Thank you for your great questions and comments this week, and I wish you a wonderful weekend (and for many of you, the start of summer already!).
Next week is the Kung Fu Kids’ very last week of school, and also our last week in California before heading for the shores of a beautiful lake in Michigan to spend the summer before returning to Palo Alto again this fall.
Hopefully I will have more exciting financial adventures to report on from Michigan (it probably doesn’t sound as exciting as California, say, or New York City, but believe me, it holds its own) 🙂 and if any of you are located in Michigan please let me know and I will schedule a meetup—it would be great fun to meet you in person!
But enough about me, onto this week’s questions!
First, Jeff asks,
Why would lack of stimulus verbiage cause gold prices to fall? I would imagine they would continue to rise as belts tighten even further.
Great question! Most people buy gold as a means of insurance against the devaluation of world currencies (especially against the devaluation of the dollar). When Bernanke agrees to more stimulus (e.g. he prints more dollars) he is implicitly devaluing the dollar and causing fear of rampant (even hyper) inflation, which is good for gold prices (especially in dollar terms).
But when he decides not to introduce more “stimulus” (dollars) into the economy, gold tends to suffer because that implies a stronger dollar (and an eventual increase in interest rates) which is bad for gold.
However, you are fundamentally correct—on a long-term basis nothing has changed, and in fact I believe that it is only a matter of time before more “QE” is officially announced. This could happen at the upcoming June 20th Fed meeting, or later in the year (my guess is later, but that is simply a wild guess—I have no earthly idea when Ben Bernanke will do anything!). But I do believe it’s a matter of “when”, not “if”.
Thanks for your great question, and let me know if I answered it to your satisfaction—there are many factors that drive the gold market and this would be a great full-length article topic.
Next, Anton asks,
Dear Kung Fu Girl:
As a long time reader & an avid fan, I think your readers could use your help with the following. It has been suggested by many – including yourself – that it MIGHT be wise to have a second citizenship and/or either property or currency out of the United States:
1) How would one go about determining which countries MIGHT make for good second citizenship choices? And why?
2) Which countries (or currencies) MIGHT make the best choices for diversification?
3) Which countries MIGHT be good prospects to own property?
4) How best to go about owning gold and other metals?
I – as well as many of my friends & associates – need help with these issues. Please guide us.
I realize that these are only opinions and certainly not binding in any way on you…
Please help, as I am lost on how to get started. Thank you.
Thank you Anton! I love having avid fans (that’s so nice of you) and you ask a great question.
Yes, I believe that having a second citizenship and property and currency outside of the United States is a great idea (you don’t even have to say “might”—I definitely believe it’s a good idea, no “might” about it!).
And I would strengthen my stance even further to say this applies to most any native country you might hail from, not simply the U.S. (although in general we do tend to be more insular here).
Capital flight is already happening in Europe, and of course to combat this natural tendency, governments have imposed capital controls, from onerous reporting requirements on transactions over a certain number of euros to restrictions on withdrawals of your money, and are considering making these controls even tighter.
Just take a look at some of the most recent proposals:
This may be “pitched” to the public as a way to prevent migration between countries, but it will also have the side effect of stopping people from leaving their home country (e.g. Greece) and taking their money into another country (e.g. Switzerland).
And speaking of Switzerland, we have this recent article from the Financial Times…
2. “Swiss eye capital controls if Greece goes” (Financial Times, 5/27/2012)
“The Swiss National Bank is considering imposing capital controls on foreign deposits if Greece leaves the euro, as the franc comes under heavy demand from investors seeking a haven in Europe.
Speaking to Swiss media, Thomas Jordan, head of the Swiss central bank, said the Swiss government and the SNB were looking at ways of dealing with an expected flood of foreign money into the country in the event of a Greek exit from the eurozone.”
So yes, I believe getting some of your hard-earned money out of your current home country and acquiring a second passport and perhaps even a new “bolt hole” is extremely important.
So, back to your question—how to get started?
First off, to determine which countries might make for good second citizenship options, I would do the following:
Both of these are well-known and reputable sources of international information and they both offer a wealth of free information on just this topic. They also offer paid-for subscriptions that in my estimation are well worth the money if you are serious about internationalization.
2. Ask important questions (see below).
Like most decisions in life, deciding which countries might make a good second citizenship option for you is very personal.
For example, many people whom I know personally, particularly from Argentina, are pursuing (or already have) a second passport from Paraguay.
This is a great option for many people, but unfortunately it’s a terrible option for myself and Kung Fu Guy. Why? Because Paraguay does not allow naturalization of minors, so we would not be able to obtain passports for our children, which is a deal-breaker for us.
But either of the two sites I mentioned above will have loads of information on exactly which countries are good for which type of person and why, so I highly recommend you start there.
Then, when you are making your list of possible candidates, make sure you ask the following questions:
A. Does the country allow second citizenships?
For example, I would love to have a Singapore passport, it’s one of the best travel documents in the world, but Singapore does not allow one to have another citizenship, so I would need to renounce my U.S. citizenship, which I do not want to do (at least not yet, LOL—I’ll give the politicians a few more chances).
Now, you can say that “in practice” Singapore “does not check” (e.g. it’s not enforced), but that’s not a risk I’m willing to take, particularly from a country that canes people for minor transgressions. (Nothing at all against Singapore here—I really do think it’s a great country and would love to live there, strict rules and all, but it’s not a place where I would want to be caught breaking the law).
B. Does the country have a mandatory armed service requirement or a draft?
Many do…again this depends on your age and what you think about this, but it’s not what I want for my family.
C. Does the country tax you on worldwide income, or just on money you earn in that country?
D. How “good” is the passport—will it allow visa-free travel to many countries?
E. How long does it take to obtain residency and a subsequent passport?
F. How much time must you spend “in country” to obtain residency / passport?
G. How much does it cost?
H. And of course the obvious….do you really like it there and would you actually want to LIVE there on a semi-permanent basis if required?
Wow, I could write a week’s worth of posts on internationalization alone.
Some countries offer something called “economic citizenship”, but I have only heard of two that are “real” and well-respected travel documents (and they are very expensive).
St. Kitts and Nevis is one (last I checked it was approximately $380,000 for our family of four…I’m having a tough time convincing Kung Fu Guy on that one although I think it would be great…) and Dominica is the other (slightly cheaper, but also a “slightly worse” travel document).
BEWARE of websites that promise you “instant” passports or anything remotely resembling that—these are all government-issued documents and you need to make sure you have reputable information from reputable people, which is why I recommend either Brandon from International Man (great guy) or Simon from Sovereign Man (also a great guy). I’ve met both in person and would vouch for either one—I will try to interview one or both of them and let you know!
On the flip side of “expensive-yet-fast”, if you happen to be lucky enough to be of Irish or Polish or Japanese descent, you can possibly apply for a passport there (although the rules vary dramatically from country to country as to whether your parent had to be born there, or your grandparent, or…). But if you have something like that going for you, it’s a terrific option! (Sadly, Kung Fu Guy and I are out of luck there—we’re both fourth-generation Americans, although he is fully Japanese).
For asset diversification, I will give you two answers:
1. Wherever you will actually DO it
(e.g. many people in the “international” world make fun of Americans who “internationalize” to Canada, for example, because Canada is so close to the U.S. in so many ways, geographically and otherwise. However, if it is “Canada or nothing” for you, then go for Canada and be happy and proud that you’ve taken some action!) People get so caught up on doing something “perfectly” that they end up doing nothing, which is criminal, so my first recommendation is to simply pick a place that you will DO.
2. If you can, I recommend Singapore or Hong Kong—two strong Asian banking centers with strong, well-funded banks. (Obviously do your due diligence on whichever bank you choose).
It is possible to open up a Hong Kong bank account at HSBC without leaving the U.S., although I do not know this from personal experience (yet)—I will have more to report on this soon, however.
Singapore is more difficult if you are an American—you need to open up an offshore entity (e.g. a Marshall Islands or some such entity) and then open up an account using that. (If anyone knows differently or knows a way around that please let me know!)
3. Personally I am looking in Uruguay, also, because I have property in Argentina (which, by the way, is a TERRIBLE place to store your money, so I would not recommend Argentina!).
For your final question, how best to go about owning gold and other metals, I have written about that awhile back (although I need to find the links for you) and can certainly write more in the future. I recommend physical metals if you don’t own any yet, and you can use a company like GoldMoney or Perth Mint certificates to store your gold internationally. I can devote an article (and in fact have promised another subscriber to do so!) to storing physical gold overseas, and shipping it, too, which is more difficult than it appears on the surface.
I hope this at least gets you started…it is such a huge topic (indeed, there are websites devoted to just this aspect of finance) that I could write about it for weeks! Please let me know if this has helped or if you have more questions…we can discuss all of these sub-topics in much more depth in future posts.
Thank you for your great question!
Next, Scot asks,
As a fellow newsletter junkie, I’m curious as to how you keep track of the advice and recommendations from all the various publications. I have a bookshelf full of three-ring binders, and have yet to find a good system to cross-reference and track recommendations. I’m a software developer and I have been considering creating something myself, but I’m wondering what others to do manage the copious amounts of information that streams in from print and online newsletters, blogs, etc. I can’t be the only one with this problem.
Keep up the good work!
Hi Scot, this is a great question. Information-overload…it’s awesome on the one hand and yet absolutely maddening and panic-inducing on the other. The blessing and the curse of the great “Information Age”!
Let me tell you, if you can solve THAT problem you will never want for money again. Ever.
(Seriously, there are many startups now that are attempting to do just that—deal with email, which used to be so welcome and now many times is seen as an unwanted hassle—my friend and mentor Matt Smith uses something called awayfind.com, and many other startups are also cropping up to attempt to solve this problem).
Like you, I used to have a shelf full of three-ring binders, and still do for some things, but lately I’ve switched more to only organizing things online (so in that respect your software idea is verrrry intriguing!).
I have just recently implemented filters for my email, because I literally receive more than 1000 emails per day…yikes. And I needed a better way to separate out the email that I want to read immediately and respond to, like from you dear Kung Fu Finance readers and my friends and family, from the umpteen newsletter subscriptions that I have (which I love, but want to read on my own schedule).
(Hopefully you will notice a vast improvement in my response time in the future from this change!) ☺
But your question is very interesting because it brings up a much bigger question that I will tackle in a future full-length post—what is your strategy for getting from point A to point B and then what is the best way to implement that strategy?
Because in all honesty, your question stumped me at first. The vast majority of the time I actually do not feel “flooded” with recommendations, and I had to think for a moment as to why that is, because I definitely am as overloaded with financial information as anyone!
However, I think the main difference is that I have taken the time over the years to put together my personal investing strategy, which immediately rules out all kinds of opportunities and recommendations which would otherwise overwhelm me.
For example, I do belong to Porter Stansberry’s “Alliance” club, but I only pay attention to about 1/100th of his newsletter editors’ specific recommendations. I love having access to all of the different strategies (some of his publications focus on options trading, others on buying world-dominating dividend-paying stocks, others on bonds, others on penny stocks, others on resource stocks and metals, etc.), but I am far more interested in his analysts’ high-level analysis than their short-term “buy this stock today” recommendations. And, I only focus on one or two of his “strategies” at any given moment that fit within my own personal investment strategy.
I hope this makes sense.
I covered this a bit back in some initial White Belt and Yellow Belt articles:
Determine where you want to go (Create your vision and commit), and
Take stock of where you’re starting from (Get your current financial house in order…Order from Chaos)
…and then I got sucked into some other interesting financial information and began reporting on that and haven’t yet gone back to picking up the belts where I left them! (Shame on me—obviously I need a better strategy for my website, like I have for my investments!)
(Actually, I am working on that very diligently right now, and hope to have some extremely exciting news to report on that front soon!)
But back to your point, I honestly don’t have an official “system” for keeping track of recommendations, other than in my head, and yet I don’t feel overwhelmed.
This is because at any given point in time I am only focused on a few “strategies”, and over the years my strategy has changed from investing primarily in the stock market as a retail investor to spending the majority of my time (and assets) investing in so-called “alternative investments”. I now invest in private equity (which I evaluate on an a very individual basis), rental real estate (which also doesn’t really lend itself well to “picks”), physical gold and silver, currencies, foreign real estate, etc.
It’s not that I’m never in the stock market — I do sell puts and calls from time to time (which is my cheap-o way of buying “world dominating dividend payers”) and right now am averaging into some mining stocks, but I’m more concerned about the impact of Europe’s crisis and the worldwide debt problem and the impact that will have on the stock market should one of the black swans land soon than I am on trying to “make it big” in the stock market. (Not that I’m implying that you are trying to “make it big”…I’m just trying to explain why I don’t feel flooded with recommendations).
Likewise, I believe most bonds are a terrible investment right now (although again this is personal…it’s not that no one can find a good deal on specific types of bonds, but they don’t fit my personal situation and strategy currently so all new bond recommendations I can simply ignore.)
It’s much like how Craig Ballantyne wrote his 12 Rules for Living (and I wrote mine)—it immediately simplifies your life and makes so many previously difficult decisions abundantly clear and easy, because they simply don’t fit with your “rules for living” (or investing) so you don’t even consider them.
I have my personal investment strategy (which does change and evolve as the worldwide economy and global markets and I myself change), but it serves the same purpose—it allows me to eliminate a vast majority of “recommendations” that don’t suit my personal situation and strategy.
I hope this makes sense…I will definitely spend more time on how you can formulate your own personal investing strategy to get you from point A to point B, so that you can have more peace of mind, too! Thank you for your great question!
That’s it for today…I hope you have a fantastic weekend!
Thank you very much for being an awesome Kung Fu Finance subscriber…I truly appreciate all of your helpful comments, questions and feedback.
To your financial success!
— Kung Fu Girl