China is going to build an 8 billion dollar oil refinery in Nigeria. It is the first of 3 refineries that comprise a $23bn agreement between NNPC and CSCEC. Nigeria’s state oil company, NNPC, will cover 20% of the cost while the state of Lagos will provide the land. The China State Construction Engineering Corporation, CSCEC, will cover the additional 80% of the cost. Nigeria already has 4 oil refineries but they are run very poorly and are estimated to be operating at only 40% capacity. Due to this inefficiency, Nigeria has to import some refined oil.

China’s dependence on energy (especially in the form of fossil fuels) is increasing dramatically and will continue in a strong upward trend. New power plants will be built, and more energy will be expended. One of the most obvious indicators of the trend for increased fuel demand is the automobile market.

In the past year, China’s car market expanded by almost 40%. Contrast that to the U.S. where new car sales plunged more than 20 percent in 2009 to a 27-year low of 10.43 million vehicles, less than the 12.23 million sold in China during January-November, making the Asian giant the world’s largest car market for the first time. Since the year 2002, about 50% of all motor vehicles in China have been purchased by individuals instead of large corporations or the government previously. As incomes increase, the high annual growth rate of private ownership is expected to accelerate. A new generation of young adults is emerging in China. This generation demands higher wages, better working conditions, and new material possessions.

However the Chinese government is taking steps to slow inflation, curb overspending, and control the economy. China’s economy expanded 11.9 percent in the first quarter. China International Capital Corp. has said that it expects growth to slow to 7.5 percent by the fourth quarter.

More cars mean more fossil fuels. Therefore along with this comes an increased demand for energy, particularly in the form of fossil fuels, which is still the cheapest form of energy available. Moreover it appears the Chinese government is taking steps to obtain that oil independently, even if that means teaming up with Nigeria.

Ed Lowell, contributing writer

Central banks around the world have been diversifying their own reserves out of the US dollar and into other gold and other commodity currencies like the Canadian dollar, Australian dollar and Brazilian real.  This shift in central bank policy around the world can have a significant impact on your wealth if you are completely in US dollars.

Most Americans believe the US is the land of milk and honey and will always be so.  History proves otherwise.  The US has been on a downward slide for many years and as the snowball rolling down the mountain, it has gained too much momentum to stop.

If you have all of your assets denominated in US dollars, now is the time to act.  You don’t want to be permanently tied to the woes of the US economy.  Diversify your assets through ‘geo-arbitrage’. 

From a practical standpoint, this just means to spread your wealth around the world.  Register a company in a low or no-tax jurisdiction.  Open a multi-currency bank account offshore.  Hold some of your investments outside of the US.  Buy real estate and gold.  But the time to act is now.  Tomorrow may be too late.

Snowe is talking about HR 4213, so aptly named the “American Jobs and Closing Tax Loopholes Act of 2010″.  Ironically, the loophole that looks to get closed is going to destroy inflows of investment capital into small businesses.

Basically this new act has a provision that requires S-corporations to pay as much as 15.3% payroll tax on all  reinvested earnings.  This is the same tax that is paid to workers (although the worker pays half – 7.65%), but now will be applyed to any net income regardless of whether it is paid out or not. 

This is in addition to the regular income tax that small businesses must pay.  Keep in mind the top tax rate in 2010 is 35% federal and going to 39.6% in 2011.  In addition, for earners over $200,000 single or $250,000 married, there is an additional 3.9% medicare tax.  And we haven’t even talked about state taxes yet. 

For a high earning small business owner in the US, their tax rate could be as high as 65-70%!!!!  Talk about incentive for productivity…

While this may all sound like negative news, the time to plant multiple offshore flags is now.  I know this legislation is only proposed at this moment and subject to change, but the fact remains that US political leaders (and I use this term lightly) are increasingly looking to boost federal and state revenues by taxation as opposed to promoting increases in productivity.

This leads to confusion and uncertainty in the business world.  We need consistency in order to be productive.  Who wants to invest heavily in their business when they don’t know when the next law will get passed that taxes them into oblivion?  Or when the next sovereign debt default is going to happen and the US is the one confiscating retirement funds, ala Argentina 2001.

Now is the time to take action.  Plant multiple flags.  Diversify your assets.  Establish your business offshore and take advantage of low or no-tax jurisdictions.  Establish residency and/or citizenship in another country.  Remember, buying healthinsurance after a heart attack is too late.  Don’t make that  mistake with your wealth.

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.

Joe runs a custom t-shirt company from California and sells his products all over the world through his website.  Joe has a very successful business and sells $2m per year in t-shirts with a 30% net profit margin earning $600k per year after his $100k per year salary.  After Joe takes advantage of his tax benefits, he pays 30% in tax or $180k.  That is a rather large check to write each year.

Today, Joe runs his business from Nevis.  He formed a Nevis LLC, rented a small office in Nevis to hire an administrative staff there to handle bookkeeping and customer service.  He sold his computer servers and has outsourced his server space to a firm in India.  He does all of his banking through Denmark and uses Paypal for website payments.  He has essentially severed all physical business ties in the US.  Granted, Joe still lives in California and still earns his $100k per year salary, for which he still pays his personal income tax. 

However, Joe no longer pays income tax on his $600k in net profit, saving his company $180k per year in taxes.  Joe now has reinvested his earnings into his business and expanded into a web based golf shop.  The golf shop operates on the same premise as the t-shirt shop and allows him to grow his business and his profits.

When Joe decides to repatriate some of his income from his offshore business he will certainly pay income tax on that amount.  But until that time, Joe can defer the taxation and invest his money as he sees fit in order to continue to grow his wealth. 

I understand this program doesn’t work for all of you.  In reality, it can only work for a few.  But for those few, it is a tremendous advantage.  For those of you that cannot take advantage of this, maybe it can’t be an option for your next business venture.  Certainly there are many variables to this situation and each must be individually evaluated. 

If you think this may work for you or if you have any other questions regarding your asset protection plan, contact me via email or at the number listed on our contact page.   Until next week, live well.

The $11 beer and $50 pizza was a good starter.  And I don’t mean some exotic beer and pizza.  I’m talking Pizza Hut quality.  As I found out, Norway has a 200% alcohol tax because they determined citizens drank too much and wanted to eliminate this scourge of modern society, completely disregarding the concept of personal choice.  A basic Porsche 911 costs about $250,000.  A 700 square foot apartment in the city costs about $2500 per month.  Gasoline is about $9 per gallon.  And this is all created by taxation.  On top of that Norwegians pay between 35-50% income tax.  But they do have “free” healthcare.

This “free” healthcare system consists of wait times for basic procedures that can take from just a few weeks to several months before you can get an appointment.  Of course emergency care is quick, but what about an MRI?  Sure, we’ll see you in July.  They also have a great public transportation system.  But a one-way subway ticket costs about $5. 

Unfortunately this is the path I see for the US.  There are many similarities.  Norway even considers their system an improved American government.  Is this really the way we want to go in the US?  I have no interest in living in a place like Norway.  Sure their income is much higher.  A McDonald’s employee earns about $20 per hour, but a Big Mac meal costs $12.  How do they intend to attract competitive companies when the cost of doing business is so high?  Do we want to follow in those footsteps?

For one of my Norwegian friends, we were discussing a program that allows him to ‘escape’ Norway.  He sold his company a few years ago to a large tech firm in Norway.  This firm just recently sold out to a large US company and my friend’s job is now able to be done remotely.  We are looking at ways for him to invest offshore and defer his gains as well as structuring his life around a multi-flag lifestyle.  He will likely continue to work for his company in Norway earning a ridiculously high wage in Norwegian kroners, but he will move to warmer and cheaper climate where his income goes much further.  By doing this he can structure his own investment firm in one country, do his banking and investing in another, continue to earn an income in Norway, and live in another place.  There are also huge tax savings to be gained from this.  He is very interested in intelligent asset protection planning.

Now is the time for you to consider how you want to structure your life.  Maybe you won’t make such a drastic change, but you can too form your own offshore investment company and defer taxation.  You can restructure your business for maximum asset protection.  Or you can find a new country to live in.  But don’t wait until you cannot leave or you are paying $12 per gallon for gas and waiting 6 months for an MRI.  Live well.

Whenever I am at the malls in different countries, I enjoy looking around at what the locals spend money one.  In this mall of about 50 stores, there are 5 electronic stores and another 6 that sell mobile phones and accessories.  There are also shoe stores, clothing stores, luggage, jewelry, several food establishments, and a really nice bookstore.  Anytime I am at a mall, my thoughts go to consumption and taxation.

Lately I have been contemplating a major flaw in the US tax system.  We provide incentives for consumption and restrict production through our tax system.  Right now in the US if you put your money in a savings account you will earn less than 1% annually, not exactly a motivator to save.  And you can get a 30 year fixed mortgage on your house for 5% interest.  With money that cheap, that is a pretty good motivator to borrow.  We also have the highest corporate tax rate in the world and one of the highest personal progressive tax rates.  Companies are even taxed on dividends paid, and the investor is taxed again when he receives dividends!!!  We are taxing production and incentivizing consumption.

Contrast this with Estonia.  (Don’t get me wrong, they have their problems too, but the methodology of taxation is vastly different).  Estonian companies pay no corporate income tax!  If they retain earnings for reinvestment, there is zero tax.  Personal income is taxed at a flat 21% for all people regardless of level.  If a company pays shareholders dividends, they deduct the 21% from the dividend payment but the investor pays nothing additionally.  There is a 20% VAT (national sales tax) on all consumption.  You can borrow money at about 7% to buy a house, 20% to buy a car.  And you can earn 8% in your savings account.  The Estonian policymakers penalize you for consumption and reward you for savings.  Interesting concept…  Who do you think has a higher savings rate?

The point is the US tax system is backwards.  Just like the taxation of alcohol and cigarettes, the more you tax it, the less you get.  Do we want to keep taxing our productive activities like investing and saving money, and provide incentives for consumption?  Isn’t that what got us into this mess to begin with?

But more importantly, how do we profit from these situations and what is the implication for our asset protection planning?  Really, the options are virtually endless.  You can start by moving money into an offshore bank account and save and invest in another currency.  You can structure your business either domestically or offshore to provide you with the maximum tax advantages.  You can even move overseas to a low cost country where your money goes further.  In the near future I will discuss a couple of these strategies.

In the meantime, you should be considering how to implement your own asset protection planning strategy in order to minimize your risk and maximize your gain from this perverse tax system.  As stated before, there are several tools available to you depending on your level of wealth.  Call today for your free 30 minute consultation.

Real estate and precious metals are the exception here. By holding real estate or precious metals outside of the US, this gives you significant asset protection from creditors and government intervention.   To be clear though, for US citizens or residents, all worldwide income must be reported and is taxable regardless of where you live.  So if you own a beach house on the coast of Spain and rent it out for holiday, you must report the income. 

I have been recently acquainted with a man in Costa Rica who is developing a very interesting wellness resort and spa on 83 acres of forest surrounded by protected areas and a national park.  He has already built several residences, a wellness spa, a bed and breakfast, and will soon be opening several restaurants and a medical facility.  This is a great opportunity for someone looking to retire, have a second home, go on a vacation, or take advantage of investment opportunities.  Hugo, the owner, is looking for business partners to develop additional amenities like a hotel and restaurants.  With certain qualifications, Hugo has even offered to pay for your trip to check the place out.

At this point I have not visited Hugo’s place in Costa Rica.  I have read though his investment offering and I have looked extensively at his business plan.  It is very appealing.  I will be making a trip there later this year to put my boots on the ground.  I would encourage any of you that may have some interest to at least check it out.  Do your due diligence.  Hugo is even willing to pay for your  plane ticket.

Buying real estate outside of the US is a great way to hold assets and minimize your US holdings while diversifying at the same time.  As stated in previous newsletters, this is not for everyone.  If you are a small investor or business owner and uncomfortable with offshore holdings, you should just disregard this.  But for many of you reading this, you already have a vacation house, or are considering buying one, liquid investments like securities, business holdings, and are interested in ways to diversify your holdings while giving you options.  You are the ones who would benefit.

If you want to contact Hugo, please send me an email and I will forward you his contact details.  If you have further questions or would like to schedule a free 30 minute consultation, you can contact me by phone or email.  Live well.

Historically, capitalism has proven itself to be the only system that works efficiently, but it now seems the governments of the world are increasingly trying to regulate and tax us to the point where we give up and move to our own little Galt’s Gulch (for those of you that don’t know this term, this is from the book ‘Atlas Shrugged’ by Ayn Rand, and one of my personal favorites). 

I truly believe in the free market and it really irks me to read news headlines like “The Free Market Failure…”.  I believe this to be a myth.  We have not had a truly free market in a very long time.  The governments of the world tend to want to expand their power base and tax and regulate every sector of the market.

Fortunately, there are still opportunities to protect our assets from not only unscrupulous creditors, but also government influence.  I do not advocate tax evasion or avoidance of your financial responsibilities of any sort, but at some point, you need to realize where other parties have crossed the line and become a burden on your personal freedoms. 

In the US, we will likely reach a point soon where there will be currency controls and you won’t be allowed to move your money outside of the country and invest in world markets.  In 1933 President Roosevelt confiscated all publicly held gold and within a few short months, devalued the dollar effectively stealing the citizens’ wealth. 

We are still in the midst of the largest economic crisis in modern history and most likely there will be drastic protectionist policies put in place which will not be positive for those of you with wealth.

Entrepreneurs and investors are the growth drivers of our economy.  The creation and preservation of your wealth is what will continue to improve the prosperity of the world.  The governments’ social programs are not what the world needs for progress.  This is why asset protection planning is so crucial for economic progress in today’s world.

As a society, we need you to prosper in order to improve the living standards of all.  As the cliché goes, “a rising tide lifts all ships”.  This holds true in economics as well.  As the entrepreneurs and investors of the world increase their wealth, it improves the living standards of the whole society.

 Our firm’s mission is to provide asset protection planning that allow you to create and preserve your wealth and protect it from the two main threats of the modern world; taxes and litigation.  While not very altruistic by nature, I do want the world to prosper.  This is only achievable by allowing productive members of society to maintain and increase their wealth. 

Contact us today for your free 30 minute consultation.