Wealth International, Limited

December 2007 Selected Offshore News Clips

(Especially noteworthy articles’ headings highlighted in gold.)


THE EASTERN EUROPEAN HOUSING BUBBLE

An opportunity to lose one’s money in a new exotic location beckons.

As a student of speculative manias and bubbles, I have been lucky enough to witness two giant bubbles during my 10-year stay in the U.S. The dotcom-telecom bubble burst loudly and now the residential real estate bubble has grown too large and extended to support itself as well. Now we are once again witnessing another speculative bubble. This time, it is in Eastern European real estate.

When I returned back home to Bulgaria in late 2004, people everywhere told me that real estate was definitely the best investment. I also heard that real estate is the safest investment – real estate prices never go down, right? Anytime I tried to object, people informed me that I was just citing textbook stuff that did not apply to Bulgaria. This was not the time to be theoretical, but to make money in real estate. Average annual gains in previous years ran about 25-35%, and things were only going to get better. Bulgaria was to enter the EU in 2007, so Western Europeans were on the verge of rushing to buy our real estate at sky-high prices, thereby making us all rich.

Everybody was convinced that real estate prices in Sofia, the capital of Bulgaria, would reach those of Prague and Budapest, which in turn were supposed to reach those of Rome and Berlin in the not-too-distant future. Everyone was investing in real estate ... with borrowed money, of course. The smartest and most educated were buying two or more properties, using the first one as collateral for the second, and the second one as collateral for the third. They were the undisputed geniuses that invented the way to pyramid one financial asset on top of another. Many of them, however, had never heard of Charles Ponzi.

The ultimate objects of speculation were resort properties on the Black Sea, where the majority of Western and rich Eastern Europeans will spend their summer vacations. God has blessed our Black Sea with beautiful scenery, sandy beaches, and a perfect climate, and property prices proved it. Prices rivaled those in Florida’s Miami Beach. Everywhere, people assured me that this was not a bubble, but sound financial investing based on solid fundamentals. Fundamental analysis, however, indicates that that real estate in Bulgaria is indeed grossly overvalued. Let me explain ...

What constitutes a real estate bubble?

Real estate has two fundamental indicators that provide the serious analyst with guideposts: (1) the rent-to-price ratio and (2) the price-to-income ratio. Rent-to-price divides annual rent from the property into its purchase price, giving the yield or current return on the investment. 100 years of U.S. history suggests a normal yield of around 10-12%. Property gets cheap when yields approach 15-20%, while yields lower than 6-8% suggest overvaluation and bubble territory. Over the last 3 or 4 years, yields in Bulgaria hovered in the 3-4% range, suggesting a strong bubble.

The price-to-income ratio tells how many years of pretax annual earnings are necessary for a household to purchase a house. The historical rule of thumb is that one annual income indicates undervalued properties, two annual incomes normal valuation, and three annual incomes overvaluation and bubble territory. Currently, this ratio for most regional markets in the economy is around 7-9, which is once again indicative that real estate is extremely overvalued.

Thus, both indicators confirm that there is a real estate bubble across Bulgaria, although few analysts there would acknowledge the importance of these ratios. Interestingly, when many analysts consider the fact that real estate earns less than a bank deposit, they immediately respond that rising prices more than compensate for the low yield! This is bubble psychology at work.

Macroeconomic fundamentals look terrific from one point of view and terrible from another. With steady money supply growth rates of 30%, mainstream economists counter that a currency board manages the Bulgarian monetary system, so inflation is impossible, because the government does not print “unbacked” currency. Credit has been expanding steadily for many years at a phenomenal 50% rate, driving a wild boom destined to turn into bust. Mainstream analysts would counter that the initial credit base 5-8 years ago was abnormally low, so that the credit and banking system has a lot of catching up to do, and that these healthy credit growth rates indicate strengthening confidence in our banking system.

For many years, mortgage growth was 70-80%, which makes me firmly believe that a wild real estate bubble is in the making. I also worry that current account deficits have reached nightmarish proportions at 20% of GDP, so the collapse of the currency board and the economy is a certainty. Finally, I point to the crisis proportions of the foreign debt, currently standing at 100% of GDP. Mainstream economists claim that strong mortgage growth underpins growth in the real estate sector and the economy, and that trade deficits do not matter – we are now part of larger Europe. A sound analysis indicates that the economy is bound to collapse in the near future, while a government-endorsed analysis concludes that everything is great and will get even better.

This gets us to Eastern Europe. One may confidently claim that practically all of Eastern Europe, mostly for similar reasons, is in a giant real estate bubble that is beginning to crack. The big picture shows the real estate bubble slope runs from the U.K. to Bulgaria. The explanation: Early in the decade, the beginning of the bubble was in Great Britain. Weak German and French economies forced the European Central Bank to maintain abnormally low interest rates for many years.

This fueled real estate bubbles across the stronger Mediterranean economies – Spain, Portugal, France, Greece – and, later on, in Western Europe. These bubbles in turn spread across Eastern Europe, first in the Czech Republic, Poland, and Hungary, and later on in the Baltic countries (Latvia, Lithuania, Estonia) and the Balkans (Romania, Serbia, Bulgaria). For all practical investment purposes, the real estate bubble has not spared a single country in Europe.

Anyone looking at the U.S. real estate market before 2005 could have probably seen the same thing coming. Investors should steer clear of Eastern European real estate, unless of course they would like the opportunity to lose their money in a new exotic location.

Link here.

THE COMING CHINA CRASH

While the Chinese stock market, as measured by the China Securities Index 300, is down 18% since October 16, that follows a period since January 1, 2006 during which the CSI 300 had soared 535%. Chinese economic growth is currently running at over 11% and the big money is convinced that it will continue, while the country’s foreign exchange reserves are $1.4 trillion, the largest in the world.

A crash would appear to be imminent!

Bears on China have been common for the last decade, and their track record has not been good. To see why a crash may be coming now, it is worth examining the behavior of the China Investment Corporation, the $200 billion sovereign wealth fund set up by the Chinese government in September. $200 billion is a fair chunk of cash. Six weeks ago, the power of sovereign wealth funds was celebrated and China Investment’s moves into the market were awaited with bated breath.

So much for that. A third of China Investment’s portfolio is to be invested in Central Huijin Investment Company, a purchaser of bad loans from the Chinese banks, and another third will recapitalize China Agricultural Bank and China Development Bank, to shape them up for privatization. $3 billion of the fund was invested in the private equity manager Blackstone in May – that may have bought China useful political contacts, but it is now worth $2 billion. And the remainder is being invested very carefully, primarily in U.S. Treasury securities – which are also losing money steadily in yuan terms.

The lackluster investment strategy of China Investment exposes a central flaw in the Chinese economy, its lack of a rational system of capital allocation. For more than a decade, Chinese state-owned companies have made losses, and have been propped up by the banking system. Since 2004, loss-making state-owned companies have been joined by overbuilding municipalities, erecting white-elephant office blocks in attempts to turn themselves into the next Shanghai. None of these losses have resulted in bankruptcy. Instead the cash flow deficits have been covered by the Chinese banks. As a result, the Chinese banks have an enormous volume of bad loans – $911 billion at May 2006, according to a later-withdrawn estimate by Ernst and Young, which must surely have ballooned to $1.2-1.3 trillion now.

That explains why China Investment is somewhat un-aggressive in its international investment strategy. China’s $1.4 trillion of reserves are in fact almost all required to prop up the banking system, when the inevitable liquidity crisis occurs. If the banks are to survive, China Investment will have to be followed by six more sovereign wealth funds of equal size, each of which will have to abandon its attempts to take over Exxon or Google and pour its money down domestic rat-holes.

A $1 trillion problem in subprime mortgages has caused even the U.S. money market to seize up and has required frequent applications of salves by the Fed. Since China’s economy is around 20% the size of the U.S.’s, the Chinese banking system’s bad debt problem is in real terms about five times that of the U.S. – about 40% of its GDP.

We have seen this movie before. The Japanese banking system’s bad debts after 1990 totaled around $1 trillion, about 30% of Japan’s GDP. The result was the bursting of the 1980s bubble and a period of little or no economic growth that lasted well over a decade. Admittedly the Japanese authorities made matters worse, by refusing to face up to their bad debt problem and issuing more government bonds to fund witless public spending schemes.

Nevertheless, we can have very little confidence that the Chinese authorities, once the same problem stares them in the face, would do any better. After all, at least one of the alternative policy mixes, that tried by Herbert Hoover and the Federal Reserve in 1930-32, proved very much worse. If China faces the choice between a decade of stagnation, as in Japan from 1990-2003, and a decade of economic collapse, as in the U.S. from 1929-1940, it will rightly prefer the Japanese alternative.

It may not have the choice. One of the factors that kept Japan out of real trouble in the 1990s was continued strong growth in the U.S. and world economies. Its magnificent export industries were able to continue growing, albeit at a slow rate, and provide a certain amount of traction for the economy as a whole. However, China will find it difficult to do the same, since the next decade does not seem likely to be a period of robust world growth. Far from it. The U.S. seems fated to endure at least a few years of very sluggish growth due to its housing market crash, and Britain appears to be in a similar mess, so even relatively robust growth in the resurgent economies of Germany and Japan may not be sufficient to keep Chinese exports growing.

At that point, China will have two alternatives. It can allow the banks to work their way out of their bad loans, condemning the domestic economy to probably a decade of little growth and extremely tight credit (high Chinese savings would alleviate this problem, but they will be trapped in the Chinese banks because the authorities foolishly do not allow Chinese citizens to invest abroad). Alternatively, it can inject more or less its entire foreign exchange reserves into the domestic banking system in order to recover its bad debts. That would allow the Chinese economy to continue expanding, but at a cost of devastatingly high inflation from the additional money pumped into the system.

We have seen societies with low economic growth, very high inequality (as China has now) and persistently high inflation. They are collectively known as Latin America. Since China also has much of the corruption that bedevils Latin America and its government lacks any genuine understanding of the free market and is increasingly dominated by special interests, it may indeed be fated to follow a Latin American growth path for the next few decades, with a tiny entrenched elite enriching itself at the expense of the disfranchised masses. That would be the worst possible outcome for the Chinese people, but it is not by any means impossible.

Many observers of the current U.S. financial market downturn comfort themselves with the thought that the world now has more than one growth engine, and that China, with four times the U.S. population, can because of its very high growth pull the world economy along sufficiently even when the U.S. stalls. However, if China is about to incur the inevitable backlash from its recent debt and equity bubbles, during which practices have flourished that have no place in a well functioning free market, then we may be entering a world in which the two main growth engines of the last decade are both broken. Growth in such a world will be truly sluggish and inflation high, as the world struggles to cope with the effects of an excess of cheap money now grown toxic.

Major recessions tend to produce foolish political reactions. In the U.S., it seems likely that a major recession would produce resurgent protectionism and an aversion to world trade. Japan, bless it, remained admirably politically stable during its sluggish decade, and eventually found a leader in Junichiro Koizumi who was able to lead it back into renewed growth.

In China, there can be no assurance whatever that a populace whose living standards have suddenly stopped improving will not turn to violent nationalism and/or counterproductive economics. Since the country is not a democracy and not likely to become one, the authorities are likely to react to hardship as did Vladimir Putin to the chaos of late 1990s Russia, imposing even more draconian repression and seeking a military adventure abroad to occupy the masses of disaffected youth and distract the public from its new poverty. That too would produce a future in the West far worse than would be cased by a mere domestic recession.

Bears who weary of observing the chaos in the U.S. financial markets can cheer themselves up by looking at China. There will be more than one source of the oncoming world downturn.

Link here.

THIS MAY NOT BE 1929, BUT IT IS THE BIGGEST MESS SINCE

The financial house of cards is about to come crashing down.

It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one. We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has ever seen. Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression. Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There is even a growing recognition that a recession is over the horizon.

But let me assure you, you ain’t seen nothing, yet.

What is important to understand is that this is not just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.

It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages. But the extent of those misjudgments will be revealed only once the economy has slowed, as it surely will.

At the center of this still-unfolding disaster is the Collateralized Debt Obligation, or CDO. CDOs are not new – they were at the center of a boom and bust in manufacturing housing loans in the early 2000s. But in the past several years, the CDO market has exploded, fueling not only a mortgage boom but expansion of all manner of credit. By one estimate, the face value of outstanding CDOs is nearly $2 trillion.

As part of the unwinding process, the rating agencies are in the midst of a massive and embarrassing downgrading process that will force many banks, pension funds and money market funds to sell their CDO holdings into a market so bereft of buyers that, in one recent transaction, a desperate E-Trade was able to get only 27 cents on the dollar for its highly rated portfolio.

Meanwhile, banks that are forced to hold on to their CDO assets will be required to set aside much more of their own capital as a financial cushion. That will sharply reduce the money they have available for making new loans.

CDO losses now threaten the AAA ratings of a number of insurance companies that bought CDO paper or insured against CDO losses. And because some of those insurers also have provided insurance to investors in tax-exempt bonds, states and municipalities have decided to pull back on new bond offerings because investors have become skittish.

If all this sounds like a financial house of cards, that is because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole.

That is why banks are husbanding their cash and why the outstanding stock of bank loans and commercial paper is shrinking dramatically. It is why Treasury officials are working overtime on schemes to stem the tide of mortgage foreclosures and provide a new vehicle to buy up CDO assets. It is why state and federal budget officials are anticipating sharp decreases in tax revenue next year. And it is why the Federal Reserve is now willing to toss aside concerns about inflation, the dollar and bailing out Wall Street, and move aggressively to cut interest rates and pump additional funds directly into the banking system.

This may not be 1929. But it is a good bet that it is way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.

Link here.

AN INTRODUCTION TO “CO-RELO” OR CORPORATE RELOCATION

For most avid observers, the news that many corporations are relocating some or all of their operations out of North America is hardly earthshaking. After all, who could forget Haliburton’s overnight announcement last March that it was moving its headquarter out of Houston. Or 3M’s mid-June announcement that it, too, was heading offshore. Or Pfizer’s recent announcement that it was closing plants onshore and doubling its offshore presence?

But those were just the harbinger of things to come. Top business analysts are now predicting that within the next few years, that co-relo trickle could quickly become a torrent. “Near-sourcing” in the Caribbean Basin has become a major growth industry. Caribbean Property Magazine intends to keep you informed as the story unfolds.

Offshore Times recently reported, “Call centers – the best-tracked segment of the outsourcing industry – have grown an average of 54% a year in the Caribbean since 2002 ... And near-sourcing proponents see the offshore movement getting a large boost with the implementation of CAFTA, a landmark trade treaty designed to lift business restrictions among the United States, Central America, and the Dominican Republic.”

What is the attraction? That is easy. As the accompanying articles disclose, virtually every country in the Caribbean now has unprecedented “Free Trade Zones” (all of Honduras is a FTZ). And the benefits are literally out of this world for companies currently operating north of the Rio Grande, including:

No wonder the list of companies moving all or part of their operations to the Caribbean Basin is growing exponentially. They are joining such well-established offshore manufacturers as Motorola, Panasonic, Levi Strauss, Hanes, Rawlings, Siemans, Hitachi, GTE Sylvania, and Intel. The trickle is, indeed, becoming a torrent.

The relocation revolution provides win-win opportunities for everyone involved. As both real and “virtual citizens” of the Caribbean, we are always concerned about the residents of the countries we write and read about. For the peoples of Honduras, Costa Rica, Dominican Republic, Panama, Trinidad & Tobago, and elsewhere, corporate relocation means higher wages, better working conditions, and a chance to learn new and marketable skills. For the companies relocating, the move means more competitive pricing, new markets, and the chance to reinvest profits in corporate growth and innovation.

As one Maryland furniture maker recently explained, “With the escalating wages, red tape, and onerous regulations here, I simply have to look elsewhere. It is either that, or shut down completely. Now, I have a choice.”

For you, co-relo means renewed opportunities to look to the Caribbean not only for a better lifestyle at lower prices – but also for high-level management or consulting positions with the plethora of new companies now setting up shop. We will keep you abreast of the breaking developments that will help you keep your options open.

Link here.

Honduras: More than Another Pretty Face – link.
Panama: Gateway To The Americas – link.
Costa Rica: The Ideal Relocation – link.
Dominican Republic: Nobody Does it Better – link.
Trinidad: Beyond the Carnival – link.

WHY BELIZE?

Why would anyone want to move to an obscure place like Belize? In this article I hope to introduce the reader to Belize and will outline why we find it to be one of the most enchanting, inexpensive, and unique places to live. We moved to Belize from Southern California in the late 1980s.

Belize is a Central America nation, nestled right below the Yucatan, Mexico – its border to the north. On the south and west, it is bordered by Guatemala. The Caribbean Sea is to its east, giving Belize 174 miles of coastline. Belize is about 250 miles south of Cancun, Mexico. About the size of the state of Massachusetts, it has a land mass of 8,866 square miles of territory, including 266 square miles of islands.

Belize was a British colony known as British Honduras for more than a century. It became a self-governing colony in January 1964 and it was renamed Belize on June 1, 1973. It became fully independent in 1981. Belize considers itself to be culturally both Caribbean and Central American. Belize has a parliamentary form of government, like England, with a prime minister at the helm and it operates under the English common law legal system.

Belize is much like a Central American Switzerland. It does not go to war and does not get involved with the problems its neighbors have suffered over the years. There has never been a war in Belize. While civil wars raged in Guatemala, El Salvador and Nicaragua, Belize remained untouched. With a population of about 300,000, Belize has the lowest population density in the Central American region, and one of the lowest in the world.

Agriculture and tourism are the backbone of Belize’s economy. Sugar cane exported to the U.S. is the biggest crop, with bananas to the UK a close second and citrus following that. Seafood is also a big export. The 2006 GDP of Belize was US$2.3 billion. The Belize dollar is pegged to the U.S. dollar at BZ$2=US$1. The currency has never been devalued.

Belize is the only English speaking country in Central America, due to its history as a British colony. So all the schools teach in English, the banks use English, all government forms, as well as road signs are in English. Spanish, Garifuna and Maya are secondary languages spoken in various parts of the country, as well as Low German which is spoken in the Mennonite communities. Many Belizeans are multilingual, but all speak English. You can get along just fine with English alone, but you will have opportunity to learn another language if you want to.

In Belize things are laid back – way back. It is a fabulous place to just relax. No one is in a hurry to do anything – ever. It is called “Belize Time” and everything in the country runs on it. Many find that the slow pace in Belize is just their speed. They, possibly for the first time in their lives, completely unwind and enjoy life.

The average year round temperature in Belize is a balmy 79 degrees. Homes in Belize do not have insulation or heating systems, because it never gets cold. The sun shines virtually everyday of the year. On the other hand, there is really no need to cool your home with air-conditioning either, for if your house is built right, the breeze coming off the Caribbean will do that for you.

It is generally said that Belize has the lowest cost of living in the Caribbean. You can enjoy a high standard of living on a small amount of money. A couple can still get by living on $1000 a month in Belize. That is for the basics. You will enjoy the same sea and sun on any amount.

In Belize you can enjoy true personal freedom. ... The kind that is evaporating back “home”. In a time when many living in developed countries feel they are losing freedoms and rights, a country like Belize may be just what they are looking for. There are no bans on smoking (which may or may not appeal to you), there are no restrictions on what you can or cannot build, and you only need a permit to build if you are within city limits, and then the permit is free. You do not need a fishing license, unless you plan to fish commercially. You can light a bonfire anytime you like. You can also buy medication without a prescription. Gringos living in Belize feel a sense of freedom they did not have back home, and describe the government as unobtrusive.

Belize offers Permanent Residency status to foreigners from almost any country. The cost is $1,200 for a couple and it takes just one year of living in Belize to qualify. One can live in Belize full or part time without giving up their present citizenship. With Belizean Permanent Residency you have all the rights of a Belizean citizen, except the right to vote or serve in the military. After 5 years of being a Permanent resident you have the right to become a citizen of Belize, and get a second passport, should you desire to, at a cost of only $150.

Taxes are low, and in some cases non-existent, in Belize. As a foreigner, you will be exempt from paying income tax in Belize on your income from abroad, regardless of its source. Within Belize there is no inheritance tax and no capital gains tax. Property taxes are low at 1% of the value of the undeveloped property.

Belize has been called an entrepreneur’s paradise. There are very few restrictions on what you can do and how or where you can do it. Starting a business can be very simple and inexpensive in Belize. There is a sense of freedom in Belize not found many places nowadays, where red tape can choke off your dreams. While either permanent residency status or a work permit is required to work in Belize, both are far simpler and less expensive to get in Belize than many other places. Depending on what type of work you do, a work permit can cost from $25-$500 a year.

Living in Belize is not only inexpensive, it is exciting and interesting. There are thousands of reasons, most centering on Belize’s rich, natural wonderland, replete with unspoiled scenery and an endless variety of fauna and flora, its numerous archeological sites, its lush rainforest, the world’s second longest barrier reef, and its thousand foot waterfalls.

Link here.

NEW PRIVATE BANKING MONEY SETTLES IN SINGAPORE

The country is now the #2 private banking center in world, behind Switzerland.

For much of November, it was almost impossible to get a first- or business-class seat from Singapore to top-end regional resorts such as Bali. The passengers were not early-season holidaymakers. The private banking business in Asia is so good these days that banks are flying aircraft-loads of customers for weekends away just to say thank you – whereas in the past they might have sent a year-end gift basket.

Banking for high net worth clients is one of the fastest growing segments of Asia’s financial services industry. Private wealth in Asia grew 10.5% last year to $8,400 billion, according to consultancy Capgemini. The number of Asians with liquid assets worth more than $1 million grew 8.3% to 2.6 million last year. Asian private banking is growing fast because more of the region’s millionaires are using private banking channels rather than tying up most of their wealth in property.

The private banking business in Singapore is forecast to grow by more than 30% this year and by 25-30% over the next three years. Singapore is now the world’s #2 private banking center, albeit well behind Switzerland. The industry estimates that close to $300 billion – or about 5% of the world total – of private-banking assets are managed in Singapore, compared with Switzerland’s $1,700 billion.

Singapore has transformed from a minnow to a private-banking giant in less than a decade. Six years ago, Singapore took steps to build a critical mass in wealth management and put itself far ahead of competitors such as Hong Kong. It beefed up account secrecy protection, changed its trust laws, and allowed foreigners who meet minimum wealth requirements to purchase land and become permanent residents.

In 2000, Singapore strengthened its banking secrecy laws, now considered stricter than even Swiss laws. Indeed, banks in Singapore have had to move data centers that handle private banking transactions from Bangalore, India to Singapore just as commercial banks were moving their own back office functions to cities in India.

Another big new attraction is Singapore’s new trust laws. Some European countries have laws that supersede wills and trusts. In late 2004, Singapore exempted foreigners who set up local trusts from these limitations. The new trust laws also attract clients from the Middle East, where shariah courts often pass over wives and children in favor of a deceased’s father or brother. Assets placed in trusts in Singapore have grown to nearly $100 billion from just under $25 billion five years ago, say industry insiders.

The number of private banks in Singapore has increased from just 20 in 2000 to 42, while private banking assets have grown from about $50 billion in 1998 to over $300 billion. Many newcomers are returnees. The UK’s Standard Chartered Bank, which last year re-entered private banking after a hiatus of more than a decade, made Singapore its global headquarters for private banking. Others, such as Bank Julius Baer that left Asia in the aftermath of the Asian financial crisis, have returned because they see a larger pool of assets, a more sustained pace of growth, better infrastructure and a friendlier regulatory environment.

Until recently, Europe was the main driver of Singapore’s private banking growth. Banks with huge European client bases have promoted Singapore – which imposes no tax on capital gains, interest income or overseas income – as a way around new taxes in Switzerland, where authorities three years ago imposed a withholding tax on some accounts held by EU citizens.

Wealthy Indians are a new growth driver, and have been big forces in up-market residential property transactions across Asia in recent months, particularly Singapore. The boom in Indian stock market and asset prices has created a breed of millionaires eager to park assets outside India. One private banker says money from India this year has tripled, even quadrupled for his bank. “European business was a big growth driver between 2004 and earlier this year,” says another private banker in Singapore. “Now it is all of Asia. Mostly India, China and Indonesia.”

After five years of heady growth, some private bankers in Singapore are trying to slow down. “Our biggest challenge is people,” says Marcel Kreis, who heads Credit Suisse’s private banking operations for Southeast Asia and the Pacific. Singapore has more than 1,000 unfilled private banking positions, says a partner at an executive search firm. Rival banks are pinching staff from each other, often doubling salaries and offering huge joining bonuses.

To tackle the growing skills shortage, Singapore two years ago set up a Wealth Management Institute, which offers graduate and diploma courses. Banks such as UBS are setting up their own training facilities to prepare a generation of private bankers.

Link here.

FEAR THE FOREX MARKET ... OR AT LEAST GIVE IT SOME RESPECT

Following the siren call of quick riches will leave you on the rocks.

If you have to catch something that is going around, do whatever you can to make sure it is not the forex trading bug. Although the offers of easy riches from swapping currencies might be tempting, the vast majority of investors would do well to resist the lure. Not only is this market supremely risky, but there are other, better ways to achieve the same investment goals.

That may not be readily apparent to everyone, especially given the feeble performance of the U.S. dollar, which is down around 30% against the euro over the past five years. That has made betting against the greenback look like an appetizing one-way bet.

As the easy money of the housing market becomes a distant memory, a small industry of shops offering fast access to the forex market has sprung up like mushrooms in a dark, damp room, all hinting at the profits to be made by trading currencies. To be sure, that possibility does exist. But the truth is, an individual is much more likely to lose, according to industry experts.

“I can categorically say that Joe Average has no place in the currency markets,” says Morris Armstrong, who spent 23 years as a currency dealer and who is now a financial adviser at Armstrong Financial Strategies in Danbury, Connecticut.

More than $2 trillion of currency is bought and sold each business day across the globe, largely by very sophisticated operators with major technological advantages relative to the small investor – think huge multinational banks like Citigroup and HSBC, or national monetary authorities, such as the European Central Bank and the Bank of Japan.

Also, the forex market is volatile, Armstrong says, and he points out that “margin can do some serious damage,” especially to those without very deep pockets. Trading on margin means borrowing money to pay for a large portion of the trade. While that leverage multiplies the gains, it also exaggerates the losses. Often, leverage is offered to currency clients by brokers, but if the market moves unfavorably enough, then the entire amount of the investment can be lost quickly. So even if traders gets things right directionally or strategically, they can still lose money if the timing is wrong.

That said, experts agree some exposure to foreign currencies can be a good way to reduce the overall riskiness of a portfolio. So now that you have been warned, what can you do? Small investors might want to consider buying stocks of companies that would do well if the dollar stays weak, and perhaps even if it does not, says Jerry Miccolis, a financial adviser at Brinton Eaton Wealth Advisors. “Pick U.S. multinationals with lots of new growth potential,” he says, highlighting Coca-Cola and Procter & Gamble as prime examples.

Investors get the double benefit of growing overseas markets, enhanced by the dollar story, because much of those firms’ new business is coming from rapidly expanding emerging economies, Miccolis explains. He also like the iShares S&P Global Consumer Staples (KXI) ETF, which tracks a basket of consumer staples stocks across the globe.

A less leveraged way to gain direct currency exposure can be through foreign-denominated money market mutual funds. Roe owns the Pimco Developing Local Markets fund, which is effectively an emerging-markets money market fund.

For those who are still keen on having direct currency exposure to a single currency, ETFs might be a simple way to go. If you want to buy the Canadian dollar or Australian dollar, you can use the CurrencyShares Canadian Dollar Trust (FXC) or the CurrencyShares Australian Dollar Trust (FXA). These ETFs attempt to track the value of the underlying currencies and are not leveraged. In addition to the CurrencyShares ETFs, iPath has a similar family of single currency funds, including the iPath GBP/USD Exchange Rate ETN (GBB), which tracks the value of the British pound vs. the U.S. dollar.

Link here.

A REVIEW OF CRASH PROOF: HOW TO PROFIT FROM THE COMING ECONOMIC COLLAPSE

Ever since I had my epiphany and realized that Peter Schiff had been right about the imminent collapse of the U.S. dollar, I have been meaning to write a review of his book. When the stock market became increasingly volatile, I thought, “I had really better write that review soon!” But the final straw came today, when I read that wholesale prices in November rose at the fastest rate in 34 years. Readers need to learn how to protect their wealth, while they still have some left.

Schiff is president of Euro Pacific Capital, a broker-dealer specializing in foreign markets. He is very well read in Austrian economics, and his pessimistic analyses on CNBC and other outlets have earned him the nickname “Dr. Doom”.

Just as with Ron Paul, Schiff is a staunch proponent of honest commodity money. He believes that the U.S. dollar is poised for a significant fall versus other currencies but in particular against real goods and services. Since closing the gold window in 1971, the Fed’s inflation of the money supply has been tempered somewhat by the unique position of the U.S. Foreigners, especially other governments, were willing to accumulate large reserves of dollar-denominated assets. But once the illusion is broken, the game will be over. The only thing that buoys a fiat currency’s market value is the widespread belief in its future market value. Once that belief is questioned, the green pieces of paper can become worthless. As Schiff puts it in one of his clever analogies:

Remember when Iron Mike Tyson wore the heavyweight crown, was knocking out everybody in sight, and was so fearsome it seemed inconceivable he could lose? Well, as always happens eventually, he finally met his match. Buster Douglas beat him, and after that he just kept getting beaten. It was the same Mike Tyson, but Buster had broken a psychological barrier.

Any reality check that pierces the myth that the American economy is too big to fail could begin the process of unraveling. (pp. 5-6)

Schiff then goes on to give his own knockout prediction:

Our days as the dominant economic power are numbered. The dollar is going to collapse, and Americans are going to experience stagflation on an unprecedented scale in the form of recession and hyperinflation. Those of you who act smartly and quickly by taking measures I outline later in this book not only will avoid loss of wealth but also will have positioned yourselves to prosper while your neighbors suffer a painful period of reconstruction and reform. (p. 6, italics original)

Although Schiff is remarkably well-versed in Austrian theory for someone who is not a professional economist, I do have a few quibbles with his presentation on the trade deficit. That is not a huge objection, because his ultimate purpose is to guide investors through the storm. This is really where Schiff shines. Of course he recommends getting out of dollar-denominated assets. But Schiff goes much further. He takes the reader step-by-step through the process of selecting foreign assets, and also gives pointers on buying gold.

I will not reveal all of the secrets, but let me give a great example that illustrates the sophistication of his analysis. It is really a lot more than simply, “The U.S. is going to hell in a handbasket!” In a section entitled “SHORT THE MARKET?” Schiff writes:

It’s not everybody’s cup of tea, but an investor of above-average sophistication might reasonably ask, "If the U.S. stock market is a train wreck waiting to happen, why not just sell it short?" ...

Here’s why I would recommend against doing this.

Retail brokers normally require investors to hold any short-sale proceeds in U.S. dollars usually earning no interest. The dollar, seen through my famously jaundiced eye, could lose more purchasing power than the security you sold short lost value ...

I’ve got a much better idea, which is to borrow dollars and spend them to acquire foreign income-producing assets, using the income to pay the interest. Short selling accomplishes the opposite, as you end up borrowing assets, which will probably have some intrinsic value, and acquiring dollars, which may have none. (pp. 112-113)

Beyond his diagnosis of the American economy, and the nuts and bolts of how to ride out the storm, Crash Proof is filled with all sorts of interesting tidbits. For example, he says that China’s advantage is that it is not a democracy, and this is precisely why it will be so successful in the coming decades (p. 177). On the matter of supposedly communist China, Schiff asks if the reader remembers seeing “Made in the USSR” on all sorts of products during the Cold War? Of course not. Schiff’s conclusion is that “in ‘communist China’ entrepreneurs have more freedom than they do in America. It is far easier to go into business there than here.” (p. 176)

Another interesting part of the book is Schiff’s graph of the Dow Jones Industrial Average divided by the gold price. After peaking in both 1929 and 1966, this ratio returned both times to about 1 to 1. If that were to happen today, it would mean a tremendous fall in the stock market and a huge rise in gold. Even if the ratio returned only to 2 to 1 or even 3 to 1, it would still spell a large fall for stocks and a large upswing in gold. (pp. 220-222)

Finally, to give a taste of the passion in the book, I will close with Schiff’s chilling warning of the looming choice that Americans will face:

For years the United States has been traveling a course the Nobel Prize-winning Austrian economist Friedrich von Hayek set forth in a book self-descriptively titled The Road to Serfdom. The coming economic collapse may finally bring Americans to that grim destination. But it is also possible that the same dire economic conditions will inspire a return to the country’s constitutional traditions of sound money and limited government, the foundation upon which a viable economy can be rebuilt. There is a fork in the road to serfdom. One choice leads back to freedom, and it is my fervent hope that Americans will take it. (p. 259)
Link here.

Avoid the crowd. Mobs, Messiahs, and Markets explores what really keeps investors from building wealth – the space between their ears – review.

PAID IN DOLLARS, EXPATS STRUGGLE TO MAKE A LIVING

Erica Nevins’s faith in the dollar was shaken the moment she pressed a crumpled $1 bill into the hand of a little girl begging for money on the streets of Marrakesh, Morocco. “I don’t want this. This is nothing,” Nevins recalled as the scornful reaction of the child, who demanded more.

Since then Nevins, an American fashion executive, has replayed that moment over and over in her head as she confronted the harsh reality of living on a dollar income in Paris and then moving to pricey London. “The absurdity of this is that it’s so true,” she said. “A dollar really means nothing. It’s scary.”

With plunging exchange rates, American expatriates whose pensions or incomes are paid in dollars are scrimping. No more dinners out when a bottle of Perrier for €3.50 translates to $5 and no more Christmas shopping binges when a shiny iPod for €159 is the equal of $230. And ultimately some are moving to greener pastures that match the color of their money.

“Those that can hold out are holding their breath and we’re hoping for a return of the dollar, but those that can’t are going,” said Susie Bondi, an American who has lived in Paris for 12 years, but is moving to Vienna in January with her husband, Fred, to stretch their pension dollars in a city with a lower cost of living.

The past six months have been anxious for expatriates, with the dollar sinking against the euro, the pound and currencies from the Czech koruna to the Costa Rican colón. Those declines are accelerating the flight of expatriates in Europe, according to tax attorneys who listen to the woes of clients who are giving up because they see no relief in sight.

Even U.S. government employees are feeling the pinch in countries with strong currencies like the Czech Republic, where the koruna has gained 17% this year against the dollar. Radio Free Europe, the U.S.-backed international broadcaster headquartered in Prague, is suddenly facing a housing crisis for many of its 500 employees. And the news organization’s new chief executive, Jeffrey Gedmin, ranks the weak dollar with attacks on journalists around the world who have been kidnapped in Baghdad and jailed in Azerbaijan as one of the critical issue that it is facing.

The impact of the sagging dollar has been particularly acute for expatriates who live on fixed pensions paid in dollars or self-employed workers whose clients are largely based in the U.S. Josh Soski moved from San Francisco to Barcelona in September to start a freelance video production company that supplies clients like Current TV in the U.S. with short video features on European stories. These days, he said, he finds himself sitting on his bed, with his head in his hands, obsessively checking currency rates on his laptop. “They pay us $2,500 for a piece, and you cash it in and it is €1,400 or less. That’s shocking,” said Soskin. To survive and hedge currencies, Soskin is now scouting for European clients who will pay him in euros. Other self-employed workers – from medical translators to online entrepreneurs – are simply cutting off their American clients because it is no longer worth working for them.

Many companies with American executives posted abroad are starting to seek advice on how to deal with currency depreciation, according to Achim Mossman, managing director for international executive services for KPMG, a tax advisory firm. In the future, he expects more American companies to pay their employees abroad with local currency, and he is also advising companies to follow calculated formulas to measure the cost of living standards to make salary adjustments. Some employees have successfully pressed their companies to shift from dollars to local currencies.

Nevins, who was paid in dollars while living in Paris, changed her income to pounds when she moved to London earlier this year. But she still cannot resist making constant mental calculations to measure the price of everyday purchases in London. “Everything from a cup of coffee to going to the movies is so much higher,” she said. “An adult movie ticket can range up to $26 and in terms of the holiday season, my boyfriend and I are doing all our shopping online in the United States. We’re not thinking of shopping here.”

That kind of currency fever invades daily thinking, according to some expatriates, who cope by not thinking about exchanges. Others say the downward spiral has become a basic part of life. One expatriate from Madrid recently received an e-mail from a relative in Costa Rica who wrote about the tragic circumstances surrounding the fatal heart attack of a cousin and the cremation of her remains. And then the correspondent closed with a simple last line, “And also, as normal, the dollar fell today against the colon.”

Link here.

BULLIES, MUGGERS, SNEAK THIEVES, AND CON MEN

A field guide to government operatives.

Somehow it seemed as though the farm had grown richer without making the animals themselves any richer – except, of course, for the pigs and the dogs. ~~ George Orwell, Animal Farm

The beginning of political wisdom is the realization that despite everything you have always been taught, the government is not really on your side. Indeed, it is out to get you.

Sometimes government functionaries and their private-sector supporters want simply to bully you, to dictate what you must do and what you must not do, regardless of whether anybody benefits from your compliance with these senseless, malicious directives. The drug laws are the best current example, among many others, of the government as bully. Our rulers presently enforce a host of laws that combine the worst aspects of puritanical priggishness and the invasive, pseudo-scientific, therapeutic state. They tolerate our pursuit of happiness only so long as we pursue it exclusively in officially approved ways. Gin, yes; weed, no.

Notwithstanding the great delight that our rulers take in tormenting us with their absurdly inconsistent nanny-state commands, they generally have bigger fish to fry. Above all, the government and its special-interest backers want to take our money. If these people ran a store, they might aptly call it Robberies R Us. Their credo is simple and brazen: “You have money, and we want it.”

Unlike the sincere street criminal, however, the robber in official guise rarely puts his proposition to you in the blunt form of “Your money or your life,” however much he intends to relate to you on precisely such terms. When I say “rarely,” I do not mean that the authorities never carry out their plunder blatantly. Throughout the land, for example, criminal courts, acting as de facto muggers, strip people of great sums of money in the aggregate by fining them for conduct that ought never to have been criminalized in the first place – drug-law violations, prostitution, gambling, traffic infractions, reporting violations, doing business without a license, and innumerable other victimless “crimes”. The predatory judges and their police henchmen care no more about justice than I care to live on a diet of pig pancreas and boiled dandelions. They are simply taking people’s money because it is there to be taken with minimal effort. In this manifestation, government amounts to a gigantic speed trap.

The more common way for government officials to rob you, however, involves their seizure of so-called taxes, which take countless forms, all of which are purported to be collected in order to finance – mirabile dictu – benefits for you. Such a deal! You would have to be a real ingrate to complain about the government’s snatching your money for the express purpose of making your world a better place.

Sometimes the “political exchange” into which you are hauled kicking and screaming rests on such a ludicrous foundation, however, that honesty compels us to classify it, too, as a mugging. I have in mind such compassionately conservative policies as stripping taxpayers of hundreds of billions of dollars and handing the money over, for the most part, to rich people engaged in large-scale agribusiness and, sometimes, to landowners who do not even bother to represent themselves as farmers. The apologies that the agribusiness whores in Congress make for this daylight robbery are so patently stupid and immoral that the whole shameless affair resembles nothing so much as the schoolyard bully’s grabbing the little kids’ lunch money and then taunting them aggressively, “If you don’t like it, why don’t you do something about it?”

Government sneak thieves, in contrast, fear that they may occupy more vulnerable positions than the agribusiness gang and similarly impudent special-interest groups cum legislators. They specialize in legislative riders, budgetary add-ons and earmarks, logrolling, omnibus “Christmas tree” bills, and other gimmicks designed to conceal the size, the beneficiaries, and sometimes even the existence of their theft. At the end of the day, the taxpayers find there is nothing left in the till, but they have little or no idea where all of their money went. Finding out by reading an appropriations act is next to impossible, inasmuch as these statutes are almost incomprehensible to everyone but the legislative insiders and their staff members who devise them and write them down in a combination of Greek, Latin, and Sanskrit.

Unlike the government sneak thieves, the government con men openly advertise – indeed, expect to receive great credit for – certain uses of the taxpayers’ money that are represented as bringing great benefits to the general public or a substantial segment of it. Surely the best example of the con man’s art is so-called national defense, a bottomless pit into which the government now dumps, in various forms, approximately a trillion dollars of the taxpayers’ money each year. The government stoutly maintains, of course, that all ordinary Americans are constantly in grave danger of attack by foreigners – nowadays, by Islamic terrorists, in particular – and that these voracious wolves can be kept from the door only by the maintenance and active deployment of large armed forces equipped with ultra-sophisticated (and correspondingly expensive) equipment and stationed at bases in more than 100 countries and on ships at sea around the globe.

Without dismissing the alleged dangers entirely, a sensible person quickly appreciates that the threat is slight – just do the math, using reasonable probability coefficients – whereas the cost of (purportedly) dealing with it is colossal. In short, as General Smedley Butler informed us more than 70 years ago, the modern military establishment, along with most of its blessed wars, is for the most part nothing but a racket. Worse, because of the way it engages and co-opts powerful elements of the private sector, it gives rise to a costly and dangerous form of military-economic fascism. Lately, the classic military-industrial-congressional complex has been supplemented by an even more menacing (to our liberties) security-industrial-congressional complex, whose aim is to enrich its participants by equipping the government for more effectively spying on us and invading our privacy in ways great and small.

Worst of all, despite everything that is claimed for the military’s protective powers, its operation and deployment overseas leave us ordinary Americans facing greater, not lesser, risk than we would otherwise face, because of the many enemies it cultivates who would have left us alone, if the U.S. military had only left them alone. (Yes, Virginia, they are over here because we’re over there.) The president routinely declares that the hugely increased expenditures and overseas deployments for military purposes since 2001 have reduced the threat of terrorism, but, in fact, terrorist incidents and deaths have increased, not decreased. Although privileged elements of the political class gain from militarism and neo-imperialist wars, the rest of us invariably lose economic well-being, real security, and all too often life itself. In 2004, people who said that security against terrorism was their top concern voted disproportionately, by an almost 7-to-1 margin, for George W. Bush. They were conned.

The mugger, the sneak thief, and the con man make up a large proportion of the leading figures in government today. The lower ranks, especially in the various police agencies, have a disproportionate share of the bullies. No attempt to understand government can succeed without a clear understanding of these characteristic types and their typical modus operandi. With this understanding firmly in mind, you will remain permanently immune to the infectious swindle, “I am from the government, and I’m here to help.” The truth, of course, is the exact opposite. The government is not really on your side. Indeed, it is out to get you.

Link here.
The lawless surveillance state: Congress exists as a vital enabling arm of the most extreme abuses of the Bush administration – link.
Collapse of Liberty City 7 case exposes fraud of “war on terror” – link.

NOT YOUR FATHER’S DEFLATION

Forget about paper money deflation, think deflation in “real money”, i.e., gold.

Among those rational enough to perceive the looming economic downturn, a heated debate has arisen that centers on whether the slowdown will be accompanied by inflation or deflation.

Those in the deflation camp believe that money supply will collapse as a natural consequence of the implosion of the biggest credit bubble in U.S. history. As loans go bad, assets, which collateralize these loans, will be sold at fire sale prices to satisfy creditors. It is also argued that a recession will reduce consumer discretionary spending, causing retailers to slash prices to move their bloated inventories. This is the way the situation played out in the 1930s and this is how many expect it to happen today.

However there are several key differences between then and now, which argue against the classic deflationary scenario. In particular, the Fed’s ability to pump liquidity into the market in the 1930s was limited by the gold backing requirements on U.S. currency. No such limitations exist today. This distinction is critical. When credit was destroyed after the Crash of 1929, the Fed was not able to simply replace it out of thin air. Today however, the Fed will likely print as much money as necessary to prevent nominal prices from collapsing. In fact, in the infamous speech that spawned his “helicopter” sobriquet, Ben Bernanke explained how the printing press can be used to stop deflation dead in its tracks.

To fully understand the way inflation and deflation affect prices, we need to differentiate between assets, such as stocks and real estate, and consumer goods, such as shoes and potato chips. If we measure prices in gold, as we did during the 1930s, both asset and consumer goods prices will fall, with the former falling faster than the latter. So in that sense the deflationist are correct. However, in terms of today’s paper dollars, this outcome is completely impossible. During deflation, money gains value, so prices naturally fall as fewer monetary units are required to buy a given quantity of goods. In the coming deflation, real money (gold) will gain considerable value, so prices will therefore fall sharply in gold terms. Paper dollars however, which have no intrinsic value at all, will lose value, not only as the Fed increases their supply, but as global demand for the currency implodes.

The way I see it there are only two possible scenarios. The more benign outcome would we be one where asset prices fall, even in terms of paper dollars, but consumer goods prices continue to rise. This would be the stagflation scenario. The more catastrophic scenario is one where asset prices hold steady or even resume their ascent, while consumer goods prices rise even faster. This of course is the hyper-inflation scenario, and is the worst possible outcome. I see no possible scenario where consumer goods prices fall in term of paper dollars.

Many mistakenly believe that when the U.S. economy falls into recession, reduced domestic demand will lead to falling consumer prices. However, what is often overlooked is the fact that as the dollar loses value, the rising relative values of foreign currencies will increase consumer demand abroad. As fewer foreign-made products are imported and more domestic-made products are exported, the result will be far fewer products available for Americans to consume. So even if the domestic money supply were to contract, the supply of goods for sale would contract even faster. Shrinking supply will be a major factor in pushing consumer prices higher in America.

In addition, since trillions of dollars now reside with our foreign creditors, even if many of these dollars are lost due to defaulted loans, those that are not will be used to buy up American consumer goods and assets. As a result of this huge influx of foreign-held dollars, the domestic dollar supply will likely rise even if the Fed were to allow the global supply of dollars to contract, forcing consumer prices even higher. In fact, a contraction in the domestic supply of consumer goods will likely coincide with an expansion of the domestic supply of money. The result will be much higher consumer prices despite the recession. So even though Americans will consume much less, they will pay much more for the privilege.

The real risk is that the Fed gets more aggressive as it realizes that the additional credit it is supplying is not flowing where it wants. If the Fed drops enough money from helicopters it will eventually reverse the nominal declines in asset prices. Unfortunately, that road leads to hyper-inflation and disaster. No matter what, even if the Fed succeeds in propping up nominal asset prices, they can do nothing to sustain their real values. Consumer goods prices will always rise faster, leaving the owners of those assets poorer no matter how high their nominal values climb.

The big problem politically is that hyper-inflation may superficially appear to be the lesser evil. If asset prices are allowed to collapse, ownership of those assets will pass to our creditors. If instead we repay our debts with debased currency, we retain ownership of our assets and shift the losses to our creditors. Since American debtors can vote in U.S. elections and foreign creditors cannot, the choice seems obvious. Of course there are some American creditors as well, but since they comprise such a small percentage of the electorate, my guess is that their losses will be seen as acceptable collateral damage.

Link here.

A picture of paper assets, gone mad.

At the end of 2006, the financial assets of financial institutions surpassed 20% of annual GDP. Those assets had never even eclipsed 5% of GDP until the early 1990s. Even more effective at getting the point across than these dry numbers is to look at a graph of the data over time.

That is what 50 years of stability looks like when it stops being stable. We all understand that the value of “paper assets” is inherently unstable, because that value is subject to very rapid up-and-down swings. So, when paper assets are a relatively small percentage of national wealth (5% or less of GDP), the economy will not be badly damaged if that small percentage fluctuates widely.

But when paper assets rapidly increase to the levels of recent years (20% or more of GDP), well, a bubble that swells ... and then deflates can wreak economic havoc. That scenario is unfolding right now in the real estate market, and among lenders who “spread around the risk” to every corner (and under every rug) in the entire financial system.

The information in this chart is NOT new. It was publicly available when the chart appeared back in January of this year. Alas, instead of seeing the danger for what it was, the media (and Wall Street) threw a party about how great it was to be in a “liquidity boom”.

Link here.

ERNST AND YOUNG PUBLISHES TRANSFER PRICING SURVEY

Key profits transfer mechanism comes under increasing scrutiny.

According to the results of a survey published earlier this month by accounting firm, Ernst & Young, 87% of multinational enterprises (MNEs) believe that transfer pricing is a risk when managing their financial statements, as compliance requirements have increased due to developments in financial reporting.

Commenting on the publication of the biennial “Global Transfer Pricing Survey”, John Hobster, Ernst & Young’s Global Accounts Leader, Transfer Pricing, explained, “Risk mitigation is a key priority for MNEs, and transfer pricing has increasingly moved into board rooms and audit committees. As convergence of customs and tax authorities continues, tax authorities collaborate more and more across borders, and new regulations come into place, MNEs want to ensure that transfer pricing is compliant with tax laws.”

The degree of perceived transfer pricing-related financial-statement risk varied significantly by industry, reflecting the inherent complexity of the underlying transfer pricing issues of those industries, according to Ernst & Young. In particular, 53% of parent company respondents in telecommunications, 48% in pharmaceuticals, and 45% in the biotechnology industry reported that transfer pricing posed the largest financial risk they face.

“Companies need to manage their financial risks with greater precision, as enhanced transfer pricing documentation requirements have intensified the responsibilities of MNEs to actively report and justify the impact of their tax position. This is particularly tough at a time when there is a greater chance that transfer pricing policies and practices will be audited,” Hobster continued.

Over half of the survey respondents (53%) said that their transfer pricing compliance costs had increased. This was a significant increase on the 2005 survey results, where only 29% of parent companies mentioned a rise in costs as a result of financial reporting and regulatory developments.

The survey further showed that 19% of parent respondents have had their customs valuations challenged where they have been based on their transfer prices for the same goods, or vice versa. In 44% of these cases, increased customs valuations (and costs) have not resulted in corresponding adjustments (and credits) to corporate income taxes.

Transfer pricing was found to be the single most important issue for 76% of parent respondents in the pharmaceutical sector, which was an increase of 19% on the 2005 survey. Pharmaceutical companies are nearly twice as likely as companies in any other industry to experience an adjustment of transfer prices, and parent respondents in the pharmaceutical sector said that 56% of transfer pricing examinations since 2003 resulted in adjustments.

Link here.

WE ARE ALL PRISONERS NOW

At Christmas time it has been my habit to write a column in remembrance of the many innocent people in prisons whose lives have been stolen by the U.S. criminal justice (sic) system that is as inhumane as it is indifferent to justice. Usually I retell the cases of William Strong and Christophe Gaynor, two men framed in the state of Virginia by prosecutors and judges as wicked and corrupt as any who served Hitler or Stalin.

This year is different. All Americans are now imprisoned in a world of lies and deception created by the Bush Regime and the two complicit parties of Congress, by federal judges too timid or ignorant to recognize a rogue regime running roughshod over the Constitution, by a bought-and-paid-for media that serves as propagandists for a regime of war criminals, and by a public who have forsaken their Founding Fathers.

Americans are also imprisoned by fear, a false fear created by the hoax of “terrorism”. It has turned out that headline terrorist events since 9-11 have been orchestrated by the U.S. government. For example, the alleged terrorist plot to blow up Chicago’s Sears Tower was the brainchild of a FBI agent who searched out a few disaffected people to give lip service to the plot devised by the FBI agent. He arrested his victims, whose trial ended in acquittal and mistrial.

Raising doubts among Americans about the government is not a strong point of the corporate media. Americans live in a world of propaganda designed to secure their acquiescence to war crimes, torture, searches and police state measures, military aggression, hegemony and oppression, while portraying Americans (and Israelis) as the salt of the earth who are threatened by Muslims who hate their “freedom and democracy”. Americans cling to this “truth” while the Bush regime and a complicit Congress destroy the Bill of Rights and engineer the theft of elections.

Freedom and democracy in America have been reduced to no-fly lists, spying without warrants, arrests without warrants or evidence, permanent detention despite the constitutional protection of habeas corpus, torture despite the prohibition against self-incrimination – the list goes on and on.

In today’s fearful America, a U.S. Senator, whose elder brothers were (1) a military hero killed in action, (2) a President of the U.S. assassinated in office, (3) an Attorney General of the U.S. and likely president except he was assassinated like his brother, can find himself on the no-fly list. Present and former high government officials, with top-secret security clearances, cannot fly with a tube of toothpaste or a bottle of water despite the absence of any evidence that extreme measures imposed by “airport security” makes flying safer.

Elderly American citizens with walkers and young mothers with children are meticulously searched because U.S. Homeland Security cannot tell the difference between an American citizen and a terrorist. All Americans should note the ominous implications of the inability of Homeland Security to distinguish an American citizen from a terrorist. When Airport Security cannot differentiate a U.S. Marine General recipient of the Medal of Honor from a terrorist, Americans have all the information they need to know.

Any and every American can be arrested by unaccountable authority, held indefinitely without charges and tortured until he or she can no longer stand the abuse and confesses. This predicament, which can now befall any American, is our reward for our stupidity, our indifference, our gullibility, and our lack of compassion for anyone but ourselves.

Some Americans have begun to comprehend the tremendous financial costs of the “war on terror”. But few understand the cost to American liberty. Last October a Democrat-sponsored bill, “Prevention of Violent Radicalism and Homegrown Terrorism”, passed the House of Representatives 404 to 6. Only six members of the House voted against tyrannical legislation that would destroy freedom of speech and freedom of assembly and that would mandate 18 months of congressional hearings to discover Americans with “extreme” views who could be preemptively arrested.

What better indication that the US Constitution has lost its authority when elected representatives closest to the people pass a bill that permits the Bill of Rights to be overturned by the subjective opinion of members of an “Extremist Belief Commission” and Homeland Security bureaucrats? Clearly, Americans face no greater threat than the government in Washington.

Link here.

SLOGANS THAT WORK

Some corporate catchphrases do their job. They inspire the employees and the suppliers to be innovators.

Can you motivate the troops with a mere corporate slogan? Yes, if there is some substance behind it. A few years ago “Blue Ocean” was the rallying cry inside the Kyoto videogame company Nintend. Blue Ocean is the notion of creating a market where there was none before. Instead of joining the videogame arms race of faster processors and more violence, Nintendo aimed to attract people who had not played games before. Its less flashy but addictive games like Nintendogs and Brain Training, coupled with innovative touchscreens, voice activation and motion-sensing technology, made games easy to play. Women and middle-age folks became converts. Nintendo now outsells Microsoft and Sony, and last year its market capitalization surpassed Sony’s.

What makes a corporate slogan effective? A recent issue of the Strategy & Innovation newsletter summed up the matter this way: The most effective corporate catchphrases are sticky. In other words they should be understandable, memorable and effective in changing thought or behavior.

Cranium, a Seattle board game company, uses an in-house jargon word, “chiff” – for “clever, high-quality, innovative, friendly, fun.” With this phrase Cranium’s executives strive to remind themselves – and their suppliers and their 80 employees – that they have to be incessantly innovative, in everything from package design to the choice of questions for their brain-teasers.

According to S&I, their Chinese manufacturing partner called Cranium Chief Executive Whit Alexander to discuss a new plastic game piece. Alexander specified that the piece would be purple and made of multiple parts that would need to be glued together. The Chinese manufacturer balked. “It’s not ‘chiff,’” he said. Alexander was astonished. His supplier, halfway across the globe, had used Cranium’s own pet phrase to critique the lack of innovation. The Chinese manufacturer came back with a novel, smooth design using a single-injection molding. It would be cheaper to make, and it would deliver more fun to the customer.

What kind of slogans fail? Here is one guaranteed to be ineffective: “Our mission is to unlock shareholder value.” What does that tell the customer about how you are going to treat him? What does it communicate to a vendor?

Costco, the retailer that combines high quality with low prices, communicates its philosophy by talking about “salmon stories”. In the mid-1990s Costco was selling skin-on salmon fillets for $5.99 a pound. Good, but not good enough. The fish buyers persuaded the salmon packers to remove fat, back fins and collarbones. Costco cut the price to $5.29. Then buyers asked for skinless, boneless fillets. The boost in quality led to a boost in sales. With volume higher, Costco was able to cut the price to $4.99. Eventually they ordered directly from salmon farms and took the price down to $4.79. Costco could have stood pat at $4.99 but did not because it wanted to reinforce its mission – to drive itself and its suppliers down the cost curve and to do so ahead of when competitive pressures compel it to.

The right philosophy, stated in the right way, makes it easy for the troops to offer feedback. If Cranium’s stated strategy was, “To be the number one provider of tabletop entertainment,” on what ground could a Chinese manufacturer state an objection? Could he say, “Using this glued-together piece will threaten your provider position”? Doubtful.

British Petroleum came up with a catchphrase 17 years ago to state a new philosophy about exploration costs. The oil industry had a tradition of tolerating failure. You poke 10 holes in the ground, and it is okay if the first 9 produce nothing so long as the 10th is a gusher. That might have made sense in the days of Spindletop, but it does not today, when wells have to go much deeper and cost $4 million to $40 million.

The BP slogan: “No dry holes.” Meaning, geologists would have to make a much more compelling case before they ordered up the drilling rig. The idea got across. BP’s hit rate, two in three, is three times the industry average.

Link here.

AN OTTOMAN WARNING FOR AMERICA

Future historians will look back on the current decade as a turning point comparable with that of the ‘70s. No, not the 1970s. This is not going to be another piece pointing out the coincidence of an unpopular Republican president, soaring oil prices, a sagging dollar and an unwinnable faraway war. I am talking about the 1870s.

At first sight, the resemblances across 130 years may not seem obvious. The 1870s were a time when conservative leaders such as Benjamin Disraeli, British prime minister, were powerful and popular. It was a time of falling commodity prices, after the financial crash of 1873 and the opening up of the American plains to agriculture. And it was an era of currency stability, as one country after another followed the British lead by pegging to gold.

Yet, on closer inspection, we are indeed living through a global shift in the balance of power very similar to that which occurred in the 1870s. This is the story of how an over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. The empire that suffered these setbacks in the 1870s was the Ottoman empire. Today it is the U.S.

Link here.

FIVE REASONS TO NOT BUY A PROPERTY IN A FOREIGN COUNTRY

I looked at an article Bill was pointing to. Paul from Caerphilly has just invested $700,000 in a 2-bedroom house on St. Vincent and The Grenadines. As he explains, “I am not even looking to visit the development but rather to sit back and watch my investment work for me.” If only it were that easy. But you and I know better.

Bill walked out of my office shaking his head. “This is just what we have been warning readers of International Living not to do all these years.” Indeed. And I will take this opportunity to remind you again of a few fundamentals:

(1) Never buy in a market where you have never been. Lief and I broke this rule once three years ago, and we are regretting it. Without question, if you are buying with any thought to personal use, you want to spend time in a place before committing to a real estate purchase. But even if you are buying only for investment, you should pound the local pavements (or beaches) with your own two feet. No amount of research can substitute.

(2) Buy only what you see. The developer or real estate agent may promise a marina, a clubhouse, paved roads, and a helicopter landing pad ... but if those things do not exist the day you sign your contract ... they do not exist. And you are not buying them. Maybe, someday, they will be built. But do not figure them into your purchase price.

(3) If you are buying for personal use, rent first, for at least six months. You may have visited the country several times. You may feel you know it well. But you know it as an outsider. You need to give yourself a chance to get to know it as a local. If possible, arrange your trying-the-place-on-for-size visit during the least appealing season.

(4) If you are buying for investment, don’t buy at the top. Talk about stating the obvious, I know, but you would be surprised what people can be persuaded to do. Reasonable investments are found ahead of the infrastructure, as Lief Simon, our resident global real estate investing guru, reminds his readers regularly. You want to buy before the roads go in, and you want to pay pre-road prices.

(5) Finally, recognize that real estate values do not always go up. Look at Buenos Aires in 2001 (following devaluation of the peso), Ecuador in 2000 (following dollarization), London in 1989. Property markets go up (sometimes exuberantly and beyond reason), and they go down (sometimes crashingly). As an investor, you are as interested in the downturns as in the years of appreciation, for the falls often afford you buying opportunities.

Lief has been reporting lately, for example, on the current and ongoing decline of the Spanish property market. Leigh Fergus, Euro-editor in Paris, recently commented on the most recent interest rate hike in the UK. Further rate rises in the UK and Ireland could (and we believe will) contribute to the decline (finally) of these frothy markets. All opportunities to watch.

But do not pursue any of them, dear reader, from your armchair. And do not buy because you are certain an overseas property investment will make you rich.

Link here.

RELOCATING ABROAD ... AHHHHH!

Moving is exciting for some and dreadful for others. The chore of packing all your personal belongings, making new friends and confronting the unknown can be daunting. However, a change of scenery, great job opportunity or better lifestyle can be extremely motivating factors. Regardless of whether you are looking forward to the big day or looking for anything to do but think about it, relocation is sure to bring a host of different experiences, ranging from complete excitement to an absolute nightmare, especially when moving overseas.

The packing process can be tricky, including the crucial decision when only one box is left: Is placing cleaning products and dry foods in the same box a bad idea? An enquiry that today remains unanswered. However, there are even more issues to solve when this move is being made to another country, including import taxes and “Where they heck do I pick up my stuff anyway?!”

So, after packing up your life as you know it, managing to get it to another country and into your new home, the fun part begins. Living abroad.

The expatriate is sure to ride the emotional rollercoaster after arriving in the host country, and a great majority of these ups and downs has to do with cultural differences. If you arrive in a new country with your ethnocentric thinking cap on, then all you are going to get is a lot of migraines.

However, despite how open we are to new things, cultural differences can make transitioning to a new country difficult. So, it is the responsibility of the expatriate to learn more about the host country’s customs and norms and be prepared for the bumpy ride ahead.

With regards to educating oneself about a country’s cultural nuances, I recommend the crash course lesson, which is showing up at the local watering hole and getting knackered with the natives. However, a more civilized approach would be to surf the internet, checking out a variety of online resources, such as blogs, forums and travel sites. Forums are excellent because one can post a question and get an assortment of answers from different individuals. Good expatriate websites with great forums are expatexchange.com and expatforums.org. Also, Escape Artist provides an array of articles about living, working, investing and traveling overseas – including international real estate.

In addition to learning more about the country to which one will immigrate, expatriates can also develop a better understanding about the emotions they will undergo after relocation. According to Professor Steve Barnett of the University of Louisville, most expatriates experience a common series of emotions upon arrival in a foreign country.

Before the move, you usually feel nervous, excited, scared, and/or all of the above. Upon arrival, you are on cloud nine. After all, life is exciting! Walking around the block is guaranteed to be barrels of fun, all the while ruminating as to why you did not make the move sooner. After a couple of months, the honeymoon is over. Walking around the block would be possible if they fixed that darn sidewalk or implemented some form of traffic control! The language barrier is finally getting to you and practicing has become more of a chore than a novelty. The expected, but dreaded, culture shock has arrived. But, you cannot go back now! After all, you just got here. So, you get on with your life. Then, one day, you realize that you have been doing just that. Wow! You have been living in a foreign country and actually learned how to grocery shop (200-grams of meat, none of that pound nonsense!) and pay your electricity bill. You find yourself becoming more competent and more familiar with the insider knowledge. Hooray!

For expatriates returning to their native country after a work assignment, they are expected to experience a reverse culture shock upon arrival, which will eventually subside. For individuals that plan to relocate abroad permanently, whether for retirement, a better life or to be with a spouse, then I hope this finds them well.

Link here.

CREDIT BUBBLE 2007 YEAR IN REVIEW

In short, a continuation of the unfolding “worst-case-scenario”.

The year was remarkable for the unusual divergences between bursting bubbles and others continuing to inflate. This was the case both domestically and globally. As an example, the U.S. KBW Bank index sank 24.8%, while the NASDAQ 100 surged 19.9%. The AMEX oil index surged 32.8%, while the S&P 500 Homebuilding index collapsed 60%. Globally, major Chinese stock indices about doubled in price, while Japan’s Nikkei 225 fell 11%. In Europe, Britain’s FTSE mustered a 4.1% gain, while Germany’s DAX posted a 22.3% rise.

“Decoupled” Asian bubbles inflated dangerously. The Chinese Shanghai Composite surged 96.7%, inflating 2-year gains to 355%. China’s CSI 300 index, which includes stocks on the Shenzhen Stock Exchange, gained 162% this year. The Shenzhen Composite was up 420% in two years. Hong Kong’s Hang Seng index rose 37.1% this year, with 2-year gains of 81.2%.

Taiwan’s TAIEX index gained 5.7% (up 28.7% in 2 years). South Korea’s KOSPI index gained 32.3% (2-year gain of 39%). Singapore’s Straits Times index advanced 15.4% (2-year 47.4%, 5-year 156%). Thailand’s Bangkok SET index rose 26.2% (2-year 22%). Malaysia’s Kuala Lumpur Composite index rose 32% (2-year 61.6%). Indonesia’s Jakarta index surged 52.1% (2-year 136%, 5-year 546%). The major Philippine index posted a 21.4% gain (2-year 75.2%). The Vietnam Stock Index gained 23.3% (2-year 202%). India’s Sensex index jumped 46.6% (2-year 118%, 5-year 495%). The Karachi Stock Exchange 100 rose 47.1% (2-year 56%).

Q4 losses (3.5%) reduced 2007 gains in Australia’s S&P/ASX index to 11.8% (2-year gain 33%). The New Zealand Exchange 50 dipped 0.5%, reducing 2-year gains to 20.7%.

Latin America certainly participated in the Global Bubble Phenomenon. Brazil’s Bovespa index surged 43.7% (2-year gain of 93%). The Mexican Bolsa rose 12.3% (2-year 68%) and Chile’s Select index 13.3% (2-year 56.8%). Argentina’s Merval gained 2.9% (2-year 40%), and Peru’s Lima General index jumped 36.0% (2-year 263%).

While December numbers have yet to be reported, better than 25% year-over-year growth pushed international reserve (central bank) assets to $6.06 trillion. Through September, China’s reserves were up 45% y-o-y to $949 billion. Russian reserves were up 56% this year to $466 billion, with India’s reserves increasing 56% to $264 billion. Brazil’s reserve assets almost doubled to $162 billion. OPEC reserves were up 36% y-o-y to $421 billion. “Sovereign Wealth Fund” was added to financial market vernacular. The dollar drifted further away from reserve currency status.

Despite the significant Q4 U.S. slowdown, 2007 will post only a modest decline from last year’s record total global debt issuance. The global IPO market enjoyed a record year approaching $275 billion. Although 2nd-half deal flow slowed sharply, global M&A activity was still 20% ahead of 2006 (according to Dealogic), led by Asia and the emerging markets.

Gold gained 31.8%, its largest annual gain since the tumultuous year 1979 (when its price doubled) and its 7th straight year of positive returns. Crude oil surged 59%. Heating oil gained 62%, gasoline 54% and natural gas 17%. Despite declining 10% from its recent high, Wheat prices inflated 77% this year. Soybeans prices rose a record 79% this year to the highest level since 1973. After gaining 80% last year, corn climbed another 16% in 2007. Cotton prices rose 20%. The CRB index inflated 16.5% this year, and the more energy-weighted Goldman Sachs Commodities index surged 40.6%. It was the year when the markets came to recognize that significantly higher energy and commodities prices were having only minimal impact on demand.

During 2007, it became clear that the Federal Reserve had lost control of inflationary forces. The year ended with import prices up 11.4% y-o-y, the Producer Price Index up 7.2% y-o-y, and the CPI up 4.3% y-o-y. Despite a weakened economy and another year of dollar devaluation (and booming exports!), the U.S. current account deficit remained in the neighborhood of $800 billion. Coupled with huge speculative outflows seeking profits from global inflation, the world was absolutely inundated with dollar liquidity.

It was, as well, a year of shattered myths:

Indeed, the entire bullish notion of contemporary risk modeling, structuring, hedging, and financial guarantees (“credit insurance”) is now in serious jeopardy.

2007 saw the initial bursting of the Great U.S. Credit Bubble. To be sure, the enormous bubble in Wall Street-backed finance abruptly went from runaway boom to astounding bust. Much of the mortgage origination market collapsed spectacularly. 30% annualized broker/dealer balance sheet growth came to an abrupt halt during 2007’s second half. Booming “private-label” MBS issuance ground to an immediate halt. Mortgage credit availability was reduced radically, especially in subprime, “jumbos” and riskier loan categories. The booming asset-backed securities and CDO markets faltered badly. The banking system’s off-balance sheet structured “vehicles” collapsed in illiquidity. The global inter-bank lending market seized up. The hedge fund industry waited anxiously for redemption notices. Counter-party risk became a very serious systemic issue, as did speculative leveraging. The global financial system ends the year on the precipice.

Meantime, U.S. bank credit expanded almost 12% during the year, with commercial and industrial loans ballooning almost 21%. With risk embracement turning to risk aversion, the marketplace called upon the money fund complex to intermediate risk. Money fund assets expanded an unprecedented $729 billion, or 30.6%. And as liquidity disappeared for Wall Street-backed mortgages, Fannie and Freddie’s combined books of business inflated an unprecedented $600 billion (or so). The Federal Home Loan Banking system ballooned its balance sheet by more than $200 billion, in the process becoming lender of last resort to some very troubled financial institutions. Global central bankers engaged in unparalleled concerted marketplace interventions and liquidity injections, sustaining global bubbles in the process.

From the Fed’s Q3 “Flow of Funds”, total (non-financial and financial) U.S. system credit growth expanded at an annualized $4.99 trillion, sustaining the U.S. Bubble Economy but in an unsustainable manner – unsustainable in the quantity and structure of credit and risk intermediation, as well as with the nature of economic (bubble) activity. Financial sector debt expanded at an alarming 15.6% annualized pace.

Of late, the Wall Street credit crunch and severe tightening in risky debt markets have instigated recessionary forces. Many housing markets have gone from bad to worse – on the way to much worse. Florida is a mess, while California is an unfolding disaster. Some analysts have begun to recognize that U.S. asset and debt markets have not faced such precarious dynamics since the Great Depression. Meanwhile, collapsing U.S. and international interest-rates fuel myriad global bubbles and inflationary pressures. In short, 2007 has been a continuation of the unfolding “worst-case-scenario”.

Link here.

PHILANTHROPIST HAS NO TELEVISION OR HOME PHONE, BUT $MILLIONS TO GIVE AWAY

How he came to that position is a lesson for everyone.

Although he was only schooled to the eighth grade, 78-year-old Millville, New Jersey resident Paul Navone has had a lifelong love affair with numbers. It was that passion for math – or “figures”, as he likes to call it – that saved him from getting bored with his longtime factory job as a quality control technician at a local manufacturing plant.

Aside from keeping the drudgery at bay, it also proved to be a considerably lucrative relationship. Although he never made more than $11 per hour in the 62 years he worked, Navone – who has neither a phone nor a television at his home – is a multimillionaire. He gave away $1 million of his wealth earlier in December to Cumberland County College. And only weeks later, on January 9, another school in the region is slated to announce that Navone has made yet another equally large gift.

According to his broker, Navone earned his wealth through frugal living coupled with what Navone described as “making the money work for (him).” He invested in stocks and bonds and always reinvested his returns, rarely taking any out of the market.

Learning more about Navone, however, his life story becomes increasingly intriguing. Navone never married and has always lived alone – he described himself as a “loner, almost to the extent of being a recluse.” He has never taken advantage of his wealth in the way most people might – large houses, fancy cars, lavish vacations. He drives an old-model SUV and lives in a small house in Center City Millville.

He has never traveled outside the region other than to two places: the only leisure vacation he ever took was to New Orleans by bus. His other adventure included a trip to Florida for a union convention on behalf of the union to which he belonged, the Glass Bottle Blowers Association. He cannot remember the last time he owned a television. The last thing he remembers watching on TV, Navone said, was the NASA moon landing in 1969. Navone’s broker said the septuagenarian has never received a windfall.

Navone applied for his first job – at Wheaton Glass – upon becoming eligible to work on his 16th birthday. From Wheaton Glass he moved on to the Millville Manufacturing Company, where he worked his way up to weaver before being drafted into the U.S. Army in 1951. After serving two years in Germany, he returned to his job in Millville. He moved to Armstrong Cork, the factory at which he would work for more than 41 years as the plant itself changed ownership – and the products it manufactured – four times. He retired from his job as a quality control tester 12 years ago at the age of 66.

In the interim, he regularly worked 60-hour weeks. He made enough money to buy several rental properties throughout his life, either in Millville or Atlantic City, although he never owned more than three properties at any given time. The rental income, he said, was what enabled him to save his paychecks for a rainy day. “Very seldom did I have to dip into my weekly wages,” he said.

As his wealth increased, he continued living frugally. He also never aspired to rise through the professional ranks, preferring to remain a wage earner. “Time and time again, it was proven that salaried people made less than hourly workers,” he said. “I never wanted a title. What good is a title?”

He still frequents flea markets and rarely buys anything at full price. His wardrobe is almost entirely second-hand, he said, except for “maybe the socks.”

“I don’t know when I buckled down and got serious about making money,” Navone said. “It just grew into my lifestyle. With age, it got more serious. I never denied myself anything, but I certainly never spent on something outstandingly lavish.”

Despite his wealth, Navone said he has never let the money, or the ability give it away, get to his head. His current philanthropy, he insisted, is not due to illness. “It still hasn’t registered in my mind, the significance of (the million-dollar gifts),” he said. “I think I’m the same now as I’ve always been.”

Link here.
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