Wealth International, Limited

January 2006 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)


Azuero Peninsula, about half way down Panama’s southern Pacific coast, is known for its traditional festivals and magnificent deep-sea fishing. The buzz surrounding the area has only intensified lately, fueled by Mick Jagger’s recent property purchase on the peninsula. Locals say that Bruce Willis followed suit by purchasing a neighboring lot, and Tommy Lee Jones keeps a property there. That kind of celebrity interest is putting the region on investors’ radar screens.

Robert Cheesbrough, of Hawaii-based Presitige World Properties, is handling several parcels of oceanfront property on the Azuero Peninsula, and says he is excited about the country’s plans for more upscale projects. At Punta Mala, in the Los Santos province, he has listed 124 acres of pristine ocreanfront for $1.85 million, which includes government concessions for private beach-front property. The property is next to luxury extate homes that are being developed by an Italian group. A small airport is only 15 minutes away, and utilities are within a mile.

For anyone who envisions Panama as a sleepy, bucolic, country the first view of the capital city may come as a shock. The skyline of Panama City, which edges Panama Canal, bristles with high-rise business towers and residential condominiums – and construction cranes that signal more buildings are on the way. The country’s reputation as a hot new destination (there are frequent comparisons to Costa Rica a dozen years ago) is based as much on the capital’s high-energy urban lifestyle as it is on the beautiful beaches of its Pacific or Caribbean coasts or its lush mountainous interior. “Panama City is like Manhattan,” says Terry Theodorou, a certified international property specialist based in California.

The building boom in Panama City, the country’s banking center, began in the 1990s. Panama is known for being very friendly to foreign investors and would-be homeowners from the U.S., offering tax incentives and a dollar-based economy (the currency is the balboa). “We love Americans,” says Theodorou, emphasizing Panama’s “low inflation, good infrastructure, cheap phone rates, and good cell phone service.” And the Panamanian government has worked hard to overcome a national image that many still associate with the Noriega years. Some of the recent development can be traced to land that became available after control of the canal was transferred to Panama in December 1999. Most of the upscale real estate in Panama City consists of futuristic high-rise condominiums, which are attractive to foreigners for their security and convenience.

Link here (PDF file).


A new website has appeared on the internet to help people find and be informed about offshore banking accounts. “While many people associate offshore bank accounts with organized crime or illegal activities, this is mainly due to the fact that their only exposure to international banking has come from the cinema.” says Frank Hamilton, manager of Offshore Banking Accounts. “This site was created to inform people about this perfectly legal enterprise that can assist you in finance management. These types of accounts actually provide a much-needed service and are especially helpful to individuals or companies with international business holdings or those who work outside their own country.”

Offshore banking can provide easy access to funds, as well as distribute funds to international locations quickly and without a lot of red tape. These accounts are not intended to hide your assets for the purpose of tax evasion. Hamilton also points out 5 benefits of offshore banking accounts.

There are many myths and fallacies surrounding offshore banking. While you should make every effort to get as much information as possible before choosing an offshore bank facility, do not believe everything you hear.

Link here.


Police were given sweeping powers to arrest people for every offence, including dropping litter, failure to wear a seat belt, and other minor misdemeanors. The measures, which came into force on January 1, are the biggest expansion in decades of police powers to deprive people of their liberty. Prior to 2006, officers could generally arrest people if they suspected them of committing an offence which carried at least five years in prison. They will now have the discretion to detain someone if they suspect any offence and think that an arrest is “necessary”.

The civil liberties organization Liberty said the change represented “a fundamental shift” in power from the public to the police and the state and was open to misuse. It pointed out that powers to stop people under anti-terrorist legislation, which the public had been reassured would be applied correctly and sparingly, were wrongly used against an elderly heckler at the Labour Party conference this past autumn. There are also worries that the new arrest laws will create major problems for constables, whose judgment on the “necessity” of an arrest is likely to be routinely challenged in the courts, particularly under human rights legislation.

Officers will have to satisfy themselves of “a person’s involvement or suspected involvement or attempted involvement in the commission of a criminal offence” and that there are “reasonable grounds for believing that the person’s arrest is necessary.” They will also have the power to take digital photographs of suspects on the street when they have been arrested, detained or given a fixed penalty notice. The Home Office said the move would save time spent in taking suspects to a police station to be photographed and that it would “greatly reduce the ability of suspects to deny that they were the person in question.” But many people fear that the move will create a vast database of photographs of innocent citizens which could be kept even if the police decide not to take any further action against them.

Hazel Blears, the Home Office minister, said, “It is vital that the police are equipped with the powers they need to enable them to do their jobs properly and effectively. The powers need to be updated to reflect modern policing priorities and the changing nature of criminal activity. We need to maintain the crucial balance between the powers of the police and an individual’s rights. The introduction of a single, rationalized power of arrest simplifies arrest powers and requires the police officer to consider the necessity of the arrest.”

Link here.


But former Eastern bloc countries are starting to offer stiff competition.

Several countries, notably in the former Eastern bloc, are putting in place more liberal economic policies, according to the Index of Economic Freedom, published annually by the Heritage Foundation, the Washington DC-based free market think tank. Hong Kong and Singapore, described in the Heritage Foundation report as “the economic jewels of Asia”, finished 1st and 2nd respectively in the rankings for the 12th straight year, but perhaps the most surprising finding of the 2005 survey was the significant representation from Europe.

Ireland, which has attracted strong investment interest from the U.S. in recent years with its 12.5% corporate tax rate, was a notable performer last year, overtaking Luxembourg and Estonia to clinch third spot in the index. Meanwhile, Iceland moved up three spaces to fifth place, where it is tied with the U.K. Estonia fell to 7th place followed by Denmark in 8th. The U.S. improved enough to re-enter the top 10 after falling out last year for the first time ever, and was considered the 9th freest economy in 2005, tied with Australia and New Zealand. Of the top 20 freest economies, 15 were in Europe, and Austria, Germany and Cyprus led the pack of 33 countries which joined the ranks of “free” economies last year.

The Heritage index rates countries on 10 broad measures of economic freedom, including trade policy, fiscal burden of government, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights, regulation and black market activity. The report explains, “The countries with the most economic freedom also have higher rates of long-term economic growth and are more prosperous than are those with less economic freedom.” Of the 157 countries graded in the 2006 Index, 99 improved their overall scores, compared to 51 whose scores worsened and five that remained unchanged. The 10 most repressed economies, in descending order, were Turkmenistan, Laos, Cuba, Belarus, Libya, Venezuela, Zimbabwe, Burma, Iran, and North Korea.

Link here.

Brave New Singapore (Part 1)

Amid its pristine spires, economic prosperity, efficient subway and infrastructure, and the almost perfect cleanliness and crime-free environment of Singapore lurks an eerie fiend: slavish oppression. After serving as a British colonial outpost in Southeast Asia from 1819, the small “Parliamentary Republic” of Singapore attained peaceful independence from Britain in 1958 and set up its own government linked with Malaysia. The tropical city-state attained complete independence in 1965, and has since grown to a population of 4.24 million. The nation has virtually no agricultural production and relies completely on tourism, banking, manufacturing, and trade (imports) for survival. It has blossomed into an offshore tax haven in recent years and many multinational firms have their Asian headquarters in Singapore. Singapore is ranked second in the world (behind Hong Kong) in the Cato Institute’s Economic Freedom of the World 2005 index [see article immediately above]. During our December 2005 visit, my wife and I experienced favorable first impressions to say the least.

With the world’s second busiest port, first world shopping malls, and top-notch public services, one might be tempted to think that Singapore is a bastion of capitalism and freedom. However, upon closer scrutiny, one can see that Singapore more closely resembles Hitler’s Germany overflowing with its Brown Shirt regiment. Let us not forget that Germany emerged from the Great Depression earlier under Hitler’s rule and began to enjoy economic prosperity under him. Some have labeled Singapore’s socioeconomic system as “neomercantilist”. Others as simply “fascist”. And fascism seems to fit Singapore’s model well: a regime that 1.) exalts the nation above the individual, 2.) uses violence, propaganda and censorship to forcibly suppress political opposition, 3.) engages in severe economic and social regimentation, and 4.) engages in corporatism. When it comes to freedom, money simply is not everything.

In her online article in “Happy-face fascism”, Sue Ann Tellman rightly calls Singapore’s civil society “parental authority institutionalized in a nation-state.” Judging from reports during our recent trip to Singapore, things have not changed much in the last 11 years. The single-party nanny state has produced dire proactive policies. For example, public toilets are monitored and non-flushers are fined, jaywalkers are resolutely fined, personal grooming standards (e.g., hair length) have been regulated, the press is not free and import of foreign publications is restricted. The importation, manufacture, possession, and sale of chewing gum have been banned since 1992 (except for medical purposes).

Breaking the rules can result in beatings (with a bamboo cane), large fines, imprisonment, expulsion, and, in extreme situations, capital punishment. Hanging is the mandatory punishment for drug dealers, as one Australian teen found out in December 2005. Criminals like rapists and vandals are stripped naked and caned until their buttocks are hideously bruised and bloodied. Tellman comments, “the Government promotes ‘family values’ to provide the social stability needed for continued economic growth. In the Singaporean context this means complete subservience to the state and its social dictates.” Social stability is also “enhanced” by tight regulation of industry and trade, often including stiff payments for the privilege of doing business. If you think this sounds a little like what America is becoming you are correct, both in terms of policies pertaining to real property “ownership” and individual liberties.

Link here.


You may have heard of a group of nomadic people who call themselves “PTs” and wander around the globe. These letters stand for, among other things, “permanent tourist” or “perpetual traveler”. The idea for PTs came form a reclusive writer who calls himself W.G. Hill. As the story goes, Hill read an article by Charles Schultze, an international newsletter writer, who advocated the concept of becoming a “permanent tourist” or “perpetual traveler” thus not having a permanent residence in any one nation or place. Hill expounded on this seductive idea with a series of books that lead many of his readers to believe falsely that they could somehow free themselves of paying U.S. taxes by roaming the world and joining the PT movement.

The PT theory might have some validity if a person is a citizen of a country that imposes taxes on the basis of residence, such as Canada or the U.K. Those lucky persons may be able to reduce their national taxes significantly by taking up residence in an offshore tax haven and returning to their original nations only for a limited time each year. But the PT theory is not valid for U.S. persons (either U.S. citizens or resident aliens) who, under American law, are taxed on the basis of their citizenship or alien status. The U.S. person is subject to U.S. taxes on his or her worldwide income, regardless of where on earth he or she lives. There is a modest exception to U.S. income taxes, with up to $80,000 each year for income earned outside the U.S. being tax-exempt, if the U.S. person also lives and works outside the U.S. for at least 330 days in any 12 consecutive months and meets certain other requirements.

There is a way by which a U.S. person legally can become a PT of sorts – but it takes careful, long range planning and a degree of courage and determination, as well as expert tax and legal advice. One leading offshore attorney, Marshall Langer, calls it “the ultimate estate plan” – and that is expatriation. Legally, to benefit from the PT idea he or she, first, must acquire a second citizenship from another country, preferably one that taxes only on the basis of actual residence, such as Canada. The second step is to cease to be a resident of the U.S. and establish residence in another nation, hopefully a tax haven. Lastly, the U.S. person must formally end U.S. citizenship by signing a formal declaration at a US embassy or consulate in a foreign country, as prescribed by law.

Now the IRS can claim tax jurisdiction over ex-citizens for a period of 10 years, but if you and your assets are long gone they may have trouble collecting. And keep in mind most that nations, even ones that are tax havens for foreigners, will tax residents on the income earned within their borders.

Link here.


The Internet makes everything better – just ask Chicago private investigator Ernie Rizzo, who routinely goes online to track down cell phone records. They help him answer such burning questions as whether a suburban police chief is having an affair, the answer to which is worth quite a bit of money to the police chief’s wife. To Rizzo, such tools are like manna from heaven. “I would say the most powerful investigative tool right now is cell records,” Rizzo said. “I use it a couple times a week. A few hundred bucks a week is well worth the money.”

Most people believe that their phone records are confidential, but it turns out that they are easily available to anyone with an Internet connection, a credit card, and $150 to burn. The situation has gotten so bad that both the FBI and the Chicago Police Department have warned agents and undercover officers about the dangers posed by cell phones when the records are so easily available to criminals, gangsters, and terrorists. The Electronic Privacy Information Center (EPIC) last August identified more than 40 web sites that offer to sell calling records without the knowledge of the person making the calls. Verizon is suing several of these companies in court, but their actions are currently little more than a drop in the bucket.

How these web sites get this information is even more interesting. Three main ways are used to obtain the data: pretexting, hacking, and good-old-fashioned bribery. Pretexting is simply the art of social engineering, in which the online data broker calls the phone company and gains access to a customer’s records by pretending to be that customer. This is made easier by the fact that most of these data brokers subscribe to other databases that give them access to customers’ Social Security numbers, dates of birth, etc. Hacking is another popular option, especially now that most phone companies allow customers to manage their accounts online. Many customers never bother to set up these accounts, leaving them easy targets for determined hackers. Finally, when all else fails, throw money at the problem. Big payouts to individuals inside the phone companies can ensure that a data broker has access to any records it cannot get through other means.

Link here.


The IRS has come under renewed pressure to supply statistical information relating to tax law enforcement activities after a motion filed in court last week accused the IRS of illegally withholding information from the public. Professor Susan B. Long, a co-director of the Transactional Records Access Center (TRAC) at Syracuse University, filed the lawsuit in the U.S. District Court in Seattle, accusing the IRS of breaking the terms of the federal Freedom of Information Act (FOIA) by failing to abide by a 1976 court order requiring the agency to make available certain detailed information regarding its enforcement of tax laws. TRAC, a non-partisan research center that disseminates federal government statistical information, is used by many groups to analyze the activities of the government.

However, in May 2004, the IRS informed Professor Long that the agency would no longer supply the requested data and that any future statistical data requests would cost $12,000 per month to receive in electronic format. According to IRS spokesman Frank Keith, the agency’s lawyers concluded after lengthy research that the 1976 court order no longer existed and therefore IRS was within its rights to withhold the information. Recent TRAC reports had revealed a fall in the number of hours devoted to audits of large businesses and wealthy taxpayers, at the same time as an increase in the audit rate in lower income groups. “All of these and many other similar findings were based on the kinds of data that the IRS has been unlawfully withholding from TRAC and the American people,” Professor Long stated in announcing the filing.

The IRS argues that it is under no legal obligation to supply TRAC with detailed statistics, and has been doing so on a voluntary basis. According to Mr. Keith, nobody within the IRS is now aware of the 1976 court order. Professor Long however, believes that the IRS has knowingly and deliberately obstructed the law by withholding statistical information.

Link here.


It was over three years ago that the analyst scandal of the late, great bull market of the 1990s reached its denouement, when Wall Street firms agreed to pay $1.4 billion to settle charges from Eliot Spitzer that their research misled investors. The hero was Spitzer, and the villains were the craven analysts and the investment bankers who bullied them into issuing sunny reports. If that is the story line, you might well believe that Spitzer’s settlement, by pretty much forbidding one side to have anything to do with the other, fixed research.

But actually, the real culprit in all of this has gone unpunished. The real culprit, of course, is corporate America. After all, it is corporations who told investment bankers that they would not get any business unless their firm’s analyst told investors to buy the stock – the investment bankers only cared because the companies cared. Spitzer’s reforms have made it difficult for companies to exert that particular form of leverage. But never fear. They have others. Indeed, over the last few years, the worry about the ways in which companies punish non-sycophants has been growing. According to a memo written by Richard Colby, the deputy director of the SEC’s division of market regulation, the agency did an informal survey of brokers, and concluded that retaliation by companies – as well as by others including large investors and venture capitalists – “continues to be a problem”.

The real challenge is how do you do anything about it? After all, overt acts are one thing, but subtler intimidation is very difficult to police. And no matter how tough analysts are, it is hard to always be immune to this. In other words, there are still plenty of reasons to have a little caution about the “research reports” you read.

Link here.


Town hall bureaucrats are to be given sweeping new powers to investigate homes for identity card evasion and to impose heavy fines on occupants found without one. The revelation, in an obscure Whitehall consultation paper, calls into serious doubt the Government’s repeated promises that planned ID cards, already hugely controversial, will be voluntary and that no one will be forced to carry one. It will stiffen resolve at Westminster to oppose the Identity Cards Bill, which is due before the Lords again next week.

Peers are already vowing to water down the plans to ensure that registration for cards is voluntary. At present the Bill requires people to submit their details to a new national ID Card Database when they apply for a passport, in effect making registration compulsory. The small print of a consultation paper published by Lord Falconer’s Department for Constitutional Affairs, released during the Christmas holiday, reveals that town hall officials will be asked to police the scheme by using the Electoral Register to identify homes and individuals without cards. The register will be cross-checked against the proposed Identity Card Database in what the Conservatives are calling “Big Brother” tactics. Those who fail to register for a card or to keep their details up to date when, for example, they change address face fines of up to £2,500. In baffling language, the document proposes a shadowy sounding system called “Core” – and discusses the need for “data sharing” and “unique, personal identifiers”. (Core is a new centralized, electronic electoral register to replace the current, locally managed registers.)

The plans for heavy policing of the scheme fly in the face of promises by Tony Blair that the cards would be voluntary, a promise repeated in Labour’s manifesto for the general election in May last year. Charles Clarke, the Home Secretary, promised three months ago that ID cards “will not create Orwell’s Big Brother state”. Shadow constitutional affairs secretary Oliver Heald said, “There is growing concern among the public about Labour’s use of invasive ‘Big Brother’ computer databases – without transparency or clear backing from the public – such as for the forthcoming council tax revaluation.”

Link here.


Who needs non-U.S. investments in their retirement plan? You do! If you are a U.S. citizen or U.S. resident, you are the victim of a vast campaign of misinformation concerning how you can invest your retirement plan. Your broker or custodian does not want you to know that many of the world’s best investments are only available outside of the U.S. And that is because it does not put any money in their pockets when you invest offshore. Instead, it puts more money in your pocket. The financial scandals that rocked Wall Street made it clear the U.S. investment system is set up to benefit brokers and their employees – not you. But you can break that trend by finding the truth – and acting accordingly.

Your IRA or pension plan can own raw or improved land, condos, office buildings, single or multi-family homes and apartment buildings in any country, so long as the real estate is not for your current personal use. The only investment a retirement plan cannot make, domestically or offshore, is in collectibles and some types of insurance. Indeed, most investment restrictions are imposed not by U.S. law, but by domestic American custodians or retirement plan administrators.

Another “off limits” investment to most U.S. investors are offshore funds. Of 80,000 funds trading worldwide, only about 10,000 are registered in the U.S. Offshore funds are much more profitable, due to the falling dollar, the superior performance of emerging markets and the ability of offshore fund managers to use risk hedging techniques that are impossible to use in domestic U.S. funds. Unfortunately, due to US securities laws, most offshore funds will not sell directly to U.S. investors. Even if they did, the U.S. tax consequences of direct ownership of most offshore funds can be punitive … unless you purchase them through your IRA or pension plan. And now someU.S.u brokerage firms are so paranoid about offshore investing, thanks to the PATRIOT Act, the mere mention of offshore investing has caused some of them to tell their clients to close their accounts and seek advice elsewhere!

Placing a portion of your retirement offshore can also offer protection against the long-term decline of the U.S. dollar. Asset protection is another reason for placing your retirement plan offshore. In the U.S., pension assets are at risk. Some retirement plans are protected, but many others are not. If a U.S. creditor gets a judgment against your unprotected plan, forget all hopes of a comfortable retirement. But if your retirement plan is invested in a suitable foreign nation it can be made essentially judgment proof against almost all claims.

Many reasonable people want a shield against the prying eyes of business partners, estranged family members or identity thieves. Financial privacy can be the best protection against frivolous lawsuits. If you do not appear to have assets to justify a lawsuit’s time and expense, you will not be a target. Assets you invest offshore are far more private, as they are off the domestic U.S. asset tracking radar screen.

Link here.


Internet banking, online payment systems and stored value cards not requiring identification give criminals new opportunities to filter money through the U.S. Representatives of the Treasury Department, Federal Reserve, Justice Department and other government enforcement agencies urged in a Money Laundering Threat Assessment report more cooperation to squeeze money launderers and narrow potential avenues for tainted funds. “The volume of dirty money circulating through the United States is undeniably vast and criminals are enjoying new advantages with globalization and the advent of new financial services,” they said in the report, a precursor to the government’s annual Anti-Money Laundering Strategy.

The regulators and law enforcement officials said it was “currently not possible” to accurately estimate the total amount of money laundering in the U.S., or how much is being cut off by government enforcement. Citing a need for a common definition of what constitutes money laundering, regulators said they needed more cooperation to patch vulnerabilities from money orders, stored value cards, check cashing, electronic payments, remittances and other financial transfers. “Moving away from face-to-face customer interaction, particularly for (bank) account openings, challenges the traditional process of customer due diligence,” they said.

The report concluded stored value cards or gift cards were compact, potentially anonymous alternatives for those seeking to smuggle physical cash linked to crime. Cards and other tools to facilitate migrant remittances could also be misused, regulators added.

Link here.


Do you know if your company has a pension plan? Do you care? Chances are that unless you are nearing retirement, you probably have not given it a lot of thought. But that lack of interest – especially if your company is planning major changes in its pension – could mean the difference between enjoying Caribbean cruises or sharing the senior citizen plate at the local cafeteria in your golden years. Now is not the time to ignore the sea change that is taking place with company pensions.

In the past few weeks, profitable companies like IBM and Verizon Communications announced they are freezing their pension plans in an effort to cut costs. That means that the plans, which provide monthly checks to employees when they retire, will no longer allow workers to accumulate credit for their years of service or increase in annual income. The upshot? When employees retire, their pension checks will be significantly lower than they expected. And depending on specific circumstances, such as age and income, it could turn a champagne retirement into one that affords only cheap beer.

So maybe you do not work for IBM or Verizon or one of the troubled companies that froze or terminated their pension plans during the past few years. There is still plenty of reason to pay attention. Some experts predict that other well-off companies will follow the example of longtime bellwether IBM and freeze their pensions, too. Experts blame it on accounting rules that force companies to calculate liability using short-term interest rates. Even if a company has not had to make a contribution to its pension fund and it has enough assets to cover its liabilities long-term, the pension liability alone can hurt the profit and loss statements that drive Wall Street, said Joel Wehner, actuarial practice leader for the Southwest for Milliman, a benefits consulting firm that specializes in life, health and retirement plans in Houston.

And what of 401(k)s, which have been pitched as a great way to save for retirement? “Average employees, when left to their own devices, make all the wrong decisions,” said Wehner, who is a big fan of traditional pension plans. “They don’t put enough money into the plans, they take money out at the wrong time, and they make the wrong decisions on investments.” So what can the average person do? If you have a pension plan, Wehner recommends learning as much as you can about it – what you have already earned and what you figure you will get when you retire. And because you do not have a lot of control over the future, contribute as much as you can to your 401(k).

Link here.


Despite his rather appealing personal humility, the tributes lavished upon Alan Greenspan, the chairman of the Federal Reserve, become more exuberant by the day. Ahead of his retirement on January 31st, he has been widely and extravagantly acclaimed by economic commentators, politicians and investors. After all, during much of his 18½ years in office America enjoyed rapid growth with low inflation, and he successfully steered the economy around a series of financial hazards. In his final days of glory, it may therefore seem churlish to question his record. However, Mr. Greenspan’s departure could well mark a high point for America’s economy, with a period of sluggish growth ahead. This is not so much because he is leaving, but because of what he is leaving behind: the biggest economic imbalances in American history.

One should not exaggerate Mr. Greenspan’s influence – both good and bad – over the economy. Like all central bankers he is constrained by huge uncertainties about how the economy works, and by the limits of what monetary policy can do (it can affect inflation, but it cannot increase the long-term rate of growth). He controls only short-term interest rates, not bond yields, taxes or regulation. Yet for all these constraints, Mr. Greenspan has long been the world’s most important economic policy maker – and during an exceptional period when globalization and information technology have been transforming the world economy. His reign has coincided with the opening up to trade and global capital flows of China, India, the former Soviet Union and many other previously closed economies. And Mr. Greenspan’s policies have helped to support globalization: the robust American demand and huge appetite for imports that he facilitated made it easier for these economies to emerge and embrace open markets. The benefits to poorer nations have been huge.

So far as the American economy is concerned, however, the Fed’s policies of the past decade look like having painful long-term costs. It is true that the economy has shown amazing resilience in the face of the bursting in 2000-01 of the biggest stockmarket bubble in history, of terrorist attacks and of a tripling of oil prices. Mr. Greenspan’s admirers attribute this to the Fed’s enhanced credibility under his charge. Others point to flexible wages and prices, rapid immigration, a sounder banking system and globalization as factors that have made the economy more resilient to shocks.

The economy’s greater flexibility may indeed provide a shock-absorber. A spurt in productivity has also boosted growth. But the main reason why America’s growth has remained strong in recent years has been a massive monetary stimulus. The Fed held real interest rates negative for several years, and even today real rates remain low. Thanks to globalization, new technology and that vaunted flexibility, which have all helped to reduce the prices of many goods, cheap money has not spilled into traditional inflation, but into rising asset prices instead – first equities and now housing. The problem is not the rising asset prices themselves but rather their effect on the economy. By borrowing against capital gains on their homes, households have been able to consume more than they earn. Robust consumer spending has boosted GDP growth, but at the cost of a negative personal saving rate, a growing burden of household debt and a huge current-account deficit.

Ben Bernanke, Mr. Greenspan’s successor, likes to explain America’s current-account deficit as the inevitable consequence of a saving glut in the rest of the world. Yet a large part of the blame lies with the Fed’s own policies, which have allowed growth in domestic demand to outstrip supply for no less than 10 years on the trot. Part of America’s current prosperity is based not on genuine gains in income, nor on high productivity growth, but on borrowing from the future. The words of Ludwig von :: “It may sometimes be expedient for a man to heat the stove with his furniture. But he should not delude himself by believing that he has discovered a wonderful new method of heating his premises.”

While Mr. Bernanke is even more opposed than Mr. Greenspan to the idea of restraining asset-price bubbles, he seems just as keen to slash interest rates when bubbles burst to prevent a downturn. He is likely to continue the current asymmetric policy of never raising interest rates to curb rising asset prices, but always cutting rates after prices fall. This is dangerous as it encourages excessive risk taking and allows the imbalances to grow ever larger, making the eventual correction even worse.

Links here and here.


Russia saw a net inflow of capital into the private sector in 2005 for the first time in the post-Soviet era, suggesting that business confidence is slowly returning to the country after a period which saw the authorities become increasingly dictatorial in the business sector. Preliminary data published by Russia’s central bank last week showed that net inflows of private sector capital into Russia reached $300 million in 2005. This compares with a net outflow of capital of $8 billion in 2004 – up from a $1.9 billion outflow in 2003 – when a politically charged tax probe against the oil firm Yukos and its former chief executive Mikhail Khodorkosvky was reaching its height.

Deputy Prime Minister Alexander Zhukov told a televised meeting of the Russian Cabinet that the central bank data was evidence of a “positive change” in Russia’s investment climate. Confidence in the Russian business environment has taken a severe battering after the highly-publicized trial of former Yukos boss Khodorkosvky, who was jailed last year after being found guilty of tax evasion, fraud and embezzlement. It is a widely held belief that Khodorkosvky was punished more for his political ambitions than for tax crime, and it is felt by many observers that the breaking up of Yukos following its $28 billion bill for back tax was a ploy by the Kremlin to exert greater control over the oil industry.

Despite the recently unveiled figures, a slew of back tax investigations against other firms, not only in the oil industry, has exacerbated the feelings of uncertainty and insecurity experienced by many investors in Russia over the past eighteen months.

Link here. Yukos hit with another claim for back tax – link.


Wall Street and Main Street rarely agree about the price of anything. Sometimes Wall Street values certain assets above what private investors would pay. At other times, Wall Street prices out-of-favor assets well below what private investors would pay. The latter of these two pricing disparities is the sort of thing that causes us value investors to bound out of bed in the morning. Whenever we discover assets in the stock market that are selling for deep discounts to their real-world values, we have usually discovered a compelling investment opportunity.

Back in October of 2004, the stock market was assigning an insultingly low valuation to the shares of Orient-Express (OEH), an owner and operator of luxury hotels, restaurants and tourist trains. By buying OEH stock you were paying far less for comparable hotel assets than what private market buyers were paying for similar properties. Not only that, but hotel properties of all types had been commanding ever-higher prices in 2003 and 2004. The average price per room for luxury hotels in 2004 was about $140,000 and climbing. Super luxury hotels of the sort that Orient-Express owns were commanding a multiple of that price. The stock market was valuing Orient-Express at only $226,000 per room – not including the value of its interests in three fine restaurants and luxury trains. So I recommended the stock to my subscribers. Today, after more than doubling in price over the last 18 months, Orient-Express shares are no longer cheap. Orient-Express now trades at an Enterprise Value (market cap, plus debt, less cash) to EBITDA ratio of nearly 25 times. This value is nearly double what control investors have recently paid for hotel assets.

So what stock market assets are cheap today, based on private market values? One candidate would be timber. Peter Langerman, who runs the respected value-fund Mutual Series, likes timber assets. Private buyers, he notes, are paying between 16 and 20 times cash flow for timber properties. Yet, the stock market values most timber stocks at only around 8x cash flow. Langerman likes Potlatch, Weyerhauser and International Paper. In Capital & Crisis, we hold Plum Creek Timer (PCL), a timber REIT. It is another variation on the same idea and given the favorable tax status of the REIT structure, Plum Creek deserves an even higher multiple than timber assets held by more heavily taxed operating companies.

NewAlliance Bancshares (NAL) is a Connecticut-based thrift. Thrifts are not particularly popular right now. The price to tangible book ratio – a commonly cited ratio when dealing with financial institutions – is only about 1.8 times today. If you compile a list of recent transactions for thrifts and banks, you will see the acquisition multiple paid is closer to 3x tangible book. Here is a table that shows the top deals in 2005, limited to only those banks in the New England and Mid-Atlantic regions. The table is limited to deals of at least $100 million. Smaller transactions get smaller multiples. But even if you include all of them, the average price to tangible book ratio paid is about 2.5 times. NewAlliance is a substantial bank, the 5th-largest in Connecticut, which is a desirable and affluent market. The bank is over-capitalized, which is one reason it has been buying back its stock and boosting its dividend. Nonetheless, it remains a prime takeover target.

All the stocks I have mentioned provide an opportunity to profit from the pricing disparities between public market values and private-transaction values. So whenever you are trying to buy stocks cheap, you cannot afford to ignore what is happening in the private markets. Net-net, whenever Wall Street and Main Street disagree, opportunities emerge.

Link here (scroll down to piece by Chris Mayer).


Former vice president Al Gore gave what I believe to be the most important political speech in my lifetime, and The New York Times, “the newspaper of record”, did not report it. Not even excerpts. For the Times, it was a nonevent that a former vice president and presidential candidate, denied the presidency by one vote of the Supreme Court, challenged the Bush administration for its illegalities, rending of the Constitution and disrespect for the separation of powers. So much for “the liberal press” that right-wingers rant about. If a “liberal press” exists, The New York Times is certainly no longer a member.

The Washington Post had a short report on Gore’s address at Constitution Hall, but the newspaper, if that is what it is, managed to water down the seriousness and urgency of the message that Gore brought to the country with sneers. Gore’s address is the first sign of leadership from the Democratic party in six years. This alone makes it a major news event. But not even his own party took notice. According to reports, only one Democratic senator, Dianne Feinstein (CA) was in the audience. One would have thought the entire Democratic congressional delegation would have turned out in support of Gore’s challenge to Bush’s extraordinary claims of power. The lack of an opposition party makes the media vulnerable to intimidation by a dictatorial-minded administration.

The New York Times ownership suppressed for one year the leaked information in the paper’s possession that the Bush administration was violating the Foreign Intelligence Services Act and was spying on Americans without court warrants. Had the Times not placed a gag in its reporter’s mouth and suppressed the story, Bush may have gone down in defeat as the new Richard M. Nixon. Clearly, the Times is failing the obligations of a free press. Bush is angry at the newspaper and at the government officials who leaked the story that Bush illegally spied on American citizens. Both may be prosecuted for making Bush’s illegal behavior public. By ignoring Gore’s speech, is the Times signaling to Bush that the newspaper is willing to be a lap dog in exchange for not being prosecuted?

With the U.S. media now highly concentrated in a few corporate hands, has the Democratic Party reached the conclusion that opposition is no longer possible? Once Bush places Sam Alito on the Supreme Court, he will have a high court majority friendly to his claims that his executive powers are not constrained by congressional statutes or judicial rulings. Once a president is held to be above the law, whether for reasons of his role as commander-in-chief or any other, he can no longer be held accountable. Conservatives should fear this more than anyone. How can any conservative fail to realize that Bush’s attack on these rights is the ultimate attack on property?

Gore challenged the American people to step up to the task of defending the Constitution, a task abandoned by the media, the law schools, and the Democratic and Republican parties. If we fail, darkness will close around us.

Link here.


Hong Kong is a city that lives on its connection to China. The former British colony serves as port, intermediary, service center, and more for the mainland. But Hong Kong has also been dogged by the fear that China’s booming cities – especially Shanghai – will soon eclipse it. One special source of anxiety is that as more world-class mainland companies go public, they will issue shares on the Shanghai and Shenzhen exchanges, and scorn Hong Kong’s bourse.

Well, the world just got evidence that Hong Kong’s supremacy is still assured. On January 13, Hong Kong Exchanges & Clearing, the company that manages the city’s security exchanges, released its 2005 figures. Last year, mainland companies raised $24.7 billion in Hong Kong. In contrast, total money raised in Shanghai and Shenzhen combined amounted to just $4 billion. These figures put paid to the notion that Hong Kong will be eclipsed by Shanghai as the financial heart of greater China anytime soon. Despite some improvements, mainland exchanges are still battling problems of corruption, fraud, and uncertainty caused by the huge overhang of nontradable shares controlled by state-linked entities. Hong Kong, meanwhile, has distinguished itself as the undisputed preferred destination for mainland companies.

Hong Kong’s importance as a mainland financial center actually seems to be growing. As of December 31, mainland companies – defined as those domiciled in China or their Hong Kong-registered subsidiaries – accounted for 39% of the bourse’s capitalization, up from 30% in 2004, and up from just 5% a decade ago. According to the data released on January 13, mainland companies last year accounted for 46% of daily turnover and 91% of all new listings. The flood of new listings and secondary offerings last year has helped catapult Hong Kong up the ranks of global markets. With $1.05 trillion in capitalization, Hong Kong last year overtook the main bourses of Spain to become the 8th-largest market in the world, behind No. 7-ranked Deutsche Borse. Shanghai is ranked a distant No. 19, and Shenzhen is No. 30.

Gone are the days when Hong Kong’s market was dominated by property conglomerates and trading houses, known locally as hongs. Mainland cell-phone operator China Mobile is the 2nd-largest stock with market capitalization of $9.35 billion, while China Construction Bank holds the No. 3 slot with $7.8 billion. HSBC Holdings (HBC) is No. 1. No. 4-ranked Hutchison Whampoa, traditionally a Hong Kong conglomerate, now derives a significant chunk of its earnings from its ports and retail operations in China.

The bigger question today is how long the current bout of China fever will last. Investors have taken a couple of serious beatings from China stocks in Hong Kong in the past 10 years. But somehow their China hunger comes back – and Hong Kong remains the place to satisfy it.

Link here.


Earlier this year, the Supreme Court, acting again like a gang that smoked too much bad weed, ruled that the federal government has the right to prohibit people from growing marijuana for medicinal purposes. The Court relied on an interpretation of the Constitution’s Commerce Clause that basically gave the feds unlimited control over any activity that Congress or federal agencies sought to influence. Justice Clarence Thomas had an eloquent dissent in which he laid out the absurdity of the majority’s position:

Diane Monson and Angel Raich use marijuana that has never been bought or sold, that has never crossed state lines, and that has had no demonstrable effect on the national market for marijuana. If Congress can regulate this under the Commerce Clause, then it can regulate virtually anything – and the Federal Government is no longer one of limited and enumerated powers. … By holding that Congress may regulate activity that is neither interstate nor commerce under the Interstate Commerce Clause, the Court abandons any attempt to enforce the Constitution’s limits on federal power.

The Court’s majority based its decision on the 1942 case of Wickard v. Filburn. This is one of the most misunderstood landmark cases of the last century. Confusion about farm policy resulted in undermining everyone’s freedom. The Franklin Roosevelt administration had created a separate legal class of citizens – wheat farmers – and had minimized their freedom in order to boost wheat prices. In Wickard, the Supreme Court, for one of the first times, went hip-deep into the new administrative-law regimes spun out of the 1930s. The justices basically made fools of themselves through their complete lack of understanding of the federal policies that led to the de facto takeover of every wheat farm. According to the Court, the government’s intent to benefit some wheat farmers gave government officials the authority to absolutely control all wheat farmers – even those who were not selling their wheat. The notion that the government was entitled to regulate that which it subsidizes basically permits Congress, the president, and federal bureaucrats to seize control of whatever they throw money at.

To assume that subsidies do not subvert liberty is to believe that politicians do not like power. It is only a question of time until some politician or some bureaucrat finds it in his interest to exercise the power latent in the subsidy. The politicians and bureaucrats come to feel that the money they dole out is their own – and try to exercise the management rights inherent in public property that they have long since denied to the owners of private property. Moreover, with the recent Supreme Court medical marijuana decision, this doctrine is stretched to even further extremes. As a result of a horrible legal decision issued more than 60 years ago, the federal Leviathan is able to continue expanding its controls over the lives of the American people.

Link here.


As coincidence would have it, Mark Crispin Miller’s new book, Fooled Again, documenting the Republican theft of the 2004 presidential election, arrived in the same mail delivery with the January 12 edition of the Defuniak Springs Herald, the locally owned weekly newspaper in a Florida panhandle county seat. The Florida panhandle is thorough-going Republican. Even Democrats run as Republicans. Nevertheless, the newspaper’s editor, Ron Kelley, believes that American political life is measured by something larger than party affiliation. In his editorial, “The shepherds and the sheep,” Kelley reports that two Florida counties have banned any further use of Diebold voting machines after witnessing a professional demonstration that the machines, contrary to Diebold’s claim, are easily hacked to record votes differently from the way in which they are cast by voters.

The pre-election statement by Diebold’s CEO that he would work to deliver the election to Bush was apparently no idle boast. In five states where the new “foolproof” electronic voting machines were used, the vote tallies differed substantially from the exit polls. Such a disparity is unusual. The chances of exit polls in five states being wrong are no more than one in one million. Miller describes considerably more election fraud than voting machines programmed to count a proportion of Kerry votes as Bush votes. Voters were disenfranchised in a number of ways. Miller reports incidences of intimidation of, and reduced voting opportunities for, poorer voters who tend to vote Democrat. Some of Miller’s evidence is circumstantial. However, he documents widespread Republican dirty tricks and foul play. The media’s indifference to a stolen election burns Miller as much as the stolen election itself.

Miller is not alone in his concerns. The non-partisan U.S. Government Accountability Office (GAO) in response to congressional request investigated a number of complaints regarding the electronic voting machines, and noted several problems in its September 2005 report. Curiously, the media has shown no interest in the GAO report. In my opinion, a free press has proven to be inconsistent with the recently permitted highly concentrated corporate ownership of the U.S. media.

The electronic voting machines leave virtually no paper trail and their use involves private potentially partisan corporations tabulating the votes with proprietary software that is not transparent. A number of counties in various states have decided to return to paper ballots that can be verified and recounted. But now that Republicans have learned that they can use the electronic machines to control election outcomes, the disenfranchisement of Democrats is likely to be a permanent feature of American “democracy”. Miller directs our attention to Bush’s high-handed treatment of dissenters. If electronic voting machines programmed by private Republican firms remain in our future, dissent will become pointless unless it boils over into revolution. Power-mad Republicans need to consider the result when democracy loses its legitimacy and only the rich have anything to lose.

Link here.


Everyone interested in “escaping” overseas has by now heard the hype about Costa Rica. What many people do not know is that different areas of Costa Rica have very different ex-pat cultures. The Southern Nicoya Peninsula is the area known not only as a haven and hangout for some of the world’s most creative people, but also as the most beautiful environment to live in. Within a 30 minute drive of the center of the area, you can find a full-sized flying trapeze with occasional shows and classes, at least two recording studios, an organic food market, some of the best scuba diving on the Pacific coast of Costa Rica, unbelievable sport fishing, three dance studios, two acupuncturists, a chiropractor, five or six yoga studios, four wildlife conservation projects, and some of the world’s best surfing in year-round eighty degree water. The food is a variety of world cuisine including five or six real Italian pizzerias, fresh bakeries, a few sushi places, Indian and Middle Eastern food, several vegetarian restaurants, plus dozens of local seafood restaurants.

What you will not find here are McDonalds or any other famous brand restaurants and stores, casinos or brothels, traffic, shopping malls, or towering condominium complexes and mega-hotels. The air and water are incredibly clean because there is no industry within two or three hours drive. Jaguars and five other types of wild cats still live in the area, as well as several types of parrots and toucans, dolphins and whales, two types of monkeys, anteaters, and many other mammals, and birds. The sky is often so clear that on a cloudless night, one can see the Milky Way as if from a boat in the middle of the ocean.

The area is in a tropical transition zone between the too-dry-and-over-developed north, and the too-humid-and-buggy south. Because it is more remote than the coastal areas farther north in Costa Rica, the area has lagged in development and pricing, and the community that lives here likes it that way. Prices have been rapidly escalating, but compared to land in California or Hawaii it still seems like a bargain. The general consensus is that the area is going to become sort of a luxury artist eco-community. Until then, everyone considers it to be like Maui 20 years ago.

So many people want to move to Costa Rica right now that there are several good books written about the subject, and countless websites with the details, so we do not need to list all the specifics again here. Suffice to say that both the Costa Rican government and the people are generally very friendly towards foreigners moving here. The hospitals are as good as in the U.S. The dentistry is great. It is gourmet all the way here in this part of the rainforest, so buying property here does not mean you have to live like Tarzan (although some do.)

The property pricing is all over the place, mostly depending on how close to the beach a property is, or how spectacular the ocean view. Prices range from $300 and up per square meter, to less than $1 per square meter for larger fincas and farms 15-20 minutes inland. Many people move to Costa Rica wanting to be on the beach, but then find it is more comfortable and peaceful a a bit inland, where it is cooler and less humid. Unless you plan to surf or swim every single day, the extra comfort and tranquility are worth the short drive to the waves. While it is possible for a family to live in Costa Rica like Adam and Eve, living on your own fruit and fishing in your own personal Garden of Eden (and some do), more likely you are going to want to have a car, some travel expenses, etc. It is reasonable to think that a family of four can live well here for around $1200-$2500 per month.

Link here.

Real estate in Costa Rica: the greater fool phenomena – link.
Detailed analysis of the real estate market in Costa Rica – link.


How can you take advantage of the U.S. dollar’s short-term strength while holding onto your medium-to long-term foreign currency positions? In many cases, tax swaps are the answer. Let us say you are holding Swiss francs whose market value has decreased since time of purchase. Further, you view the franc’s fundamentals as strong with the potential for an increase in future value from present value. Simply sell the Swiss francs and immediately repurchase them. That captures a capital loss, which can be used to offset capital gains elsewhere in your portfolio. Additionally, you still own the same asset with an expectation of future gains. Commodities such as precious metals and foreign currencies are not governed by the “wash sale” rule for securities contained in the U.S. Tax Code (IRC § 1091). Therefore, you can sell foreign currencies and immediately repurchase them at current market prices.

Normal spreads, commissions and transfer fees could make this transaction cost prohibitive, with commissions, spreads and fees of 4%-6% or even more. However, by working with a company that offers preferential commissions of 2% or less for foreign currency tax swap transactions, this technique rapidly changes from cost prohibitive to cost effective. The timing to maximize your tax loss is when the markets are at the low end of their trading ranges, not the end of the tax year. Technically and seasonally, the time is now to consider a foreign currency tax swap. Even if you do not need this tax-saving capital loss in the current tax year, you are permitted to use $3,000 per year (to offset ordinary income) and roll the remainder forward to the next year.

Link here.


General Leonid Ivashov was the Chief of Staff of the Russian armed forces when the September 11, 2001, attacks took place. This military man, who lived the events from the inside, offers an analysis which is very different to that of his American colleagues. As he did during the Axis for Peace 2005 conference, he now explains that international terrorism does not exist and that the September 11 attacks were the result of a set-up. What we are seeing is a manipulation by the big powers. This terrorism would not exist without them. He affirms that, instead of faking a “world war on terror”, the best way to reduce that kind of attacks is through respect for international law and peaceful cooperation among countries and their citizens.

As the current international situation shows, terrorism emerges where contradictions aggravate, where there is a change of social relations or a change of regime, where there is political, economic or social instability, where there is moral decadence, where cynicism and nihilism triumph, where vice is legalized and where crime spreads. It is globalization what creates the conditions for the emergence of these extremely dangerous phenomena. It is in this context that the new world geo-strategic map is being designed, that the resources of the planet are being re-distributed, that borders are disappearing, that international law is being torn into pieces, that cultural identities are being erased, that spiritual life becomes impoverished …

The analysis of the essence of the globalization process, the military and political doctrines of the U.S. and other countries, shows that terrorism contributes to a world dominance and the submissiveness of states to a global oligarchy. This means that terrorism is not something independent of world politics but simply an instrument, a means to install a unipolar world with a sole world headquarters, a pretext to erase national borders and to establish the rule of a new world elite. It is precisely this elite that constitutes the key element of world terrorism, its ideologist and its “godfather”. The main target of the world elite is the historical, cultural, traditional and natural reality; the existing system of relations among states; the world national and state order of human civilization and national identity.

Terrorism is the weapon used in a new type of war. At the same time, international terrorism, in complicity with the media, becomes the manager of global processes. It is precisely the symbiosis between media and terror, which allows modifying international politics and the exiting reality. In this context, if we analyze what happened on September 11, 2001 we can arrive at the following conclusions: 1.) The organizers of those attacks were the political and business circles interested in destabilizing the world order and who had the means necessary to finance the operation. 2.) Only secret services and their current chiefs – or those retired but still having influence inside the state organizations – have the ability to plan, organize and conduct an operation of such magnitude. 3.) Osama bin Laden and “Al Qaeda” cannot be the organizers nor the performers of the September 11 attacks. They do not have the necessary organization, resources or leaders.

The September 11 operation modified the course of events in the world in the direction chosen by transnational mafias and international oligarchs – that is, those who hope to control the planet’s natural resources, the world information network and the financial flows. This operation also favored the US economic and political elite that also seeks world dominance.

Link here.


A family member from Irvine, California – a branch manager at Bank of America – told us two weeks ago that her bank held a “workshop” where the last two days were dedicated to discussing their bank’s new security measures. During these last two days, the workshop included members from the Homeland Security Office who instructed them on how to field calls from customers and what they are to tell them in the event of a national disaster. She said they were told how only agents from Homeland Security (during such an event) would be in charge of opening safe deposit boxes and determining what items would be given to bank customers.

At this point they were told that no weapons, cash, gold, or silver will be allowed to leave the bank – only various paperwork will be given to its owners. After discussing the matter with them at length, she and the other employees were then told not to discuss the subject with anyone. The family member has since given her notice to quit the bank.

I found the news alarming and decided to find out more myself. On a trip to my bank here in Houston, I remarked to a young new bank employee, “well I guess you’ve been told all that stuff by the manager and the Homeland Security about what to tell your customers” – and to my amazement, the young woman came right out and said yes she had been through all that, then whispered to me across the counter, “but we’re not supposed to talk about – I could lose my job.”

What should you do with this information? I am not trying to “scare” anyone – just providing some news I think is relevant to Americans. Each must find his way through this dark forest – you will do with this information what best suits you and your loved ones – me personally, I see this as another indicator of how the criminals in charge over our lives intend to fleece U.S. citizens completely then dispose of them as only refuse. Be prepared.

[Ed note: The laws and procedures ostensibly permitting such actions by the Feds have probably been in place for ages. E.g., after the laws outlawing gold ownership by U.S. citizens were enacted in 1933, bank safe deposit boxes were searched for the presence of gold. Whether this alleged recent reminder to the banks has any particular significance is for the reader to decide.]

Link here.


Law enforcement agencies in the U.S. have announced the arrest of the head of a Bahamas-based investment management company, who has been accused of laundering more than $1 billion in funds derived from tax evasion, drug trafficking, securities fraud and bank fraud. Martin Tremblay, President and Manager of Dominion Investments, a Bahamas-based investment services provider and financial advisor, was arrested Monday by the Organized Crime Drug Enforcement Task Force’s Strike Force. An indictment unsealed in Manhattan federal court charges Tremblay with conspiring with a number of other defendants to launder $1 billion in illegal proceeds for numerous Dominion Investments clients, all in exchange for a substantial commission, in a long-term money laundering scheme.

According to the indictment, Dominion Investments is an investment services provider and financial advisor incorporated in the Bahamas in 1994, licensed by the Securities Commission of the Bahamas, and a member of the Bahamas Financial Services Board. Dominion Investments’ website states that the company is a “leader in the offshore financial services” market, offering its clients “the knowledge and expertise they need to effectively use international tax planning, asset protection, and other wealth preservation techniques”.

The indictment charges that from approximately 1998 through December 2005, Tremblay used Dominion Investment accounts to receive hundreds of millions of dollars in proceeds from international narcotics trafficking, securities fraud scams, income tax evasion, mail and wire fraud schemes, and bank fraud, among other crimes. Tremblay was then said to have laundered the illicit funds by transferring them into U.S. bank accounts and offshore bank accounts in Canada, the Bahamas, and elsewhere around the world. To further conceal the source and nature of these funds, Tremblay and his co-conspirators are said to have created shell companies and fictitious entities, using the same false nominees, addresses, and telephone numbers, to launder the illegal proceeds.

The indictment alleges that $50 million in proceeds from tax evasion was laundered through Dominion Investments, along with a further $3 million in the proceeds from the sale of GHB kits, more commonly known as the “date-rape drug”, and millions of dollars derived from cocaine trafficking and numerous stock fraud schemes. Tremblay was captured as a result of an undercover sting operation conducted by the Strike Force in 2005, during which he was videotaped agreeing to launder large amounts of money earned from narcotics sales. Approximately $220,000 was eventually transferred by wire to Dominion Investments-related accounts.

Link here.


#1.) Bubble Trouble, Grand Prize Winner, Dumbest Moment of 2005: “If you grew up in Danvers, and you remember it as the spooky place on the hill, it might not be the right place to live.” – William McLaughlin, an executive with AvalonBay Communities, which is converting boarded-up Massachusetts mental institution Danvers State Hospital into a 497-unit complex of high-end apartments and condos. That sound you hear? Not the ghosts of mental patients, but loud hissing from the wildly inflated housing bubble, which tops our list this year with seven priceless moments of real estate insanity. First up: the nuthouse-to-yuppie-house trend currently sweeping North America, with such conversions also planned in Detroit, New York, Vancouver, and Columbia, S.C., where the centerpiece of the development is an original brick building with the word “asylum” chiseled into the facade.

#30.) Better get your offer in quick – rumor has it, Kate Moss is very interested. A house in the Shepherds Bush area of London measuring less than 10 feet across at its widest goes on the market for $933,000. Listing agent Winkworths describes the anorexic structure as“qutterly amazing and almost certainly unique.”

#90.) See? Our plan to turn it into a bastion of American-style capitalism is working just fine. “Before, in Iraq, the houses were cheap. Now the houses are expensive, but the lives are cheap.” – A real estate agent in Baghdad, about the red-hot market in the Iraqi capital, where prices have soared as much as 1,000% in the past three years. The increases are fueled by foreign investment, pent-up demand after Saddam Hussein’s strict property regulations, and even reinvested gains from looting.

#100.) Bubble? What bubble? Oh … that bubble. In May an Experian-Gallup national survey finds that 65% of Americans have not heard anything about a possible “housing bubble”. Another 12% have heard “only a little”. Indeed, 70% expect home prices to keep rising, while only 5% think they will slip. However, when the facets of a housing bubble are described to them, about 40% go on to say that the scenario is likely to occur in their area in the next three years.

Link here.


The problem with the “freedom indexes” (the 2006 edition of the one done by the Heritage Foundation and The Wall Street Journal has just been published; another one is due to the Fraser and Cato institutes), is not that they are done by bad analysts (quite the contrary, and we have friends among them) nor that none of the underlying data is not potentially interesting to economists or investors. The problem is that it is not clear what they measure.

If “economic freedom” is defined in the most general sense of the liberty to do anything peaceful one wants to do with one’s own property, and to enter into any contractual relation one wants (except to commit violent crimes), then obviously this is not what the indexes measure. The HF/WSJ index ties economic freedom to “the production, distribution, or consumption of goods and services,” but this will only do if, by “goods and services”, we understand those allowed by the state to enter legal markets. If “economic freedom” is inseparable from the rest of human liberty in a social context – using one’s property to express dissenting opinions, travel, have sex, grow marijuana, store one’s firearms, raise funds from “public” investors, etc. – the freedom indexes are off the mark.

This explains why some countries ruled by hard tyrannies, as opposed to the soft, Tocquevillian brand we know in the West, where nobody in his right mind would want live except to make a buck as a privileged foreigner or a member the local nomenklatura, make it to the top of the list. Who would want to live in Hong Kong (ranked 1st of 151 countries in the HF/WSJ index), that is, under one of the worst tyrannies on earth, and so much so for its very efficiency? Who would want to be a peasant under other Asian tyrannies like Singapore (ranked 2nd)?

The selective definition of economic freedom also explains why the indexes show growing economic freedom while everybody who lives in the real world must know that the 20th century, rightly described by Mussolini as “the century of the state”, is continuing in the 21st with a vengeance. Thus, the “economic freedom” that is being measured is a rather special animal: it is the freedom to do what is narrowly defined as freedom in the statistics underlying the index. I am not saying that such indexes are totally useless. They do regroup variables that are correlated with GDP per capita and its growth, but keep in mind that GDP is a very unreliable construct that reveals basically nothing about the general welfare, and is based on arbitrary value judgments. But the freedom indexes have little to do with “economic freedom” as we use the term in politics, economics and philosophy.

Link here.


The rise of the Libertarian Movement Party as a national force is the real story in the upcoming presidential election in Costa Rica. The party’s leader, Otto Guevara, has been able to do what no libertarian has achieved anywhere in the western hemisphere, including the U.S. Mr. Guevara is currently running third, with 15% in the polls – far behind the expected winner Oscar Arias, but a close second to Otton Solis, a classic Latin American populist. The Libertarian Movement party is also well ahead of the Social-Christian Democrats and is set to obtain some 12 seats out 57 in Congress. As Guevara told me recently, he wants to “force the next government to negotiate with the Libertarian Movement Party its public policies for the next four years” and prepare the terrain for a presidential victory in 2010.

Since their inception, the Costa Rican libertarians have been on the rise. In 1998 they got Mr. Guevara elected as the first libertarian in Congress and in 2002, with nearly 10% of the vote, they managed to get six legislators elected. Now, they have become a force to be reckoned with and, without renouncing their radical views, have penetrated into the mainstream – every libertarian’s dream. The libertarians stand for minimal taxation and regulations and have successfully blocked the current President’s attempts to raise taxes for the past three years. They believe in ending government monopolies on electricity, telecommunications, oil refining and insurance, as well as legally protected private monopolies such as vehicle inspection. They have proposed the elimination of trade barriers including support for the Central American Free Trade Agreement with the U.S. And they believe in a property-owning society (they support giving titles to informal home owners), stand against foreign intervention (they stood against the war in Iraq, which the Costa Rican government supported), and in favor of decriminalizing drugs.

One should not, at least at this stage, read more into Guevara’s success than is necessary. But eight years of solid growth without compromising on those issues generally deemed to be an impossible sell deserve at least a second thinking with regard to politics and classical liberalism.

Link here.


Croatia is one of Europe’s loveliest treasures. Everything a discriminating visitor – or home buyer – is looking for can be found right here: crystal-clear seas, timeless fishing villages and unspoiled beaches, roman ruins, a pristine lake district, and medieval walled cities. Every twist and turn of the coastline serves up grandstand views of secret coves, little harbors, and calm turquoise waters. Out in the Adriatic Sea, a galaxy of islands – 1,185 of them – shimmer like a cache of emeralds. The French diving legend Jacques Cousteau once described Croatia’s waters as “the cleanest and clearest” in the world. When you go out into the Adriatic you will be astounded at how far down into the depths you can see.

What else? Oh, yes – Adriatic property prices are what you could find on the Mediterranean a generation or so ago. Although prices have been increasing at a rate of between 20% and 30% per annum in recent years, (30% in the last six months in the splendid medieval city of Dubrovnik, the hottest spot on the country’s real estate map), it is not too late to find great values. Prices are still well below the European average. When compared with many other European vacation destinations, agents are correct in claiming that the Dalmatian coastline still has significant growth potential.

It is hardly surprising, then, that this little gem of a country is experiencing something of an investor feeding frenzy. Where else along Europe’s sunshine coasts can you find a two-bedroom seaside apartment for under $80,000? Now could be an ideal time to snap one up since it seems most unlikely that prices will fall. Croatia is seeking accession to the EU by 2008, though this could actually come as early as 2007.

Although Croatia was once part of Yugoslavia, the vast majority of Croatians actually resent their country being portrayed as part of the Balkans. Both historically and culturally, they regard themselves as firmly a part of central Europe. Croatia is not a battle zone. The war here ended in 1995. It is neither Kosovo, nor Bosnia. In fact, Croatia is nothing like either. If you are under the impression that it is war-torn, backward, poor, or struggling, think again. Such ideas are either out-of-date or misguided. What you need to know is that Croatia is a wonderful retirement destination, a dream holiday spot, and an interesting investment opportunity.

Link here.


At this writing, the confirmation for Judge Samuel Alito still is not completed. Some of the angst liberals have experienced with this nomination is understandable. They consider abortion “rights” to be front and center, the main “right” supposedly guaranteed by the U.S. Constitution (which does not mention abortion). In fact, the ACLU even has declared that abortion “rights” trump everything else that comes down in the Bill of Rights.

However, some of the debate has dealt with issues that are of most importance to our lives, those being attached to the balance of power, and specifically the power of the executive branch versus Congress. One dissenter, Sen. Patrick Leahy of Vermont, has declared that “I am concerned that if we confirm this nominee it will further erode the checks and balances” that the Constitution supposedly created. Now, I agree with that argument as far as it goes, but it really does not go far enough. That is because the dissenting senators, and New York Times editorialists, have a truncated view of executive branch power. In their minds, the debate is only between Congress and the occupants of 1600 Pennsylvania Avenue.

Guess what? The executive branch covers all of those agencies that people on the left (and some on the right) claim to love. The same people who have suddenly discovered the various checks and balances created by the Constitution are also the same people who decried any attempt by Congress to put even mild restraints upon the IRS during the Clinton years, even after it was firmly established that the agency was abusing citizens and illegally destroying their livelihoods. (James Bovard’s Feeling Your Pain, which documents hundreds government abuses during the Clinton Administration, is worth reading for anyone who believes that Bill Clinton and Al Gore respected the rights of anyone. Government abuse of citizens is the staple for all of the political classes.)

Ever since the Great Depression and the New Deal, federal agencies have amassed huge powers and have become a law unto themselves. This process has come about only because Congress agreed to redelegate its constitutional powers and hand them over to the executive branch. The process continues unabated today. So, yes, by all means let us have the debate on “separation of powers”. Let us applaud when Patrick Leahy or Teddy Kennedy or John Kerry speak of limiting the powers of the president. But if we are going to limit the president’s powers, then we must logically turn to those entities that the president and his appointees control – the bureaucracies. At that point, unfortunately, the dissent stops while the Kennedys and the Kerrys and the New York Times editorial writers bow down and pay homage to the IRS, FBI, BATF, EPA, TSA, and every other agency that Congress should never have created in the first place.

Link here.


Defying the old saying that you can’t take it with you, some of America’s richest men are planning to enjoy their fortunes from beyond the grave. They are preparing not only to have their bodies deep-frozen at the moment of death but also to use a tax loophole to bequeath their wealth to themselves. Known as personal revival trusts, the schemes invest millions of dollars until future medical technology makes it possible to bring the beneficiaries back to life.

Believers in “cryonics” sign up to private companies which will suspend their remains in liquid nitrogen and store them for what may be hundreds of years. Most are extremely wealthy – necessarily so, given the $150,000 cost of preserving a body. Now they are seeking to ensure enough future funds to pay for their revival – and for their living expenses in what might be 23rd-century America. David Pizer, a holiday resort owner in Arizona, has made arrangements to be frozen along with his wife and their favorite dogs. He also plans to preserve the couple’s fortune, estimated at about $10 million. Using a personal revival trust, Mr. Pizer, 64, who is in good health, hopes that his wealth will have shown spectacular growth when he comes back to life.

The inheritance loophole was originally devised for America’s 19th-century industrial dynasties, such as the Rockefeller and Carnegie families. Concerned that their fortunes would be consumed by taxes, they created long-term trusts to preserve their estates. Personal revival trusts simply name the deep-frozen corpses as a beneficiaries, treating them, for legal purposes, as unborn grandchildren. Don Laughlin, 75, a Nevada casino owner, has decided to leave his preserved remains $5 million, estimating that he has “a better than even chance of coming back.” At least a dozen other such trusts are thought to exist.

Link here.


The government may not think you are important enough to eavesdrop on your telephone conversations, but did you know that anyone with a passing interest and a few bucks can go online and buy a record of your phone calls? Don’t care? Privacy experts say you should. Suppose your phone logs were used by a stalker or abusive spouse to locate you or your friends or children? Perhaps a dangerous criminal discovers you have been helping the police by snooping into officers’ telephone records. Or maybe your unscrupulous boss just wants to find out what you do after work as ammunition to demote or fire you.

“Stealing a person’s phone log can lead to serious personal, financial and safety issues for just about any American,” Sen. Charles Schumer, D-N.Y., said last week after introducing federal legislation that would make the unauthorized sale of private cell, land-line or Internet phone records a felony. So-called data brokers have been selling personal phone records for years, but privacy concerns over the practice have been growing as Web sites offering the service have proliferated.

The Federal Communications Commission recently disclosed that it had launched an investigation into “troublesome data brokering practices,” including whether phone companies are doing enough to protect customer records. And several state attorneys general’s offices have been examining the issue for the last several months as part of a multi-state privacy group. Phone companies themselves have started to take action against some of the data brokers, which often steal customer records by tricking phone company employees or paying them for the data. Cingular Wireless two weeks ago obtained a temporary restraining order against 1st Source Information Specialists, a Florida firm that operates the online phone record service www.locatecell.com.

Phone companies say the only legitimate way to get phone records is to order your own or have a subpoena or court order. Data brokers often get the information by pretending to be the customer, a regulator or phone company employee. These so-called “pretexters” may buy a customer’s personal data, such as Social Security numbers from online sources, to help gain access to the accounts. “It’s a con job and they are very good at it,” said John Walls, spokesman for the wireless association CTIA. For customers worried about snoops stealing their phone records, some companies including Cingular and Verizon offer the option of restricting account access by requiring a pass code.

Link here.


Young people are victims of identity theft far more often than senior citizens, and when they do get scanned, the Gen X-ers lose three times as much money. This is just one of the counterintuitive conclusions that appear in a new identity theft report released by the Council of Better Business Bureaus. They have commissioned such reports for the last few years, and this year’s research suggests that despite the hype, identity theft is not increasing. Since 2003, cases of identity theft have dropped from 10.1 million a year to 8.9 million, and the report takes pains to stress that theft using the Internet occurs in only a small (and declining) percentage of the cases. In other words – go out and shop! It’s safe! It’s the American way!

The report’s conclusions are not all sweetness and light, however. Mixed in with the good news is the fact that the total amount of fraud (as measured in dollars) has been rising, and now stands at more than $56 billion. The amount of fraud per victim has also jumped by more than $1,000 in the last two years alone, suggesting that thieves are learning how to make better use of the information they acquire.

Among the report’s top 10 findings are that most data compromise – 90% – takes place through traditional offline channels and not via the Internet, when the victim can identify the source of data compromise. Lost or stolen wallets, checkbooks or credit cards continue to be the primary source of personal information theft when the victim can identify the source of data compromise. Almost half (47%) of all identity theft is perpetrated by friends, neighbors, in-home employees, family members or relatives – someone known – when the victim can identify the perpetrator of data compromise.

It is worth raising the question of how far we can trust such studies. Visa and Wells Fargo provided some of the cash to fund the research, and the results definitely turned out to be in their favor. Like Fox Mulder, we at the Orbiting HQ want to believe – but we have seen a lot of conflicting information.

Link here.


I know a few things about secret, illegal wiretaps. To begin with, they do not stay secret. Second, George Bush should have read the articles of impeachment for Richard Nixon before authorizing the illegal snooping on American citizens. The second article of impeachment against Nixon cites his use of electronic surveillance for illegal purposes as grounds to remove him from office. The revelations of Nixon’s sneaky snooping were the final blow that ended his criminal presidency. But back to my memoirs. In 1968, a few months after Martin Luther King’s assassination, Gainesville, Florida, was a police state, especially in the black community. Generally thought of as an oasis of reason in a sea of racism because of the presence of the University of Florida, Gainesville actually differed little from much of the then still “segregation forever” South.

Civil Rights activist Jack Dawkins arrived in Gainesville in 1967, and he mobilized the black community after two girls were molested while in police custody. A grand jury whitewashed the police. At the behest of the Gainesville Sun, Dawkins’ newspaper, Black Voices, was declared by a local judge to be a “clear and present danger to the administration of justice.” Dawkins was held without bail. Famed Civil Rights attorney William Kunstler charged to the defense of the activist, and a federal appellate court strongly admonished the Gainesville judge. Dawkins disappeared. “We all knew that the cops would find an excuse to kill him,” Marshall Jones, a distinguished psychology professor who was denied tenure at UF because he supported civil rights, told me. Dawkins has never reappeared.

Enter John Sugg [the article author], then a 22-year-old, fresh-from-the-Navy Gator. What I had learned about Vietnam in the Navy had made me vigorously anti-war, and I eventually helped lead various veteran and student groups opposed to the conflict. The antiwar and civil rights groups suspected that we were being spied upon and wiretapped. My girlfriend, a UF librarian, obtained her personnel file for an insurance claim – and found more than two dozen photographs of me haranguing crowds, as well as several surveillance memos that made it clear we been “infiltrated”. Court cases would reveal that the spies were the only people advocating violence. We tried an experiment. We got on the phones and breathlessly told each other that Dawkins was returning to Gainesville. We were to meet him at a Winn-Dixie parking lot in the middle of the night. We buzzed it up on the phones with tons of details, alluding to secret communications channels with Dawkins.

We, of course, had no idea where Dawkins was – even if he was still alive. But we did know where throngs of federal and local cops would be on the night in question, and we were right. We got the drop on the federal agents staking out the Winn-Dixie, and photographed them waiting to collar (or kill) Dawkins. More important, as would come out in several cases – most notably the “Gainesville 8”, a trial of Vietnam vets accused (and found innocent) of plotting terrorist attacks at the 1972 Republican National Convention – the government never had any evidence against activists nor did it have any legal justification for many violations of constitutional rights. In one instance, it was revealed that federal intelligence officers held a child hostage to force the babe’s prostitute mother to swear to outlandish tales of sex and drug orgies among anti-war activists.

Fast forward to circa now. George Bush’s assault on civil liberties, the gloriously misnamed PATRIOT Act, was drafted before 9-11. It was sitting there … waiting. The cry from the Bushies is that they need better intelligence (and, yes, we all agree that that is true by one definition of intelligence). We know that Bush was warned, weeks before 9-11, of very specific plans by Osama bin Laden to attack American targets with hijacked planes – and our government did little (other than John Ashcroft stopped flying commercial flights). Lack of intelligence was not the cause of 9-11. We also know that all of the thousands detained – probably unconstitutionally – after 9-11 have revealed few real threats to America. The government has had little success in terrorism prosecutions, especially compared to the numbers detained. The most recent government debacle was the failed prosecution of Tampa academic Sami Al-Arian, after a decade of investigations.

We know that when the Bush administration came out last May with an assessment of terrorist threats, it was not murderous groups such as right-wing militias, anti-abortion extremists and other haters that interested the feds. Rather, the “threats” were environmental and animal rights groups, which despite vandalism have never killed anyone. The Bush psychology is to keep the public in a constant state of fear. Logic and liberty die in such an environment. We are far more safe today, even with Bush’s mismanagement of the nation, than when we faced Nazi Germany, Imperial Japan or the nuclear-armed Soviets. Yet, Bush contends that as a “war president”, his power should be unlimited.

The power to wiretap and monitor U.S. citizens is constitutionally anathema. But, more important, this is not a power whose real mission is nabbing terrorists. The targets of the abuse are Americans – who must fear that their phones are bugged, their emails read, their list of library books turned over to agents, their bank accounts sifted. That experience of mine I mentioned: An FBI agent called me two years ago with a not-too-subtle threat to reveal wiretaps of me talking to Al-Arian. The agent, Kerry Myers of Tampa, was attempting to get me to snitch on federal law enforcement sources who had confided in me.

The government’s goal is control. A docile population, whose anxieties are jacked up by the strident mendacities on Fox News, is prepped to believe even the most outlandish claims of Big Brother. And if you disagree and dissent, be careful of what you say on the phone.

Link here.
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