potential). 2010 Apr May Jun Jul Aug Sep Grab Income With a Higher Yield and Lower Tax Rates Income matters. And with the Fed committed to maintaining ultra-low interest rates, you’re simply not going to get income from traditional sources like government bonds, bank CDs, or other traditional income plays. In addition to getting paid, there’s the possibility for a bigger company to come along and pay a premium to make an acquisition. That’s why within the MLP space, I like some of the smaller players. The best player for TSI readers is none other than Williams Partners (WPZ). Fortunately, there’s an entire category of investments that combines the best of high-yield investing with tax advantages. The company’s conventional metrics don’t appear too special on the surface: a P/E of 15, a fair amount of debt, and a return on equity of about 14%. These kinds of numbers are pretty typical for the MLP sector. Master Limited Partnerships (MLPs) provide exactly the kind of tax-advantaged income that investors are going to be clamoring for in the next few months. And there’s a rich supply of MLP companies with a great history of sharing profits with their investors. But what Williams does have is high operating cash flow, a 6.5% dividend yield, the tax advantages of an MLP, and infrastructure assets all over North America. Williams Partners (WPZ) is a BUY up to $45.00. You can buy this like any other stock or REIT. To enjoy the tax advantages above, you’ll want to use a regular, non-retirement account. It’s a great way to significantly boost your dividend yield in a low-yield world. TSI While many smaller pipeline companies are focusing on certain areas, like the Gulf Coast or the Marcellus Shale, Williams is laying down the pipe all over the country. I like that kind of diversification in my infrastructure plays, and many MLPs have much bigger geographic concentration. Andrew Packer is editor of the Credit Crunch Short Report. He is also Managing Editor for The Sovereign Individual, and serves as an Investment Analyst and Head Researcher for The Sovereign Society. Contact Andrew at [email protected]. And Williams has been on the buying end itself, and now controls enough pipelines to deliver 12% of the natural gas used in the United States. 13 Portfolio Update A Powerful One-Two Punch Growth Plus Dividend Income as TSI Portfolio Boosts Yields and Removes Laggards By Andrew Packer tions. The first is Kraft Foods (KFT). Shares have gone nowhere in the past few years. We’ve given the company time to see whether the acquisition of Cadbury can move Kraft’s bottom line. And the verdict is in: It can’t. Income is the name of the game this month! In today’s low-yield world, we’re continually scouting out the best global brands and strategies to boost income without resorting to low-yielding garbage like Treasuries and government bonds. Kraft has a great history of dividend payments, and a global footprint. Sell Kraft (KFT) at market. As of this writing, you’ll be locking in a small gain of about 7.4%. Considering that includes dividend payments and two-plus years of holding time, it’s been a major disappointment. We’re also weeding out some positions that have lagged the market in the past year, so that you can re-direct your capital into opportunities with better upside potential. Next, we’re closing out the Power Shares DB Agriculture Fund (DBA). When first recommended last year, the Fund contained an equal-weighting of four major agricultural commodities. Brave New High-Yield World: 3 New Income Plays this Month This month, we’re adding Roche, the Swiss pharmaceutical giant. It offers a discounted price to its historical average, a solid dividend yield, and a future product pipeline that gives it a competitive edge over other “Big Pharma” companies. That’s since changed to the point where it’s a basket of all currencies — and it’s so diversified that the prospect for any real gains in one ag commodity will be offset by a loss in another. Sell DBA at market to lock in the 7.3% gain in the 18 months it’s been in the TSI portfolio. Shares of Norwegian financial powerhouse DnB Nor are a also buy this week. This one bank has nearly half the Norwegian market, and offers exposure to one of Europe’s better-managed countries. Chaos Portfolio, Physical Bullion Remain Best Buys Finally, we’re adding Williams Pipeline for its great dividend and growth potential. As a Master Limited Partnership (MLP), the company also provides for certain advantages on the tax treatment of its dividend payments. Physical bullion remains strong, thanks to gold surging to new highs in mid-September. There’s a good possibility of a pullback after such a move, we’re moving our mining positions to a HOLD. Longer term, this trend will continue, so if there’s a chance to pick up gold (and silver), focus on bullion first. Rotating to Value: Freeing up Cash for New Opportunities The TSI Chaos Portfolio, designed to hedge against market crashes, currency crises, credit market shutdowns, and other chaotic events, is always a buy. Be sure to purchase each of the Chaos Portfolio’s six positions in an equal-weighting. In addition to safe sources of income in a lowyielding world, it’s always wise to lock in profits on positions that make big moves — and it also means we close out positions that have essentially treaded water after more than a year. In a nutshell, grab some income, go global, and stay safe — and sovereign — out there in this market! TSI This month we’re closing out two recommenda- 14 TSI PORTFOLIO Symbol/ Buy Total Total Investment ISIN Added Price 9/17/10 Returns DividendsAdvice Notes TIME TO BUY Dnb Nor DNBNOR.OLOct-10 $77.40 $77.40 NEW $0.00 BUY Norwegian financial powerhouse! Roche RHHBY.PK Oct-10 $34.11 $34.11 NEW $0.00 BUY Best-of-breed global pharma player Williams Pipelines WPZ Oct-10 $42.89 $42.89 NEW $0.00 BUY MLP structure for high yield, lower taxes TIME TO Sell Power Shares DB Agriculture Fund DBA Jun-09 $25.61 $27.50 7.38% $0.00 SELL Overly diversified; narrow trading range Kraft Foods Corp. KFT Jun-08 $31.63 $31.40 1.45% $2.59 SELL Cadbury acquisition failing to boost profits THE LATEST ON OUR OPEN POSITIONS: COMMODITIES & ENERGY PORTFOLIO ASA ASA Feb-00 $14.89 $29.49 165.88% $10.10 HOLD Split 3:1 on April 5th 2010 Canadian Maple Leaf 1 Ounce Coin EverBank Dec-09 $1,184.00 $1,323.29 11.76% $0.00 HOLD Soros and Paulson Long Gold Barrick Gold ABX Feb-00 $15.28 $45.90 218.46% $2.76 HOLD EnCana Corp ECA Jun-10 $32.68 $28.26 -12.30% $0.40 BUY Best play on nat gas! ENI Spa ADR E Nov-07 $28.53 $42.67 125.80% $21.75 HOLD Expanding natural gas ties with Russia Gold bullion N/A Apr-04 $428.63 $1,274.00 197.23% $0.00 BUY Euro-zone mired in currency chaos! Goldcorp GG Jan-05 $14.87 $42.97 195.63% $0.99 HOLD Best of the Major Gold Producers Silver bullion N/A Aug-09 $13.35 $20.75 55.43% $0.00 BUY Silver rallying more than gold Silver-Wheaton SLW Jul-06 $9.86 $25.38 157.40% $0.00 HOLD Earnings boost as silver rallies in ‘10 ULTIMATE INCOME PORTFOLIO Coca-Cola KO Jul-10 $52.14 $57.51 11.14% $0.44 BUY World’s Best Brand Diageo DEO Aug-03 $37.25 $67.89 128.72% $17.31 HOLD Hard times = more liquor sales Fairfax Financial Holdings FRFHF.PK Feb-10 $384.02 $403.67 5.12% $0.00 BUY Undervalued Cad. insurance play Government Properties Income Trust GOV Dec-09 $23.88 $26.34 15.37% $1.21 BUY Uncle Sam paying the rent! Hussman Strategic Growth Fund HSGFX Jul-09 $13.02 $13.35 2.69% $0.02 HOLD New age investing; long & short Man Group PLC EMG.L Apr-10 £248.10 £235.60 -4.04% $0.00 BUY Stock in rare drawdown! McDonald’s Corporation MCD Feb-10 $62.32 $74.80 22.67% $1.65 HOLD Defensive high-yielding stock Nestle ADR NSRGY.PK Apr-08 $46.78 $52.01 16.93% $2.69 BUY World’s largest food company New Zealand Telecom NZT Jun-10 $6.32 $7.56 22.94% $0.21 HOLD Pacific Rim’s finest telecom Qualcomm Inc. QCOM Apr-10 $39.00 $41.97 8.59% $0.38 BUY Strong cash-flow, boosts dividend Unilever UN Aug-10 $30.02 $28.32 -4.76% $0.27 BUY Global defensive company on the cheap BEYOND THE DOLLAR PORTFOLIO All-Weather Portfolio EverBank Feb-07 $10,000.00 $10,995.00 9.95% $0.00 HOLD Instant dollar diversification Asian Currency Portfolio EverBank Aug-07 $10,000.00 $10.586.00 5.86% $0.00 BUY Strongest currencies in the world! CurrencyShares Australian Dollar Trust FXA Feb-10 $93.25 $93.86 2.77% $1.97 HOLD Tied to China boom, commodities CurrencyShares Mexican Peso Trust FXM Apr-10 $79.32 $78.08 -0.28% $1.02 HOLD Undervalued versus USD; oil play Everbank BRIC MarketSafe CD EverBank Aug-09 $1,500.00 $1,542.45 2.83% $0.00 HOLD Resource currencies, surpluses Access Deposit Account (Singapore Dollar) EverBank Sep-10 $2,500.00 $2,500.00 0.00% $0.00 BUY Strong economy, strong currency! iShares Canadian Corporate Bond Index Fund XCB May-09 C$18.94 $20.69 15.96% $1.04 HOLD Canadian dollar near par with USD Wisdom Tree Dreyfus Indian Rupee ICN Jul-09 $24.44 $25.69 5.11% $0.00 HOLD Rupee undervalued vs USD GLOBETROTTER PORTFOLIO Market Vectors Solar Energy ETF (SHORT) KWT Jul-10 $10.84 $12.08 -11.26% $0.00 HOLD Subsidy-dependent industry XinAo Gas (HK) 2688 Jul-10 $18.12 $23.75 30.64% $0.00 BUY Off-the-radar China Play Singapore Fund SGF Sep-10 $13.55 $15.05 11.07% $0.00 BUY Best way to own Singapore on NYSE SocGen SCGLY.PK Aug-10 $11.00 $11.92 8.36% $0.00 BUY Revised buy price per issue alert The Arbitrage Fund ARBFX May-10 $12.98 $12.86 -0.92% $0.00 HOLD Low-risk investment strategy CHAOS PORTFOLIO (CRISIS INVESTING) CurrencyShares Japanese yen ETF FXY Sep-07 $86.78 $115.30 32.84% $0.00 BUY When the USD falls, yen rises PIMCO Total Return Class D PTTDX Nov-09 $10.95 $11.49 7.85% $0.33 BUY Deflation hedge iPath S&P 500 VIX Short-Term Futures ETN VXX Oct-09 $60.96 $17.38 -71.49% $0.00 BUY Stop-loss waived; VIX is cheap! iShares COMEX Gold Trust ETF IAU Dec-07 $7.75 $12.48 61.03% $0.00 BUY 10:1 stock split on June 24 ProFunds UltraBear Investor Class URPIX Apr-06 $16.52 $8.73 -39.47% $1.27 BUY Stocks overbought, correction looms Federated Prudent Bear Fund BEARX Dec-07 $6.02 $5.18 11.63% $1.54 BUY Stocks overbought, correction looms 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. 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. For transparency sake, we want you to know that we have an advertising relationship with EverBank. As such, we receive fees if you choose to invest in their products. Stop-losses: The TSI Portfolio maintains a 20% stop-loss on every stock, ETF and bond recommendation; stop-losses are not exercised for mutual funds unless otherwise noted. 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), (www.jbpb.com), and websites maintained by securities issuers. Publisher................................Erika Nolan Associate Publisher...............Dawn Pennington Investment Director...............Eric Roseman Senior Markets Analyst................ Jeff Opdyke Legal Counsel.............................. Robert Bauman Graphic Designer......................... Bruce Borich Currency Analyst........................................ Sean Hyman Portfolio/Managing Editor.................... Andrew Packer The Sovereign Individual is published 12 times per year for US$99/year by The Sovereign Society®, 98 S.E. 6th Avenue, Ste. 2, Delray Beach, FL 33483, USA. For information about your membership, contact Member Services at 888-358-8125 or fax 561-272-5427. Our email address is: [email protected]. ©2010 Sovereign Offshore Services LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the worldwide web), in whole or in part, is strictly prohibited without the express written permission of The Sovereign Society®. LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. 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. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. 15 Travel the Sovereign Way The 5th Annual Offshore Advantage Seminar A Beginner’s Guide to the Offshore World November 3–6, 2010 L CHAAST NCE ! The Sheraton Hacienda del Mar Golf & Spa Resort of Los Cabos, Mexico Over four days this November, The Sovereign Society is hosting a private event to show you how to master the offshore world. • What the difference is between an asset protection trust and a foundation… and a great way to determine which best suits your needs. Our goal: To give you all of the tools necessary to protect and grow your wealth by taking advantage of the offshore opportunities most people will never learn. • Whether an offshore variable or fixed annuity will provide you with the greatest profit potential and asset protection. To be clear — no matter what your level of experience, this event has something for you. • A simple, direct way to create a tax-efficient, near-judgment-proof estate that will be bullet-proof beyond 2010. You’ll see presentations from our team of experts and some special guests who are prepared to give you a user-friendly introduction into the world of offshore banking, asset protection, profits, privacy and security. You’ll get simple, straightforward lessons that will teach you everything you need to know about the offshore world… From private investment firms in Switzerland and Denmark… to trusts and family foundations that send sue-happy contingency fee lawyers running... to high-growth/low-risk investments in Asia, Latin America and Europe... to insurance, asset protection and tax-saving vehicles that defy U.S. bureaucrats by complying with U.S. laws. You’ll learn: • Why it is even easier now to find an international money manager despite the UBS scandal • A simple way to comply with U.S. laws, yet still fly “under the radar” of lawyers, crooks, overzealous bureaucrats and con men. This is your last chance to order your tickets! Don’t wait another minute. Please call Opportunity Travel at 1-800-926-6575 ext. 105 or 106 to reserve your spot. • The top international investment opportunities arising from the recent market volatility. 2011 Total Wealth Symposium Sign Up Today for the 6th Annual Total Wealth Symposium! Come Join us in Beautiful Panama City, Panama, April 2011 Join us for the latest information on preserving your wealth offshore, international investment strategies, and much more! Sign up today to take advantage of early-bird pricing! TWS 2011 Early-Bird Pricing: Member pricing:...............$429 Non-member pricing:.......$449 Guest pricing:....................$449 Panama City, Panama 16 Supplement to The Sovereign Individual Unique Elegance, Lasting Value … Wear and Enjoy Your Wealth. In an age of the artificial and unreliable, there are few things that truly endure. The solid-gold jewelry from The Heirloom Collection is one of them. These spectacular necklaces and bracelets – each one handcrafted by a skilled artisan – will become a treasured gift by anyone fortunate enough to receive one. The design for this jewelry is both historic and unique. Each link is made from pure 24-karat gold, which has a depth and luster unlike anything you will see at a mall jewelry store. The design is based on the Baht – a medium of exchange that has been used in the Far East for more than 100 years. I first encountered the Baht in 1975, when I was asked by our government to assist the flood of refugees pouring into our country from Vietnam. At the time, I worked for the world’s largest currency-exchange company. My task was to help these refugees exchange their gold and foreign currencies for American dollars, so they could begin their new life in the United States. Sadly, most of the people I saw had nothing worth exchanging. They began their lives here as penniless immigrants. But a fortunate few had exchanged whatever assets they had in Vietnam for gold. Many of them, in fact, wore their wealth in the form of necklaces and bracelets that our company, First Collectors Guild, replicates today. Wearing personal wealth continues as a centuries-old tradition in Asia, Africa and South America. Our artisans handcraft the Baht, a traditional Thai design. Every item in The Heirloom Collection is Individual golden Baht links were commonly used as lovingly handcrafted by artisan jewelers. That currency, worn around the neck and broken off as needed. is why no two pieces are quite alike. Yet, They ensured an individual’s assets were not at the mercy of each link is made with the precise amount of governments, banks or burglars. And, while they were protecting their wealth, they got to wear it as well. Today, The Heirloom Collection brings customers authentically handcrafted beauty in the form of pure Baht links, with necklaces and bracelets connected by either the traditional dragon clasp or the commonly preferred lobsterclaw clasp. gold you desire and forged with an artist’s eye for detail and beauty. The Heirloom Collection’s classically elegant 24K gold pieces mark the return to a time when wealth was something you possessed and passed from generation to generation. When treasured keepsakes like these were prized for their beauty, but also for their ability to keep wealth close to home and close to your heart. You really can’t compare this unique, 24K gold jewelry to watered-down 12K, 14K, 18K and even 22K jewelry. The deepness of 24K gold’s luster is only surpassed by the richness of gold’s 6,000-year history. Yet, on a per-ounce basis, The Heirloom Collection typically sells at 25% to 50% of the prices of the inferior products you will find at the mall. For those of us who struggle every year to find that exceptional holiday gift for our loved ones, The Heirloom Collection can be the perfect solution. And, although they may seem far away as you read this today, the holidays will be upon us before you can blink. So now is decision time. Learn more about what The Heirloom Collection has to offer by going to www.heirloom24K.com. Then, call us toll-free from the U.S. and Canada at 866-885-6971 or direct at 301-881-8600. I think you will agree; this distinctive jewelry will make a highly prized gift of lasting elegance and value. And rather than locking these wonderful examples of the craftsmen’s art up in a vault, your loved ones will have the pleasure of wearing and enjoying their wealth for many years -- perhaps generations -- to come. Respectfully yours, Michael Checkan, Executive Vice President Wealth you can protect. Wealth that can travel with you. Wealth you can wear. P.S. To ensure delivery for the holidays, we must receive your order before November 12th. You cannot rush handmade perfection. Since the price of jewelry in The Heirloom Collection is based on the underlying spot price of gold, plus a modest premium, all orders must be placed by telephone with a representative of First Collectors Guild. Once the price of your purchase has been agreed upon, you will be issued a confirmation number. Upon receipt of cleared funds, your jewelry will be hand-made to your exact specifications. Approximately four weeks later, it will be shipped to you via registered/insured U.S. Mail, return receipt requested. Your satisfaction is, of course, guaranteed. First Collectors Guild Suite 400, 1700 Rockville Pike Rockville, Maryland 20852-1631 www.heirloom24k.com 866-885-6971 * 301-881-8600 SUPPLEMENT TO THE SOVEREIGN INDIVIDUAL The InsIder’s VIew Leading Source for Trends in the Coin Market Nicholas J. Bruyer, CEO First Federal Coin Corp. ANA Life Member Since 1974 Finally, a crack in the Great Wall of China! I pulled off a deal that no other coin company in history has ever negotiated. Unfortunately, only a few of you can take advantage. Dear Sovereign Individual Subscriber: “Eighty percent of success,” said Woody Allen, “is showing up.” I always listen to Woody. Years ago I recognized the huge untapped potential in gold and silver coins minted by the venerable China Mint. My company “showed up” and has been buying them ever since. In fact, we’re the U.S. leader in the China coin market. One of the most popular world coins I’ve sold is the tenth-ounce Chinese Gold Panda. Coin collectors across the planet love them too. The China Mint strikes them every year. And every year they’re best sellers and often sell out. As their knowledge of coins has grown, so has their understanding and appreciation for coin grading. And that’s a direct parallel to what’s happened in the United States. Quality is the No. 1 driver of value in today’s coin market. Coins graded by the two leading grading companies, Professional Coin Grading Service (PCGS) and Numismatic Guarantee Corp. (NGC) are in higher demand than nongraded coins. More importantly, graded coins sell for a much higher premium. The Chinese caught on very quickly. If you love gold, you’ll love the people who love Chinese gold First Strike coins become the Holy Grail in the collector markets After decades when their own government forbade it, the Chinese are now voracious buyers of precious metal coins from their own national mint. One of the more recent developments to capture the collecting world’s imagination is the advent of what’s called a First Strike™. What you may not know is that these new collectors are not only passionate about coins. They’re amazingly sophisticated. These are the earliest coins struck off the dies, and are believed by collectors to be the finest examples of a mint’s work. As a result, they carry a premium value above and beyond even the highest grades. But getting them has always been my challenge. When they’re available, the quantities are so small it’s almost ridiculous. For example, a miniscule number of First Strikes were certified by PCGS in the last couple years. You’ll laugh when you see the numbers: 154 in 2008. And a mere 25 in 2009! over, please... Call Toll-FREE today 1-800-222-3891 to Reserve Your 2010 First Strike Gold Panda Actual size is 18 mm These quantities hardly qualify as even the proverbial “drop in the bucket” when we’re talking about the gigantic China market. Fortunately, thanks to my longstanding relationship with the China Mint, I persuaded them to give me something they had never done before. For the first time, the China Mint presented a letter certifying its earliest minted coins as First Strikes. When I say first time, I mean the China Mint has never supplied such a letter before. Ever. A major world mint put in writing the fact that the coins I purchased are authentic, certified First Strikes. That’s unprecedented. When I sent these governmentcertified Tenth-ounce Gold Panda First Strikes to PCGS, I knew the news would be good. I had no idea how good. A significant number of my tiny cache came back in the near-perfect grade of MS69. This is one point shy of absolute perfect, MS70. This is the first time we’ve ever had any quantity of certified First Strikes. It’s a very limited opportunity that’s sure not to last. Of course, there’s no way to predict what a coin’s future value might be. But, the 2006 20th Anniversary Silver Eagle from the West Point Mint is a great example. Today it’s valued at $1,450 in MS70 condition. The First Strike version of the same coin boosts its value to a remarkable $2,000! Take advantage of a collector’s obsession I’m making my entire allotment of Tenth-ounce Gold Panda Certified MS69 First Strikes available to loyal readers like you. The clincher is the price: You can get in on these Tenth-ounce Gold Panda MS69 Certified First Strikes for as little as—$235 each. Purchase your Tenth-ounce Gold Pandas individually or in these multiples: One for only $279 Three for only $269 each Five for only $255 each Ten for only $235 each One reminder: These coveted Gold Panda First Strikes are very popular. When my supply is gone, they’re gone forever. Please call 1-800-222-3891 today to place your order and remember to mention Offer Code SD204. As always, your satisfaction is assured by our 30-day risk-free money-back guarantee! Sincerely, That’s chump change. That’s mad money. That’s a deal! How do you know that? Because I’m also selling the Tenth-ounce Gold Panda MS69 non-First Strike for only $219. For only $16 more, you get a vaunted First Strike! My supplies are very limited and I expect them all to quickly sell out at this price! Nicholas J. Bruyer, CEO American Numismatic Association Nicholas Bruyer First Federal Coin Corp. Life Member 4489 Prices subject to change without notice. Please remember, past performance is not an indicator of future performance. Nicholas Bruyer is an award-winning professional numismatist with more than 30 years of coin market experience. His firm is the distributor for Odyssey Marine Exploration and a distributor for the London 2012 Olympic Games Coin Program. Since 1985, hundreds of thousands of satisfied customers have acquired coins from First Federal Coin Corp. and its parent company. Note: First Federal Coin Corp. is a private distributor of worldwide government coin issues and is not affiliated with the United States Government. Facts and figures were deemed accurate as of August 2010. First Strike™ is a registered trademark of Professional Coin Grading Service (PCGS). Copyright ©2010. Don’t Delay, Call NOW at 1-800-222-3891 offer code: SD204 ©First Federal Coin Corp, 2010 AMS-SVS1010