by Peter Macfarlane for The Q wealth Report

It’s ironic that while residential and commercial real estate investors must take much of the blame for the current crisis, some of the best offshore investment and asset protection opportunities right now involve international real estate.

International or offshore real estate should be part of any savvy investor’s portfolio. Why? Because it’s a great hedge of value, a way to protect the real underlying value of your assets during difficult times.

With Quantitative Easing in the USA and Irish banks the latest in a long line of European bailouts, it doesn’t take a genius to work out that the dollar and the euro are both going to lose value over both short and long term.

With the dollar and euro collapsing, those seeking a safe haven have turned to investing in gold. I believe gold will still go much higher, or the dollar will go lower – whichever way you look at it. But I also believe it would be irresponsible to put your entire net worth into any one thing… gold included.

Real estate, when purchased at its real value as opposed to an inflated, easy-money value, is an excellent hedge. People will always need somewhere to live, and – even more to the point – people will always need food. Food requires agricultural land. As farm subsidies in major economies, like Europe and the USA, are necessarily pruned back, more agricultural production will move to emerging economies. South America, for example, is very well positioned to capitalize on this. Myself and a few clients are putting funds right now into a Hong Kong-based private fund investing in agricultural land in the Southern Cone of South America: Uruguay, Paraguay, Brazil and Argentina in particular.

There are also great bargains to be had investing in international residential real estate at the moment. Some prime properties in Europe, for example, are going at ten percent of their former asking prices. Even assuming they were wildly overvalued before, this now represents a fantastic buying opportunity.  Rather than watching the value of your dollars being eroded daily, you can hold real estate that is virtually guaranteed to increase in value over the long term. Smart real estate investors know they can also flip these properties quickly if they have bought well.

The key to international real estate investing, in my view, is common sense. Buy something that has intrinsic value. Residential property in the downtown areas of most major cities, for example, will always be in demand. Buy in cities where you can see growth.

Farmland also has an intrinsic value. With more and more mouths to feed in the world, I think buying cheap agricultural land is a great investment at the moment. If you are not yet ready to buy a ranch, there are ways you can get in to such opportunities via reputable third party investment managers, private offshore hedge funds and the like.

There is, however, a big mistake that many novice international real estate investors make. I would strongly caution against is buying into new developments in ‘exotic’ countries, especially buying off plan or touristic/retirement style developments. Buying intrinsic value means buying what can you see right now – not what a developer tells you will be there five years from now.

Too many retirees end up paying through the noose for lots that have barely been marked out on the ground and have very little infrastructure. They make the mistake of trusting a developer who speaks their language, or who has been recommended by nominally independent third parties or internet promoters who are in reality getting large kickbacks. They don’t talk to locals and see how much a lot the same size a few hundred meters down the road would cost – if they did, they might be in for a shock!

When buying in a planned retirement or touristic community, you must also consider that you will realistically be unable to resell before the developer has sold off the entire project – something that could take years in the current environment. The safest investment deals in international real estate right now are undoubtedly in existing properties – those that have already been built and are in established, popular locations.

The smartest real estate investors, when going into a market they don’t know, will actually rent a home and spend time there on the ground before they even consider buying. It may takes weeks or months and the patience to listen to all kinds of conflicting opinions, but gradually they will build up an intricate ‘insider’ knowledge of how the chosen market functions. Remember: this ‘on the ground’ form of due diligence is best.

One final word of advice: the best deals are not on the internet. The best international real estate deals always go before they are even advertised. Unlike stock markets, with real estate insider trading is the norm not the exception. The only way to find these best international real estate deals is by getting to know the right people in the right places and asking around.

If you would like to be kept up to date on international real estate investing opportunities, please sign up today for our free weekly newsletter Q Bytes.

A question that comes up frequently is why offshore account opening procedures require so much information. As an offshore banking consultant, I get to see the account opening processes of many different banks in different jurisdictions, and how widely they vary.

I can see both sides of the equation – the bank’s perspective, and the client’s… and my job is to act as intermediary and make sure both parties understand each other. I’ve become quite good at that over the years, if I say so myself.

So, how do you open an offshore bank account? You will typically need your passport, one or more bank reference letters, and proof of source of funds. More on the practical aspects of complying with these requirements in part 2 of this article that I will publish here on the Q Wealth blog next week. But first, let’s look at why all these questions are necessary…

I can fully understand that if clients are seeking privacy, they may not feel comfortable baring their financial souls to their bankers. But there are good reasons why banks need to collect so-called ‘Know Your Customer’ information. And there are steps you can take as a client to manage your banking and to protect the confidentiality of information you hand over.

• The first and foremost reason is because the law dictates it. In all reputable jurisdictions, banks are required to collect certain information. Failure to comply would have absolutely dire consequences that may include closure of the bank and/or prison for its managers. You are looking for security – and dealing with banks that are prepared to bend, break or flout laws is not the way you are going to find security. There are only a few places in the world left where you can still open accounts without ID and – trust me – you don’t want to be banking in those places!

• Secondly, banks also have to protect themselves and their reputations, in order to protect their honest clients. If they take on clients who bring heat to the bank, it is bad news for you. So you should really be happy to deal with a bank that is quite picky about the clients it takes on. For example, if it turns out later that you were involved in white collar crime like running a ponzi scheme or any kind of unlicensed offshore investment activity, the bank will almost certainly be on the receiving end of a lawsuit from people who lose money. Sometimes scammers are very good at hiding their activities, and they look like honest, respectable business people. If the bank has never met you before, they really need to check you out.

• Thirdly, many people compare offshore account opening procedures to opening an account in their home country. This should be obvious, but it’s not the same thing. One thing that might have escaped your attention, though, is the extent of Big Brother databases that exist in your home country. Banks will automatically run a credit report when you open an account, even if you are not applying for credit. They can check you out online. Offshore banks, however, cannot run online credit checks. To do so would leave an electronic footprint that would generally be a breach of confidentiality laws. That is why they have to ask new customers for a lot more paperwork. Of course, it’s more convenient for the customer that the bank can verify everything online and doesn’t have to ask the customer for so many documents. But such online checks completely nullify any expectation of privacy in the relationship.

• Finally, it’s just good business for banks to know their customers. If they know a bit about who they are and where you are coming from, they can give you better quality advice and they can respond more intelligently to your requests. They can be proactive in offering services you might need, that you might not even know existed. Having a good relationship with your private banker is absolutely beneficial. That banker will be more motivated to look after you. Try to be a ‘perfect client’ for the bank – that way, if for some reason you really need a special favour from the bank at some time in the future, you are much more likely to get it.

Banking secrecy, as I’ve often said, is far from dead, despite the propaganda that would have you believe otherwise. I even believe now that the tide has turned. Bank secrecy is a basic human right, and is more necessary than ever. What is rather passé is trying to use bank secrecy for illegal tax evasion, by holding undisclosed accounts. By taking good advice, choosing the right banks, using international asset protection structures, and carefully managing your residence and citizenship, always staying within the law, you can still keep your finances completely and utterly private. Nobody is saying it’s easy… but you can do it, and it’s worth it.

So, as one of my banker friends is fond of saying, if you unilaterally choose to waive some of the account opening requirements, you will just be causing delays for yourself. Clients who try to avoid complying with requirements will be viewed as suspicious right away. Then, trouble ahead is almost a self-fulfilling prophecy.

Bottom line? If privacy is a concern to you (and it should be) do your homework and choose a bank where you can be confident that your information will remain private. Do your due diligence on the bank first. You should only do business with people you feel 100% comfortable with, and this applies to banks and any other business relationships. Anything less than 100% and you won’t sleep soundly at night. The Practical Offshore Banking Guide 2010 can help you do this due diligence. Once a bank has passed your own due diligence smell test, then be prepared to give them the truth, the whole truth, and nothing but the truth.

Financial frauds and scams may not be a nice topic to close on before Christmas. But it’s an important one. I think even more so than in past years, I’ve talked to many investors this past year who have lost money – sometimes large amounts – in offshore investment scams of one type or another. They and their families won’t be having a great Christmas. So I think it’s an important topic.

It’s certainly not that offshore is full of scammers or even risky. Scammers are everywhere. But offshore investors often make an easy target. Forewarned you can go out and make money offshore without worrying about such things. That is why it’s important you read this article if you want to avoid forex scams, ponzi schemes and the like.

Back in the summer I was invited by a rather mysterious company to a ‘forex luncheon’ in a building in Panama City (Ocean Business Plaza to be precise). I thought it a little odd, since I have nothing to do with forex, but in the spirit of investigative journalism, I went along…

Over ordered-in sushi, which was rather good by the way, the host proceeded to make a presentation about dodgy-sounding hedge funds, roll over programs and a lot of other stuff that had absolutely nothing to do with forex.

I was not the only financial professional there – and whilst everybody was very polite it was clear that nobody in the room was taking the presenter seriously. Some people simply got up and walked out after finishing their sushi. Why they invited me I have no idea, since surely I have a certain reputation as a scam investigator by now and we have an article on our site warning against exactly this kind of scam: Due Diligence for Offshore high Yield Investment Programs. This particular scheme predictably went down a few months later.

During 2009 some of the opaque offshore investment schemes that have collapsed include:

• Hatfield Oak International
• Venture Resource Group (VRG)
• GCI
• Finanzas Forex
• Global Prosperity Plan a.k.a. Global Pension Plan (Belinda Eigenman)
• and several Swedish Credit Unions

Sweden, while a very stable and reputable country, has spurned a minor industry in scams with its credit union legislation. I’ve come across various Swedish Credit Unions over the years and not one has been legitimate.

There are doubtless many others of which I am not even aware. But they all share the same characteristics: above average (unrealistic) rates of return offered, not marketed through conventional channels, based offshore and relying on secrecy to attract clients… and if pushed, they claim that they achieve their returns using forex trading.

Forex trading is extremely high risk. If you have a good, honest broker, you can either make or lose a lot of money. The problem is that few people really understand forex trading so it is an easy play for scammers. There are mysterious entities like CLS Bank and the DTCC that I have written about previously that really do settle multiple trillions of dollars per day in transactions.

Obviously, if you have a dishonest broker, you get the potential downside without the potential upside. Though in reality, the vast majorioty of these scams are classic ponzi schemes that have absolutely nothing to do with forex.

Over the years, clients of Q Wealth have lost millions to scammers of this type. I know, because I’ve seen the proof. Unfortunately these people came to us after they had problems getting their money out.

Others have been smart enough to come to us before putting their money into such schemes, and we can honestly claim to have saved those people millions over the years too. For those who don’t know, one of the benefits of Q Wealth membership is that you can contact us any time for impartial, informal advice on any investment you are thinking of participating in. That alone could be worth thousands of times the cost of membership to you, so I know some members see their $87 annual subscription as a kind of insurance policy.

Doubtless in 2010 we will continue to see lots of similar schemes. Offshore is not full of scammers. If you follow the advice here and in our free weekly e-letter Q Bytes you can easily reach the best reputable offshore banks and offshore brokerage houses. Although we don’t get into investment advice as a business, when we see something good from a reputable source, we do let our members know – recently we’ve been recommending resource and gold mining stocks for example.

What are the trends in scams? What do I expect to see in 2010? The classic ponzi will always be around, because there are always new marks who will fall for it. Probably the forex tag will continue to be applied to these scams.

However, there are some new emerging trends that I have seen in recent months. One is forestry investments – high yields guaranteed from the Brazilian rain forest or from noni or teak plantations in Panama. Following the Copenhagen summit, expect to see more scams revolving around carbon credit trading. And following the surge in gold prices, I am already seeing ads online from penny stock pushers (boiler room penny stock scam operations) who are literally touting the latest ‘undiscovered’ gold mine!

We will also continue to see fraud attempts surrounding documentary credits. Letters of credit and bank guarantees are legitimate instruments used in international trade. But serious international traders have never heard of things like prime bank guarantees, roll-over programs, bank debentures, proof of funds leasing, standby letters, seasoned notes or anything of that nature. Also look out for anything that describes itself as a ‘HYIP.’

So don’t be scammed in 2010. Avoid anything mentioned above like the plague – and if you’re a Q Wealth member who is not sure about something, just write me or Richard and you will get an individual reply in due course. Final piece of advice: if you haven’t yet read our free five part course ‘Secrets of the Super Rich’ you should do so. It is without obligation, and did I mention it’s free? Just enter your e-mail address in the sign-up box above to receive yours.

Just when the mainstream media were trying to persuade us that things might be getting better again, comes the news of the world’s largest ever Ponzi scheme run by the now infamous Bernard Madoff, who (forgive me) “made off” with $50 billion. More victims are coming forward every day. Isn’t it incredible that some of the biggest banks in the world can be scammed?

Well, yes and no. It appears that City and Wall Street financiers had not had found the time to read our page on Due Diligence for Offshore High Yield Investments. On that page we have a 5 point offshore due diligence checklist that could, by all accounts, have saved investors millions in this case. For example, Madoff paid out returns in good times and bad, without ever explaining how he was making the money. As we’ve always said, beware of secrecy – something may be the best investment in the world, but if you don’t understand how it works, you will most likely lose your shirt. And that’s just what all these bankers, plus a lot of individuals and charitable foundations, have just discovered to their cost.

How did Madoff get away with this? Because if people see others flooding in to an investment, they assume it must be good. We call it following the sheep.

CNN, interestingly enough, just prepared their own 5 point due diligence checklist, that puts much the same ideas in a different way. For example, their first rule is “Don’t invest in anything you don’t understand.” Very good advice. I would recommend you go and read that too.

There will be a lot more like this. I am convinced that there are numerous other Ponzi schemes out there, being run by supposedly respectable institutions and individuals. Not to mention the internet based High Yield Investment Schemes known as HYIPs. Ponzi schemes work great while people don’t ask for their money back. In good times, people just roll over and re-invest the returns, so the supposed returns are nothing more than numbers on a spreadsheet.  In bad times, people try to redeem – and a run on the Ponzi scheme leads to its collapse. If news reports are to believed, that’s exactly what happened in the Madoff case.

So if you have your money invested in any scheme you don’t understand or have even the slightest inkling of a doubt about, get your money out now before it’s too late. If in doubt, go back and re-read the due diligence checklists linked to above.

In other news, Ecuador just defaulted on its bonds. The markets had been expecting this for some time, but yesterday it was finally confirmed. Gary Scott, an international investor who spends much of his time in Ecuador, when asked whether this was good or bad, answered:

This is a question much like, “Is the US federal $800 billion bail out, good or bad?”

The answer is yes and no.

First, remember that Ecuador defaulted on bonds once before in 1999.   Everything fell apart. Bank’s shut down. The country ran out of gas.  Times were terrible.

The country remained a great place to live. The cost of living collapsed. Help was easy to get. You could buy real estate for a song. So the answer to “Is this good or bad?” depends on who you are, how much money you have and where it is invested.

Gary showed pictures of smiling potato farmers, people who won’t be directly affected by the crisis, telling us that “the smiles won’t go away.”

Of course, this doesn’t just apply to Ecuador. Ecuador defaulted yesterday, but who knows wat country will default tomorrow, or when the USA will default on Treasury bonds. Probably those who really suffer more from these devaluations are the ones living in ‘sophisticated’ financial service based economies like the USA and the UK. Devaluations aside, people will carry on eating, smiling, living… and they will need places to live. Things like real estate have an intrinsic value that cannot be taken away by devaluations, defaults or financial crisis.

And there are some great bargains around right now in offshore real estate. Of course, there’s little chance of mortgage financing, so you need to pay cash. Then again if you have even $20,000 cash there are some great bargains around just waiting to be snapped up. More on this in the next Q Wealth Report – so if you are not already a member, sign up today!

Q Wealth is with you – your reliable guide through the offshore maze, in good times or bad. Remember, our aim is to help you not just survive the recession, but prosper! For Q Wealth readers, the default in Ecuador is very much good news.

Update:  Catherine Austin Fitts asks:

And we are to believe that one guy could run a brokerage and money management firm with two sets of books and siphon off $50 billion? And no one knew?

This is the financial cover story equivalent of the yarn that a few devout Muslims hijacked two planes that hit skyscrapers that then magically collapsed leaving their passports and a copy of the Koran sitting on the sidewalk.

So…who has the $50 billion?

Hmmm…