Investors Looking For Returns Overseas May Need to Think Again
Putting some of your investments in foreign assets had been a winning move for several years.Outsized returns were seemingly easy to find among a number of emerging markets.Even older, more established markets like Japan and Europe were profit-friendly as long as they were anywhere but here.The overseas investment theme has been so consistently emphasized by many professional investors and portfolio managers that it has become a seldom-challenged strategy.
What is not evident, and often not well-defined, is the extra risk associated with foreign investing.And I am not talking about corrupt dictators.Even investing in stable, transparent markets like Europe and Japan creates extra risk- currency risk.
Understanding currency movements has not been a priority since the direction of the US dollar has been favorable for investing abroad.A decline in the value of the dollar in relation to other currencies makes foreign assets more valuable to US investors.While overseas stock markets were soaring there was an extra currency bonus to US investors from the falling dollar.
But that investment thesis may be due for a review.
It is common knowledge that stock markets here in the US have struggled with fallout from the credit crisis and weakening economy.But foreign markets have also struggled, and in many cases the declines have been worse:British stocks are down 18.4% since October 2007 highs, German 21.3%, and French 25.2%.In Asia, Japanese stocks have declined 27.5%, Hong Kong 36.2% and Singapore 30.3%.In the US, the Dow Jones Industrial Average was off 18.5%.
Those declines themselves are enough to give investors pause, but a second hit comes from a strengthening US dollar.Since recent lows the dollar is up 7.7% against the Euro and 12.2% vs. the Japanese Yen.Those nasty market declines above are quoted in local curren (more…)
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Legality of Offshore Investments
Having an offshore banking account, corporation or trust are common themes in legal thrillers, spy novels and eastern European politics. There is a reason to be concerned about the legality of such accounts, for although many people would like to include them in their estate planning, a legal misstep regarding the use of any of these asset management tools could result in thousands of dollars lost in back tax payments and legal problems with none other than the IRS in addition to the possibility of spending time in prison. With that in mind, it is not surprising that many Americans shy away from offshore banking altogether.
As any good tax attorney will be able to explain to you there is a difference between tax avoidance and tax evasion. Tax avoidance is the use of legally employable strategies to reduce the amount of tax one has to pay. Tax evasion, on the other hand, is the use of illegal means to do the same thing. So the goal of any transaction that you would like to undertake offshore is to make certain that you are a tax avoider and not a tax evader. A lawyer will never be a willing party to tax evasion, if that lawyer is behaving within the cannon of professional ethics as well as the accepted norms of safeguarding their client’s best interest.
To begin with it is illegal to have a secret bank account in another country that you don’t tell the IRS about. It is also illegal to move unreported cash even if it is your money. The penalty for either of these offenses makes bank robbery look like a more attractive option.
However, with our own country continuing to advance the goal of globalization, of course it is legal to invest in, and to interact with, foreign markets and there are some tremendous incentives to do so. The key to taking advantage of these opportunities is to start modestly and remember that if it sounds too goo (more…)
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Gold Fall Could Be Manipulation
What is going on with gold? Numerous gold producers see gold reaching at least the $US1000 an ounce mark by the end of the year - yet the price is currently languishing well under $US850oz. That said, gold is currently on the rise again this week as the US dollar is poised to fall more after its recent strength. Was the US dollar going through a dead-cat bounce? Well, whatever some people call it there is a clear case that America’s economic plight is far from over. More bad economic news from USA’s financial sector is expected over September.
While the fallout from subprime and the over-inflated US housing market continues one must also consider the weakening American consumer. The US economy remains the largest in the world and despite the rise and rise of the Chinese middle class US demand for consumer items is likely to still be at least 7 times greater than China’s. Stocks in China have also been copping a considerable hammering over the last couple of weeks and falling commodity prices for copper have been attributed to falling demand from the Asian powerhouse. Falls in base metal prices have reverberated around the world and quite noticeably in Australia with its mining sector battered from days of selloffs and volatility on the ASX. Looking at China, even the most casual observer would notice that it has an export-based economy, which takes us back to the American consumer.
Various reports from the US have confirmed that the sky-high oil price has weakened consumer spending in recent months. While oil has been falling in the last couple of weeks the fall in the dollar will start oil’s climb again as oil is pegged to US currency. Although no one claims to have a crystal ball in these matters, the history of leading investment bank Goldman Sachs deserves special mention. Not only did Goldman Sachs survive the 1929 stockmarket crash, (more…)
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What Are the US Silver Standards?
The silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver. The silver standard was widespread until the 19th century, when it was replaced in most countries by the gold standard. Sterling, at 92.5 % silver, is just one of the silver standards in the U.S. today.
Today, common standards include the following:
* Coin Silver -This is a U.S. standard and is an alloy of 90% silver and 10% copper.
* Sterling Silver -This describes any alloy that contains at least 92.5% silver.
* Mexican Silver -This standard from our friends to the south is an alloy of 95% silver and 5% other metal(s) — usually copper. (Most silver jewelry from Mexico is using the sterling standard these days.)
* Britannia Silver -Even more pure than Mexican silver, Britannia silver has no less than 958.4 parts per 1000 of silver, and no more than 41.6 parts per 1000 of copper. Operationally, silver of this quality is marked in the U.K. and Ireland as “958 silver.”
* Fine Silver -Most of us would rather have a sterling reputation than a fine one, but in the world of silver, “fine silver” is almost as good as it gets. Fine silver is 999 parts per 1000 of silver. This level of purity is found in bullion bars bought for the underlying value of the silver, fine silver is usually too soft to be used in most applications.
The United States adopted a silver standard based on the “Spanish milled dollar” in 1785. This was codified in the 1792 Mint and Coinage Act, and by the Federal Government’s use of the “Bank of the United States” to hold its reserves, as well as establishing a fixed ratio of gold to the U.S. dollar. This was, in effect, a derivative silver standard, since the bank was not required to keep silver to back up all of its currency. This began a long series of attempts for America to creat (more…)