Last week I discussed an investment conference in Zurich that I attended a few weeks back.  I came back armed with lots of new ideas and connections for those of us interested in the capital markets.  I don’t normally pontificate on money management, but after that conference in Zurich, my mind was full and I had no choice but to write about it.

Most of the presentations at Fonds were in German, but I attended two that were in English.  One was presented by Jim Rogers, former partner to George Soros at the Quantum fund and the other was presented by Robin Batchelor from Blackrock.  I was especially interested in attending these presentations because they focused on the future of commodity investing.  Considering the world we currently live in, commodities may be something you should personally look at from an investment perspective.  I know I am.

Rogers focused on foodstuffs and metals while Batchelor focused on energy.  They both had essentially the same message; we have a growing population and a shrinking base of investment into production of necessary commodities.  From a long term perspective, we have nowhere to go but up with commodity prices.  Think about it, how many people do you know tell their kids, go to school, get a good education, and work on the farm?  People need to eat and we need famers to produce.  Right now we have a shrinking base of farming activity, but the population of the world is projected to triple in the next 30 years.  We have to feed them somehow and the law of supply and demand says commodity prices must rise. 

The same holds true for oil.  Oil is primarily a transportation fuel.  Most of your developed nations are near a peak or even in a decline with oil consumption.  But China and India alone have nearly half of the world’s population with a hugely growing middle class.  Right now they are consuming the same amount of oil per capita as the US was in the ‘20s.  Do you think China and India’s consumption will go down, or up?  My suggestion here is to look into portfolio diversification and take a long, hard look at commodities.  There are many ETF’s now that track various commodities so it is no more difficult than buying Wal-Mart stock.

I also had a great meeting with a guy named Raoul.  Raoul runs a family office for wealthy individuals and families.  This is not a common practice in the US, but it is quite intriguing.  His firm does not actually manage your money, but they provide you with the tools to assist with asset allocation and risk management.  He also selects and works with your money managers, banks, financial planners, tax planners and anyone else involved with your finances to make sure you are getting what you are paying for.  He can help you find the best money managers, place your money in Swiss banks (or anywhere else), and make sure you aren’t taking unnecessary risks.  His firm can provide you with online access to your portfolio whether it is in real estate, cash, securities, gold, or cattle.  He can even tell you if you have too much money tied up in cattle at any given moment.  It is quite a revolutionary service he offers and for a very reasonable fee.  He charges a small fee based on your asset holdings.  He gets no commission for advising you to buy X stock, or Y commodity.  The more your assets grow, the more he earns.  And most importantly, he is connected.  Very well connected.  He can still provide American citizens with Swiss private banking services and connect you with money managers you would never be able to have access to otherwise.  If anyone is interested in contacting Raoul, please let me know.  I will make the introduction.

I would really like to hear from my readers.  If you have some specific topic of interest, please let me know.  I would be happy to discuss it with you personally, or I can write about it on our blog or in the newsletter.  Feel free to contact me today for your free 30 minute consultation.  Until next week, live well.

This is a legitimate question and one I get frequently.  Many people are scared away by the term “offshore asset protection” thinking it involves something inherently illegal.  This is an unfortunate consequence of being bombarded by media.

There is nothing illegal or immoral about offshore asset protection.  In reality, it is not even difficult or complex as many would have you believe.  In many cases it is as simple as establishing an offshore entity to own assets you already own like stocks, bonds, gold or private company stock.  In some cases it involves the use of trusts.

I have touched on the tax benefits and how that can be a significant benefit, so I won’t dive into that too deep here.  But if your business meets certain requirements, it is possible to move it offshore and defer taxation…indefinitely.  One of the biggest threats to your wealth is destruction through taxation and this tool can offer you the ultimate in offshore asset protection.

Aside from tax benefits, what are the other benefits?  The ‘what’s in it for me?’ question.  Another major threat to your wealth is litigation.  Litigation poses a huge threat and takes up an enormous amount of resources in the modern age.  In recent reports, litigation amounted to 2.3% of our GDP.  Think about that for a minute.  In 2009, the US GDP was approximately $14T, which means litigation cost US citizens and businesses about $322B.  To put that in perspective, Norway’s 2007 GDP was 391B. 

My point is, litigation is a very real threat to your wealth and a very large cost.  As your wealth grows, so does the size of the bulls-eye on your back.  This is why proper asset protection planning is critically important.  And an offshore strategy is not just for the super wealthy and criminals.  It can be for you as well.

Let me illustrate a simple example.  Fred owns a small business in rural Kansas.  Fred has owned it for many, many years and has accumulated about $2m that he has begun investing in the stock market.  Fred also owns a home with land in Kansas.  Fred has a nice life, a good income, and a fair amount of investments. 

If Fred is in a car accident and the other driver is injured, the plaintiff attorney, Lucifer, will want to find out what Fred is worth in order to determine if he is to pursue Fred beyond his insurance limits or just drop it there.  Lucifer finds out Fred owns a house, a business, and a $2m investment portfolio, all in Kansas.  Easy pickings.  Lucifer takes Fred to court, court issues judgment, and Fred is cleaned out.

Fred’s neighbor, Jacob, also owns a small business in Kansas.  Jacob also has amassed a $2m investment portfolio and a nice house in Kansas.  But Jacob has moved ownership of the shares of his business to his offshore entity.  His offshore entity also owns his investment account, which is held in a bank in Luxembourg.  Jacob’s house is owned by a NV LLC, and the NV LLC and the offshore entity are wrapped up into an Integrated Asset Protection Trust (IAPT). 

While Fred and Jacob are in similar positions, assuming Jacob also has a similar traffic accident, they are in much different situations after the accident.  First of all the plaintiff attorney, Lucifer, will likely find too many roadblocks in front of Jacob’s wealth to attempt to pursue.  Where does Lucifer file a lawsuit?  Kansas, where Jacob lives?  NV, where his LLC that owns his home is registered?  Belize, where his offshore entity is registered?  Luxembourg, where his investment portfolio is held?  or Cook Islands, where his trustee office is?  As you can see this is quite a dilemma and the roadblocks are many for poor Lucifer.  Meanwhile, Jacob is safe and sound at home, sleeping peacefully knowing his assets are well protected.

Don’t be Fred.

For my subscribers last week, I wrote details on one way to properly structure an offshore trust to maximize asset protection.  Trusts are one of the oldest (if not the oldest) forms of legal ownership for property dating back to the Roman times.  While they are a bit abstract and difficult to understand, they are perfectly legal and one of the best ways to completely insulate yourself and your assets against the many threats to your wealth.

I have many clients inquire about trusts, but the number one question is “what happens if the trustee runs off with my money?”  This is a legitimate question, however the way our trusts are structured using LLC’s or IBC’s, it is impossible for the trustee to make decisions about your assets without your consent.  Let me illustrate a simple example;

Your stock trading account is owned by an LLC.  You are the manager of the LLC giving you full control of the use and allocation of these funds.  However, the trust is the legal owner of the LLC, thus eliminating your ownership of the funds held by the LLC.  The trustee is unable to make decsions without the settlor’s approval and you are the settlor.  In this scenario, you are the LLC manager and the settlor of the trust, but not the owner.  The trustee maintains title to the property until your demise, which at that point, your beneficiaries become the legal owners of the property.

As John D. Rockefeller said “own nothing and control everything”.  This is the ultimate goal and can easily be accomplished using an offshore trust.  By using an offshore trust, it keeps the trust assets outside the reach of US courts.  Unless there is a major crime or terrorism at play, countries like Belize and Cook Islands won’t recognize a US court ruling and thereby fully protecting your assets held within the trust.

Offshore trusts aren’t for everyone.  You must report ownership of any offshore trust to the IRS or risk severe legal penalties.  This reporting is not difficult, but it does create additional administration and for some, it isn’t worth the effort.  But if your assets have significant value and you want the ultimate in asset protection, offshore trusts are the ultimate tool.