Peter Macfarlane comments on Gold Bullion Investing, the Dollar-Euro rate, and Crisis Investing Opportunity in Hungary for The Q Wealth Report

I’m trying to get ahead of myself at the moment in order to take a little time off in August. The result of this is that I’ve got behind on some other things, like keeping up with the news. Besides, I’m a traditionalist who still likes reading magazines in print, and they sometimes take a while to catch up with me on my travels.

Hence, I’m only commenting now on an interesting article in The Economist dated July 10th. They got my attention with the cover headline “Why Gold Has Probably Peaked.” Huh? How could the Economist be saying that? Here’s a quote from the article:

At some point either the worst fears of the gold bugs must be realised – in which case, heaven help us – or the world will become a less nervous place.

The hypothesis of the article is that demand in India and China for gold jewellery is shrinking, that gold is not a great investment because it doesn’t pay interest. As the world economy returns to business as usual, says the Economist, “the gold market may also return to some semblance of normality” – in other words downwards.

Well I can’t disagree that if the global economy really does get better, gold quoted in dollars might fall. But the idea that the global economy is getting better, or that the world is suddenly about to become more tranquil and relaxed, really is a stretch…

Sometimes I think Americans have a hard time understanding Europe, as I have written recently in my comments on the Euro. I said the Euro would recover and now it’s back above 1.30 to the greenback. But the Economist is very European in some ways and it seems they have a hard time understanding Americans. I mean, if they think the world economy is returning to business as usual, what planet are they referring to???

Most of my days at the moment are taken up with Americans who want to get out of the USA. They are looking for offshore investments, foreign residencies and economic citizenships. Of course if we get bogged down in our daily routines we might be able to block out of our minds what is going on – and that is what the majority do, because they don’t want to leave their comfort zones.

However, just think back to two years ago, even a year ago, and see how things have changed – for the worse. Anyone who thinks business is getting back to normal is living in cloud cuckoo land.

Here’s something else I like. The article quotes Willem Buiter, and Anglo-Dutch economist who blogs at the FT under the moniker maverecon as saying he would not invest:

into something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs.

Apparently, Buiter was talking about gold when he said this! However I would say it about fiat currencies like the dollar, euro or pound sterling. Is he seriously trying to tell us that say the US dollar has intrinsic value based on anything other than self-confirming beliefs? (In that case, the dollar is backed by the full faith and credit of the Obama government…) Give me my gold bullion I can touch and feel over paper and electrons any day!

On a slightly different but related topic, my fellow traveller Simon Black who blogs as Sovereign Man has written a couple of interesting pieces on fiat money recently. In what I think is an excellent analysis, he explains why trillions of dollars of institutional money are constantly looking for the least worst currency to hang out in, leading to frequent switching between the dollar, the euro and the yen in a race to the bottom. This keeps the three currencies almost even in the race to the bottom, so people don’t really notice the devaluations going on… but like any landing in a storm, there’s a lot of turbulence.

Then yesterday Simon wrote about Hungary, a country I used to live and invest in some years ago and still a pretty good place to live I think. I’ll be watching Hungary closely and Simon correctly points out that what is going on there could well turn out to be more devastating than the Greek sovereign debt crisis. This would definitely lead to a flow of money out of the euro again, and the balancing increase in the dollar as that turbulence continues. As a reader pointed out on Sovereign Man, “The result of a Hungarian default would be very similar to Argentina in 2001 with some very interesting investment implications.” I rather hope Hungary does default… then I will be one of the first in there to buy some tangible real estate with a briefcase full of Federal Reserve promises…

However, one thing Americans never quite understand about Europe is that nothing happens there in August. Hungary is unlikely to default in August as that would interfere with the annual month-long party at Lake Balaton, where Budapest moves to in August. (Like Paris moves to the countryside, or Buenos Aires moves to Punta del Este in December)

It’s always safe to take some time off in August. Come September, your writer and the Q Wealth team will be gathering in Cork, Ireland for Q Wealth Masterclass – a unique opportunity to meet and rub shoulders with a dream team of people who think like us. Read about the speakers here and Five Urgent Reasons why you should attend here. This will be your opportunity not just to protect your assets but put them into long term offshore investments with growth potential. Gold and Offshore Real Estate will be right up there at the top of the investing agenda.

It seems that what the Economist sees as the worst fears of the gold bugs is actually just what the gold bugs are hoping for… Heaven help people who are not gold bugs!

by Peter Macfarlane, Joint Editor of The Q Wealth Report

I talk to people every day who are dismal. It would be easy to get depressed myself. Snow might be beautiful to some, but the humid grey skies that have been covering much of the northern hemisphere lately don’t inspire happiness in most of us. But I think it’s the economic doom and gloom that is really causing the serious pain and sending people scurrying to protect their remaining assets, or to find warmth and companionship (Funny side note, A recent survey found that Expats are most likely to fall in love in sub-zero Germany..)

As a general principle I firmly believe that health and happiness are essential ingredients in success and international wealth creation. You must be at ease with yourself before you can do anything useful. If you are depressed or desperate, you are likely to fail. Healthy, happy, positive people are the ones who make money. After all, what is wealth? It’s health, happiness and prosperity.

I’m not, however, into positive thinking psycho-babble and cookie cutter self improvement ideas. I’m a realist, an offshore banker by profession. Every now and then, it’s good to look back on what is wrong in our lives. That’s the only way to learn from bad experiences and change things for the better. Some of us work better than others under pressure or to deadlines – but all of us have to go through difficult times and learn how to react to create success and wealth.

It’s impossible to avoid being depressed sometimes. The question is how to get over it…. how to come out ahead. Q Wealth’s property tycoon and forex guru Thomas Bolther writes that “Anyone can become a tycoon if they dare to cut off some security and clean up their lives. It is a hard road but it is a road that makes you strong and eventually very rich as you will one day hit a gold mine.”

I agree with Thomas to an extent, but it seems to me that many people cling to a false sense of security. Jobs are a typical example. How many millions of people who thought they had secure jobs have discovered otherwise over just the past few months? Now they are being forced to make radical changes. These are testing times. If they had made contingency plans earlier, would they have felt more secure?

I’ve been making radical changes too. My significant other and I had to make the difficult decision last week to close a side business we’ve been running for the last five years. It’s just a small case in the global big picture, but I’m going to lose all the money I invested and I’m having to put people out of work, which is always very hard going. The problem was that the business was simply not making money, but was creating a lot of work, stress and headaches for us.

In cases like this the pure positive thinker might soldier on, working for free, believing things have to get better one day. But no, you can’t do that. It would be a mistake. It’s better to cut losses and move on to something new. Failure is nothing to be ashamed of – this crisis caught us all by surprise. For me, putting positive energy into existing or new successful projects makes much more sense than having energy sucked out of me by a business that’s on the rocks.

Getting rid once and for all of this side business will free up a lot of time for new, more enjoyable activities. We always enjoy travel and experiencing new places, new cultures, new international lifestyles and new culinary experiences. Well, this difficult decision is going to allow us to travel more, too, living closer to the true PT (Perpetual Traveler or Permanent Tourist) lifestyle.

For the last few years I’ve been the typical business traveler – something I have come to hate. I go to get things done but don’t have time for fun. I can’t enjoy the places I am visiting. Now, I can take my young family with me, go for a month or two to Montevideo,  Uruguay, look forward to a few summer months in Europe, and may be we will go to explore China together as a family, which is something we’ve been planning and dreaming of for the last five years.

Some people question the wisdom of travelling with young kids, taking them out of school etc. I couldn’t disagree more. Travel is the best education that money can’t buy. My children are already fluent in English and Spanish and talk about bush fires in Australia or schools in Japan like some kids might talk about what’s going on in the next classroom. They are so easy going. Kids are just so much more flexible than us grown-ups. To children, everything is possible. They haven’t yet learned to impose limits and restrictions on themselves. If they fall down, they just get up and carry on. We all need to think like children.

Fortunately my business – writing and consulting – can be run from anywhere there’s an internet connection. But so many more businesses these days can be run in a similar manner. I know forex and options traders, internet marketers, e-commerce guys and even real estate gurus who travel the world, learning new things, living the international jet set life, and opening their minds – while making money.

For those without a real portable trade, real estate investing is something fairly simple, that most people understand. And if you have a relatively small amount of money, you can make a lot in real estate now. There will be an article on this in issue 52 of The Q Wealth Report, due out in mid February.

Of course, the rules of the game have changed completely. You can pretty much forget about bank financing, though if you are one of the lucky few who qualify it is very cheap at the moment. But if you want to buy up some land and start building, the cost of materials like steel and concrete has fallen by half… and whereas a year or two ago you had to beg artisans to come to work for you, now they will beg you for work.

Latin America is my playground for the moment and I just see so much opportunity around here today. Latin Americans tend to take financial crises in their strides. They’ve been there, done that. Put bluntly, they are used to living in poverty, used to not getting loans. So it’s no big deal for them. Whether you are in Ecuador or Mexico, Panama or Uruguay, the recession is not hitting so hard. Plus, it’s hard to be depressed when you are living cheap in a tropical paradise.

And right now, if you are lucky enough to have US dollars, your money is going a very long way. There is some urgency to this situation as I’m sure the US dollar will collapse pretty soon, and it has a very long way to fall. Not sure where to start looking for these opportunities? For International Real Estate Offshore World is good, as is Escape Artist.

Anyway, I’ve gone on much longer than intended today. If you’ve found this article useful, and you are not yet a subscriber to Q Bytes our free newsletter on International Living and Wealth Creation, then I strongly recommend you go ahead and sign up right now. It’s free. And not just that, we’ll also give you our five part e-mail course Secrets of the Super Rich covering offshore banking, international finance, asset protection and wealth creation.

by Peter Macfarlane for The Q Wealth Report

Panama City has become a very hot real estate market for international retirement and living in recent years. A lot of it, however, has been fuelled by speculation. For a couple of years I’ve been saying it has to end, much to the chagrin of those who want to hype off-plan apartments, and even though I’ve been offered attractive kickbacks to say otherwise. Now it really looks like a Panama real estate collapse is imminent, if not already upon us.

The irreverent blog about Panama, BanamaRepublic, agrees with me, answering the question as follows:

Of course we will. Many of these dodgy skyscraper projects were financed based on fake pre-construction sales while the banks looked the other way and now of course they’re all getting nervous. And who was it again who was selling these bonds for the McTrump Ocean Club and then bought them all itself? Yes, THAT bank. Add to that that nobody is selling any pre-construction condos and you can take over whole projects now, almost 10% inflation and the picture should become clear to anyone with half a brain. Good luck, speculators!

I agree. But if you buy right and have cash, now might just be the time to pick up a bargain in Panama City. I’m going down there next week for a “Secrets of the Super Rich” event. If anyone will be in the area, let me know and we can get together for a drink! My email is info@petermacfarlane.net