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 for the Q Wealth Report

In the American media and press, a familiar news story is being rehashed – again! The IRS are trying to scare people away from perfectly legal asset protection and offshore banking strategies, by cashing in on publicity surrounding their recent coup against Swiss banking guant UBS. UBS have almost closed down their offshore private banking divisions in Geneva, Zurich and Lugano following IRS pressure.

“In the hush-hush world of Swiss banking, the unthinkable is happening: secrets are spilling into the open,” comments Lynnley Browning in the New York Times. “UBS, the largest bank in Switzerland, agreed on Wednesday to divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes.”

Reading beyond the headlines, however, the truth becomes clearer:  “It is unclear how many of its clients’ names UBS will divulge. Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.”

This, dear reader, is what I wrote about here just a few days ago in my article Is Swiss or Offshore Banking Dead? No Way!

It’s pure hype, as the article continues quoting a known hater of all things offshore:   “The Swiss are saying that this is the end of Swiss banking as they knew it,” said Jack Blum, an offshore tax specialist. “Nobody will trust the security  of the Swiss bank account.”

Exactly as I predicted the other day – a few hundred, or more likely a few dozen, people who can be identified by the IRS as tax fraudsters for other reasons will have their banking details turned over to the IRS, in accordance with the treaties. Nothing new there. It is not the end of Swiss banking. It is just the IRS trying to get publicity to scare people away from offshore bank accounts.

The Swiss do, however, have another very significant problem at the moment, that you should take into account when considering Swiss banking. In an interview with Swiss daily newspaper Tagesanzeiger, a well-known economist has warned that Switzerland risks bankruptcy, if the recent market turmoil centering on Eastern Europe is not contained quickly.  At issue are loans made in Swiss francs to Eastern European debtors – in other words, sub-prime mortgages in places like Hungary, where the property market has collapsed. The rapid growth in many countries of Eastern Europe was stimulated through loans in Swiss francs. Swiss banks and offshore institutions loaned the local banks francs, which passed the francs on to their borrowers. The loans were attractive because borrowers paid interest rates much lower than required for loans in local currency.

With many countries in the region falling into depression, currencies and asset prices are plunging. Therefore, debtors domiciled in Eastern Europe are increasingly expected to have difficulty with mounting foreign debt loads — and that spells trouble for Switzerland…. There’s a translation of the original article here.

If you are interested in learning more about protecting your assets through Swiss private offshore banking, and more attractive lower profile wealth management alternatives in Europe and elsewhere, Q Wealth Report brings you the answers. The Practical Offshore Banking Guide 2009 is a well-written and researched independent guide telling you in about 40 pages how to open your offshore bank account and – more importantly – how to keep it in good standing, and maintain a good relationship with your offshore banker.