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.
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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
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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
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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
info@sovereignsociety.com.
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 info@nestmann.com 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
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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.
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Krone Outruns the Credit Crisis,
Outpaces the USD by 30%
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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.
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Shares Back on Steady Uptrend
Following ’08-’09 Market Crash
2006
2007
2008
2009
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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
info@sovereignsociety.com.
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 info@sovereignsociety.com.
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 info@sovereignsociety.com.
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: info@sovereignsociety.com. ©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