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Dividends largely cover inflation these days, so those numbers amount to real returns. Since the stock-market bottom in March 2009, the NASDAQ has climbed almost 140%.

I said energy costs would rise. During the year, the oil price shot up, then fell sharply, then nearly recovered by year-end.

I predicted a tough time for Europe but that the euro would survive. I went out on a limb on this one; most observers predicted the euro would disappear or that some countries would leave the eurozone. Instead European leaders bought euro bonds without limit, avoiding a crisis.

I predicted Obama would win the election, and that Congress would remain gridlocked. In the event, the House stuck with Republicans and the Senate with Democrats.

Finally, I saw a grim economy with slow growth. The U.S. economy grew by only 2% for the year, almost costing Obama the election.

Looking forward to 2013 I find a much easier call: We should get more slow growth and a slow improvement in living standards. I'm slightly more optimistic than most. The consensus estimate for 2013 growth comes in at a weak 2% growth, same as 2012. I think we'll do better than that. I believe a better real estate market and an expanding China will propel us to better numbers. Still, we have a ways to go before returning to the 4% or 5% growth we've seen after other recessions.

Unemployment will finally fall next year, although we'll end the year well short of pre-recession levels.

With regards to the stock market, I predict a strong up-market over the next two years. I'm skipping my one-year prediction because of the presidential cycle. Presidential cycles show that in the two years after an election year--2013 and 2014 in this case--markets typically sputter. A strategy of selling on Dec. 31 of an election year and buying back two years later in October (October 2014 in this case) would "have sidestepped practically all down markets for the last 60 years." See article here by Marshall Nickles or Google similar studies.

Should you sell now and buy back in October of next year? I figure it's not worth the bother. Rather than try to time a sell and later buy back, just stick through good times and bad. If I'm right we'll be better off by the end of next year (2014), exactly where we want to be.

Meanwhile, while stocks should do well over the next two years, U.S. real estate should do even better. In late 2012, U.S. real estate started to move up again, and big players continued to buy foreclosed properties. Blackstone Group shrewdly spent some US$1.5 billion buying 10,000 foreclosed single-family homes. Chairman Steven Schwarzman says, "This is the kind of thing that happens once--every once in a while, where you see something that's a market-turning trend, and we are loading the boat."

If you're thinking of buying a home in the United States, I'd say now is the time.

Washington think tanks predict either Israel or the United States or both will attack Iran in 2013. I'm more skeptical. I doubt we'll see an Iran invasion this year.

The eurozone will continue to struggle. Its leaders will continue to kick the can down the road. The region entered into recession in late 2012 and will underperform in 2013. Europe's leaders will again fail to take the tough, forceful steps necessary to put things right.

Jim Paulsen, of Wells Capital Management, pointed out last summer that the term "crisis" no longer applies to Europe. "The ongoing European saga has become less a crisis than a chronic problem. No solution is in sight--indeed, 'time' may be its only solution--but after two-and-one-half years, its status hardly any longer qualifies as a crisis. The essence of a crisis is 'surprise' and a lack of time to either understand or vet the possible, probable, and even improbable outcomes. Now in its third year, the eurozone long ago left the crisis stage."

Paulsen goes on to compare Europe to Japan's zombie economy of the 1990s. Eurozone problems will likely flare up again next year, but the rest of the global economy should improve, with Europe unable to join the fun.

I suspect we'll finally see the outlines of a solution to the euro crisis, perhaps after the German elections in September. The euro crisis was never about Greece itself, but all about contamination. Germany and France worried that if Greece defaulted and left the eurozone, other weak countries, including Spain and Italy, Portugal and Ireland, might have real trouble selling debt. I predict that eventually Spain and other weak countries will strengthen and the problem of contamination will go away.

That will leave Greece isolated as the underperformer, beyond hope for recovery. At that point Greece will finally leave the euro, with a default and return to the drachma.

I'm looking way, way down the road here. We'll still have the contamination problem in 2013. But somewhere down the line--we're talking years, even decades--Europe will conclude that Greece can safely leave the eurozone.

In the meantime Germany will continue to pick up the tab.

Finally, I doubt gold or exchange rates will do very much in 2012. I have a small bet with a friend that gold will be lower on June 30 than it was last June 30. Gold has gone sideways for well over a year. I expect the trend to continue. Currencies, too, look to trade within a fairly small range. Over the next two years I expect the dollar to weaken, as it typically does in bull markets. But we'll likely avoid a sharp fall in the dollar.

That's the way it looks to me. Happy New Year.

Paul Terhorst

P.S. Congress last week passed a short-term, short-sighted, small-minded, temporary solution to the fiscal cliff. The deal puts off spending cuts for two months.

If Congress approves a new plan in early March, fine. If Congress fails to approve a plan, there's still plenty of time to act later in the year. Consider the fiscal cliff as more of a fiscal slope, with cutbacks and tax increases clicking in over time.

I view the debt ceiling as a larger problem. The U.S. Treasury has started using accounting gimmicks to keep paying bills. But unless Congress raises the debt ceiling by late February or early March, the government will have to stop paying some of its bills.

The last shut-down came during President Clinton's watch, and we had a close call again last summer. Keep your fingers crossed this time.Continue Reading:

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Huge numbers of Americans think that makes sense.

As recently as 25 years ago, Japan posed the threat. The Japanese owned some 70% of downtown Los Angeles office space. In 1989 Mitsubishi bought Rockefeller Center, a historic landmark. Japanese investors even bought Pebble Beach golf course.

What a sacrilege.

Ford and GM workers and most everyone else, it seemed, drove Japanese cars. Toyota had the best-selling pickup in America's heartland. About that time, I audited the California operations of a Japanese keiretsu (conglomerate). Japanese executives there drove big American cars, mostly Cadillacs. Funny: The Japanese were the only people in America still driving American cars. Americans drove cars from Japan.

So now we have a new demon, China, but with the same problems as before.

I'm reading a Michael Crichton book called "Rising Sun," published in 1992, based in the Japanese community in Los Angeles. Crichton's characters express the same fears we hear about today, except that those fears relate to Japan instead of China. Very little else has changed.

A character in the books says, "In America you think a certain amount of error is normal. You expect the plane to be late. You expect the mail to be undelivered. You expect the washing machine to break down. You expect things to go wrong all the time.

"But Japan is different. Everything works in Japan. In a Tokyo train station, you can stand at a marked spot on the platform and when the train stops, the doors will open right in front of you. Trains are on time. Bags are not lost. Connections are not missed. Deadlines are met. Things happen as planned. The Japanese are educated, prepared, and motivated. They get things done. There's no screwing around."

A U.S. senator in the book gave a speech in 1990: "Yes, it's true that our industry is not doing well. Real wages in this country are now at 1962 levels. The purchasing power of American workers is back where it was 30-odd years ago...The truth is our nation is sliding badly."

The senator went on to say that back in the 1950s, "American workers could own a house, raise a family, and send the kids to college, all on a single paycheck. Now both parents work and most people still can't afford a house. The dollar buys less, everything is more expensive. People struggle just to hold on to what they have. They can't get ahead."

Now here's a story from CNN last summer: "The middle class is struggling to survive and shrinking before our eyes. 'America's middle class has endured its worst decade in modern history,' the Pew Research Center said in its report. 'It has shrunk in size, fallen backward in income and wealth, and shed some--but by no means all--of its characteristic faith in the future.' ...The middle class also took a bigger hit on the pay front.

"While incomes across all class levels declined for the first time since World War II," the CNN story continued, "the middle class saw the biggest decline, with a median income for a four-person household declining to roughly US$70,000 in 2010 from about US$73,000 in 2001."

To take another example, we complain about our litigious society sucking the life out of the American economy. But 25 years ago, a character in the Crichton book says, "We have 4% of the world population. We have 18% of the world economy. But we have 50% of the lawyers. And 35,000 more every year, pouring out of the schools. That's where our productivity's directed. Other countries think we're crazy."

Other countries make stuff and do stuff while Americans just push paper, in law offices, on Wall Street, in Washington, D.C.

Kind of eerie, don't you think? To see the same concerns as 25 years ago? Japan has crumbled, only to be replaced by China. But the United States seems to confront the same sad story.

I think we can draw two conclusions here. First, as a stock broker friend once told me, "It's never different." My friend was talking about the stock market, about patterns and risk, long-term versus short. But I think we can extend it's-never-different to the larger scheme of things. Americans still believe the country is on the wrong track, just like that Senator who says we're "sliding badly."

Economists still lament that average net worth has collapsed, these days since 2001, back then since 1962.

Whether you're buying stocks or real estate, bonds or gold, remember that it's never different. Stick with the basics: diversification, prudence, rainy-day cash balances, long-term thinking, attention to detail, controlled spending, and so on.

Second, think globally. Back then Japan threatened, these days China threatens. Tomorrow might be India or Brazil. But with a global portfolio, we'll participate in the successes and offset the laggards.

We should also do well with natural resource stocks. When we own oil or copper, mining or processing stocks, as the world economy rebounds, prices should go up. We're not smart enough to know whether the demand will come from China, India, or Brazil. But if we own the raw material we should do well regardless. Whichever country comes out on top, people there will want stuff. If we own natural resources we own the raw material for that stuff.

Paul Terhorst

Paul Terhorst writes a monthly retirement and financing planning column for our Overseas Retirement Letter. Read more here.Continue Reading:

 

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"There was even, recently, legislation proposed that would have made it possible for the IRS to take away the passport of any U.S. person it accused of owing US$50,000 or more in back taxes. The IRS wouldn't have to prove the accusation...just make it. And the American in question would find himself without a passport.

"This legislation was shot down, but I believe you can expect to see it put forward again.

"More recently, the IRS has been allowed to raid the IRA account of one American with a disputed tax debt.

"This is the climate we're all navigating," Lief continued. "What can you do?

"You can moan, groan, and complain. Woe is me...

"You can wait, watch, and hope for someone to come along to help...to show you what to do from here. But who would that someone be? Some government? It's government that has gotten us where we are today.

"Your only sensible option is to take control yourself."

Analyze. Monitor. Adjust. Adapt. Overcome.

That's the starting point for this week's discussions here in Panama City at this Offshore Summit.

Lief began the day by walking attendees through the basic strategy.

"Diversification," Lief said. "That's fundamentally what we're talking about. Three flags...five flags...seven flags...call it what you like. The point is to spread your assets, your investments, your business interests, and your life around.

"If you're diversified among different asset classes or investment types but all in the United States...you're not diversified," Lief pointed out.

"If you've got several bank accounts but all Stateside, you're not diversified.

"How many of you have more than one credit card in your wallet right now?"

Everyone in the room raised his hand.

"Good," Lief continued. "That's a start. You need more than one credit card, more than one bank account, more than one residency, and, I strongly recommend, more than one citizenship.

"You need options. That's the key to surviving and thriving in the face of what's to come...whatever's to come."

This isn't about hiding money. This isn't about avoiding taxes. This isn't about getting away with anything or breaking any law. Years ago, that could have been the case. Years ago, these ideas and agendas were more cloak and dagger, more suspect, and pursued by what was generally recognized as a fringe element.

Today these objectives are a necessity of the world we're living in.

"Diversify or die broke," as Lief put it.

Lief was followed by Mark Nestmann, the world's top residency and second citizenship expert, who continued in the same theme.

"Here are the three steps to taking back control of your life, your money, and your future," Mark began.

"First, establish an offshore economic base. Move your assets, your investments, and your business interests offshore.

"Second, find a suitable new country for establishing residency. Note that it's possible to be a legal resident of a foreign country without being physically resident there. Foreign residency can be a back-up plan, a waiting option.

"Third, obtain a second citizenship. This can follow from your foreign residency...or, depending on your circumstances and the jurisdiction, it can be the result of genealogy or a direct investment.

"Follow these three steps," Mark explained, "and you're in control. You, not any government anywhere, are in the driver's seat of your life and your future."

Kathleen Peddicord

P.S. We're recording every speaker and every presentation, every question and every expert response over the three days of this final Offshore Summit of this year. While the conference continues, you can purchase the complete collection of recordings, which will be bundled to create our all-new Offshore Self-Preservation Kit, for a specially discounted pre-publication price.

When the final speaker leaves the stage Friday evening, this discount (of more than 70%) will be off the table. Meantime, you can take advantage of it here now.Continue Reading:

Read more...
 

Fortunately, different countries shine for different reasons. Some are better for banking, others for investing, some for residency, and yet others as places to incorporate your business. No country gets A ratings on all fronts.

Panama is one country that gets close. Banking options are great in Panama, with more than 80 banks operating here. Most won't open a consumer account for you unless you have a "connection" to Panama either through residency or because you own real estate in the country. Private banking accounts are easier to open, but require high minimum balances, from US$25,000 to US$1 million at the high end. You can also open a corporate account if you open a Panamanian corporation. Investment opportunities in Panama are mostly related to real estate--rental investments, timber, land banking, and development.

Using Panama as a base for incorporating your business can make sense as the country doesn't tax entities that aren't operating in Panama. You can set up a business in Panama and have an office in the country and still pay no Panama taxes if all your income is derived from outside Panama or if your business qualifies under the rules of one of the incentive areas of Panama Pacifico or the City of Knowledge.

Panama offers many options for residency, including the new "Specific Countries" residency visa that has been expanded to include 47 countries. If you hold a passport from one of these countries, residency (and I mean permanent residency) is straightforward. If you don't hail from one of those 47 countries, you still have a dozen other residency options, including a very easy retirement residency option.

Even though Panama offers good choices related to nearly all the Five Flag agendas, you don't want to plant all your flags here. Choose one or maybe two to base in this country and then look to other jurisdictions for the others. If you decide to live in Panama, then you'll want a local bank account, but plant a banking flag in another country, too. Don't bring the bulk of your assets with you to Panama if you plan to live here. And incorporate your business here only if you need a local company for operations.

What other jurisdictions should you be looking at? We'll discuss the best choices right now in more detail at the conference later this week. Here's a short list to help focus your thinking:

  • Banking - Belize, Uruguay, Singapore
  • Residency - Uruguay, Ireland, Malaysia
  • Citizenship (through residency) - Ireland, Uruguay, Dominican Republic
  • Citizenship (through ancestry) - Dictated by where your family is from
  • Economic Citizenship - Dominica, St. Kitts
  • Assets/Investment - for real estate: Colombia; for farmland: Uruguay; for a brokerage account: Denmark
  • Asset Protection - Belize, Cook Islands
  • Incorporating Your Business - Singapore, Nevis

 

Of course, coming up with a personal strategy for which jurisdictions are best for you is more complicated than simply picking countries for each flag. Still, this list will get you started.

This is where we'll start our discussions tomorrow for this week's Offshore Summit. With the help of more than three-dozen of the world's leading offshore experts and advisors, I'll walk attendees through the thinking that should go into customizing your own Five Flags diversification plan.

If you're unable to join us, don't worry. Kathleen Peddicord will be attending as journalist-in-residence. She'll report from the scene in real time each day.

In addition, each day's sessions, including every presentation, every workshop, and all Q&A, will be recorded. We'll make the complete bundle of recordings and speaker materials available as part of our new Offshore Summit Home Conference Kit, which you'll be able to purchase starting tomorrow for a discounted pre-release price. Meantime, you can register your interest here to be sure to be eligible for the pre-publication discount.

Lief SimonContinue Reading:

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"You understand the realities we're facing right now," Lief began, "thanks to the so-called Patriot Act, the HIRE Act, FATCA, and the coming 30% withholding that's going to be imposed on any U.S. person trying to transfer money to what the IRS deems a 'non-compliant bank.'

"There was even, recently, legislation proposed that would have made it possible for the IRS to take away the passport of any U.S. person it accused of owing US$50,000 or more in back taxes. The IRS wouldn't have to prove the accusation...just make it. And the American in question would find himself without a passport.

"This legislation was shot down, but I believe you can expect to see it put forward again."

This is the climate we're all navigating. What can you do?

You can moan, groan, and complain. Woe is me...

You can wait, watch, and hope for someone to come along to help...to show you what to do from here. But who would that someone be? Some government? It's government that has gotten us where we are today.

Your only sensible option is to take control yourself.

Analyze. Monitor. Adjust. Adapt. Overcome.

That's the starting point for this week's discussions here in Panama City at this Emergency Offshore Summit.

Lief began the day by walking attendees through the basic strategy.

"Diversification," Lief said. "That's fundamentally what we're talking about. Three flags...five flags...seven flags...call it what you like. The point is to spread your assets, your investments, your business interests, and your life around.

"If you're diversified among different asset classes or investment types but all in the United States...you're not diversified," Lief pointed out.

"If you've got several bank accounts but all Stateside, you're not diversified.

"How many of you have more than one credit card in your wallet right now?"

Everyone in the room raised his hand.

"Good," Lief continued. "That's a start. You need more than one credit card, more than one bank account, more than one residency, and, I strongly recommend, more than one citizenship.

"You need options. That's the key to surviving and thriving in the face of what's to come...whatever's to come."

Lief was followed by Mark Nestmann, the world's top residency and second citizenship expert, who continued in the same theme.

"Here are the three steps to taking back control of your life, your money, and your future," Mark began.

"First, establish an offshore economic base. Move your assets, your investments, and your business interests offshore.

"Second, find a suitable new country for establishing residency. Note that it's possible to be a legal resident of a foreign country without being physically resident there.

"Third, obtain a second citizenship. This can follow from your foreign residency...or, depending on your circumstances and the jurisdiction, it can be the result of genealogy or a direct investment.

"Follow these three steps," Mark explained, "and you're in control. You, not any government anywhere, are in the driver's seat of your life and your future."

Kathleen Peddicord

P.S. As I've explained, we're recording every speaker and every presentation, every question and every expert response over the three days of this Emergency Offshore Summit. While the conference continues, you can purchase the complete collection of recordings, which will be bundled to create our all-new Emergency Offshore Self-Preservation Kit, for a specially discounted pre-publication price.

When the final speaker leaves the stage Wednesday evening, this discount will be off the table. Meantime, you can take advantage of it here now. Continue Reading:

Read more...
 
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Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.

Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.

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