Wealth International, Limited (trustprofessionals.com) : Where There’s W.I.L., There’s A Way

August 2008 Selected Offshore News Clips

(Especially noteworthy articles’ dates highlighted in gold.)

August 4, 2008

Malta is a popular retirement destination and is often plugged as worthy of a would-be expat's consideration. This very interesting article honestly recounts the author's firsthand experience with the small Mediterranean island. It is a good piece to take in no matter what country one is considering moving to, as the issues that arise with regard to changes in culture, climate, and geography are universal.

A near-perfect climate, easy and affordable living, hospitable locals, no property taxes, free education, excellent health care and everybody speaks English. And the Maltese drive on the left, like the British, but a little more recklessly.

These qualities used to describe living in Malta by travel and offshore living web magazines helped convince me to give Malta a serious look as a retirement destination. Since my wife was born in Malta prior to emigrating to Canada in the mid 1950's we pursued the idea of returning to the island one day to retire.

This idea originally germinated by subscribing to the Web magazines Escape from America and International Living. I had been reading these magazines for the last few years as I was looking to get some ideas for preparing for my eventual escape from the insanity of big city living. As we were both fed up with our high pressure jobs, endless hours of commuting and struggling to keep financially ahead even though we were both working we started to question how long we could continue before our health failed.

I was employed in the construction industry and was under immense pressure trying to do 3 jobs at once. My wife was employed at one of Canada's biggest banks and was downsized after working for them for many years. Many of our workmates quit or changed companies due to the pressure which made things more difficult for those remaining. There were no "Good Days" at my company and by the end of the week I felt like I just wanted to curl up in the fetal position and suck on my thumb. Climbing up the corporate ladder for a souless corporation was like climbing on a stair master set at steep incline. In other words there was no other option for us but to find a way out ... and quickly.

After receiving a glowing report from my wife's brother who visited Malta in the summer of 2006 we started to do some serious research that culminated in my visitation to the island in January, 2007 on a two week fact finding expedition.

Upon landing in Malta I was overwhelmed by the cultural and geographical differences between Malta and Vancouver, British Columbia. At just under 400,000 people on an island half the size the city of Vancouver I quickly set to work exploring the island and to meet my wife's many cousins and relatives.

Along with my eldest son we kept accurate records on the cost of living, transportation and real estate/rental costs and availability. With information in hand we returned to Vancouver to analyze what we had learned and ultimately decided that we would proceed with our application to emigrate to Malta.

Although we had a successful trip and thoroughly enjoyed ourselves I was to learn that researching and visiting a country on a holiday and emigrating to it are two very, very different things. Although the Maltese Immigration Department made every effort to help returning citizens, the bureaucracy and cultural differences we faced since initiating the process in November, 2006 makes me wonder how we survived the ordeal and did we make the right decision.

After many e-mails, letters, legal documents and phone calls we received my wife's citizenship papers stating she had never lost her Maltese citizenship. This document was the foundation stone for the rest of us. After completing the required documents she then received her Maltese Passport which was followed by my 18 year old's citizenship papers and his Maltese birth certificate -- even though he was born in Canada -- and his Maltese passport. Then after selling our condo, cars, furniture, paying off all our debts and dumping all that we did not want we set out with my wife's 77-year-old Maltese mother in tow, for Malta in July 2007 to begin a new life.

Sell! Sell!

Although I have glossed over the details of selling most of our possessions from cars to furniture it was a very difficult time for us. It is amazing what you collect over the years and the sentimental attachments you have with the most useless things. I realized as we were going through our possessions that we were caught up in the buy, buy, buy syndrome of modern city living. We were like crows that liked everything bright and shiny and we were armed and dangerous with credit cards and cash.

One would think -- how anyone could unload 2 condominiums (ours and the mother's), 2 cars, furniture and anything else that we did not want in such a short period of time? It was easy because we were living in Vancouver which was experiencing a hot real estate market. Not only did we sell the condos within 3 days of listing them, the purchasers bought our furniture as well. The cars were sold or given to family members. All that was left to do was make flight arrangements and arrange for temporary living quarters in Malta. ...

After the downsizing was complete all that was left was to give my resignation at work and say our goodbyes to friends and relatives. I am not ashamed to say that as the plane started to take off I was struggling to keep my emotions in check. I was leaving behind British Columbia, a place that I loved, my aging parents, my eldest son, a brother, sister and many friends. What was I doing? Whose idiotic idea is this anyway? Knowing the accusing finger was pointed at me the only thing that settled me was the thought that I could always come back if I had to. I was liquid and soluble. I could do anything I wanted. I could even go back to my old horrifying job if I wanted to.

After a long flight from Vancouver, a week in Toronto visiting relatives and then continuing on to Rome we arrived in Malta on a very hot July day. The only incident in the trip was when my wife asked for an ice cube in her wine on the Alitalia flight. I thought the flight attendant was going to have her arrested.

Upon arrival we were greeted at the airport by a large crowd of people that were relatives of my wife's. I kept asking, "Who are those guys and why are they so short?"

The next few days were a "Gong Show". Our most important issue was to find a more permanent place preferably a flat for ourselves and one for the mother-in-law. We met up with a real estate agent we spoke to prior to leaving Canada. She was a British ex-pat that lived and worked in Malta. She showed up at the pre-arranged time with a small car to show us a few places she had selected. A small car the size of an Austin Mini for 5 people I might add.

We packed ourselves into the glorified sardine can for our two dollar tour without any chance of doing up our seat belts. Not that there were any to do up anyway. "Not to worry Luv" the real estate lady told me. "The law says you do not have to do up seat belts if you are in the backseat." Uh? The insanity started from this point. I had no idea what was in store for me.

A country hick from Lower Podunct captured by aliens and taken to the dark side of the moon would not have experienced what I was about to discover.

It was a hard day and after looking at a few places we realized that the mother-in-law was in no condition to be living on her own. At 77 she was failing and it was decided that we would have to get a larger house and share the costs. This presented a problem as you can well imagine. The main one being two queens in the kitchen; but we had no choice and decided to rent a large bungalow just outside the town of Mosta.

“The Maltese Way”

Once we moved into the house we had an address for the things we were shipping from Canada. We also could start my citizenship/passport applications and try to get my son's schooling arranged. The problem any traveler is faced with in a foreign land is finding his way around. We were no different. Since we were without a car we had to rely on buses or walking to get around. We were soon official members of the "Groundpounders" and the "Red Rocket Society." I am also 15 pounds lighter than when I arrived. No more sitting in a car for 3-4 hours a day commuting to work or visiting customers breathing in noxious car exhaust fumes. I have gone Green. Now I breathe them in while I am walking or riding a bus.

The good thing about bus fares in Malta is it is only about C$0.66 per ride. The downside is most of the buses were built in the early 1950's and the roads are full of potholes. It is brutal. No wonder everyone here has a car. As a matter of fact. This whole island is a giant parking lot. At approximately 17 x 12 miles in size the island is one big construction site and it is hard to tell when one town ends and another starts.

As I previously stated the way of doing things over here are a tad different from the way things are done in North America. It is a challenge to rationalize things at first but you have to learn to accept things as they are and not be too critical of the way the Maltese do things. If you view the Mediterranean as a big pond then Malta is a Lily Pad that has evolved over time to survive in its competitive environment. It is different but somehow it works. So when I see something that make me shake my head, I just shrug my shoulders and try to be philosophical about it and say "it's the Maltese way."

A good example of a strange experience is what they keep in their garages. Aside from cars and boats they also keep horses, goats and maybe their in-laws. They also may run a small business out of their garages. One has to be wary when looking for a place to rent or buy as one may find oneself living above a woodwork or automotive repair shop with all the accompanying noises and smells. ...

When you try to understand a country that is different from yours you must look at the country's history. Malta is located in the center of the Mediterranean just south of Sicily and to the north of the African continent and was a stopover point for early human migration and commerce. Malta's history is based upon human migration, war and slavery. There are ancient ruins on Malta that pre-date Christianity by 4000 years. Malta was also always under control of some invading army on their way to plunder other nations. Romans, Phoenicians, Turks, European. "Let's do Malta" was the quote of the day one would think. Malta was also a rich source for Corsair raiding parties looking for slaves.

In 1565 the Turks fed up with the Knights of St. John invaded Malta with over 40,000 men to take on the knights and their 9000 supporters. The defenders held off the Turks who eventually withdrew with only 10,000 survivors. In the 19th century Malta was under control of another invading force that was commanded by Napoleon. It was not until the United Kingdom removed Malta from Napoleon's possession that peace and prosperity came the island of Malta.

That all ended in 1940 when Fascist Italy pulled Malta into World War 2 by attacking the island and starting the 2nd siege of Malta. ... Mussolini ... wanted to impress his Nazi partners, and decided to attacked Malta in a surprise bombing raid. This caused great hilarity among the Germans as they were fighting the combined might of the Allied forces while Italy took on little Malta.

As it was a British base strategically located in the Mediterranean, Malta was almost bombed into oblivion by the Axis powers replaying the earlier 1565 Turkish siege. The results were the same however, as the Axis powers failed in their attempt to invade Malta. Forged in the fire of war, the relationship between Malta and the United Kingdom flourished. The British had a profound influence on the culture and attitudes of the Maltese and now the English language stands alongside Malti as one of the two Official languages. Malta has now gained independence from Great Britain and is a Republic and a new member of the European Economic Union. So now if I have a problem with the way things are done over here I just blame the British!

School is in and the Mother is out.

As July turned into August I was becoming frantic with the lack of response I was getting from the Maltese Education Evaluation Board. ... As hard as I tried and with intervention on our behalf by Maltese relatives we did not receive their assessment as August came to an end.

As my son's schooling was one of the main reasons for us relocating to Malta and education is free to Maltese citizens I was beginning to think that I had left Vancouver too late in the year. I decided to forget standard procedures, protocol and all the rest of the bureaucracy and search out the head mucky-mucks in the Evaluation Board. ...

Eventually I found the Evaluation Board department and politely settled my issues with them. Within a week I received my son's approval letter and met with the art college administrators. Although we were too late for our choice of art course there was one opening available in a lower level art course which we gratefully accepted. We acknowledged the fact that it would be better to aim low the first year and acclimatize to the school system here before applying for the upper level courses.

One of Malta's advertised high points is its free medical care for its citizens. It also has a private health care system for those that wish to bypass lining up at the local clinic to see a doctor. Well aware of the "free" medical system in Canada -- with its waiting times, lack of doctors and extra charges the clinics hit you with when you go for any doctor prescribed tests -- we thought we would deal with the private option in Malta.

This decision has proved to be trouble free and inexpensive so far. A doctor's office visit was only about C$24.00 and as a bonus the doctor makes house calls for the same price. You could also play both fields if you chose to do so. The government doctors moonlight as private doctors after hours. Dental care is cheap as well. The removal of an abscessed tooth set me back C$30.00 complete with check-up and X-ray. No filing out medical forms and paying the difference (more than $30.00) under your company coverage. As easy as the private system appeared, we have had major problems with the government medical system, to the point that it has resulted in my mother-in-law's decision to return home to Canada. ...

So where are we now seven months after emigrating to Malta you might ask? We have successfully negotiated the immigration and citizenship process. We are proud holders of an EU Passport and citizenship papers with all the benefits these documents offers. My son is in school and hopes to stay here for another 2-3 years and complete the MCAST Higher National Diploma program. We have doctors and dentists but I cannot find a Tim Hortens or an A&W [Canadian restaurant chains].

On the downside, although my wife and I like it here, we do not feel that we could live here all year round. It is too hot in the summer and too damp in the winter. We are also not impressed with the Maltese attitude towards trash. It can be a very dirty place at times. The buildings are also unheated and damp. You feel like you are living in a cave.

I also miss the mountains and lakes of British Columbia. When I try to explain these feelings to Maltese people they just look at me with an uncomprehending look. They have no idea what I am talking about. Fly fishing? Coyotes howl? The cry of a loon? Moose and bears?

In a nutshell my biggest problem with the Maltese people -- as much as I love them -- is lack of communication and understanding. Other than the weather and football (soccer) we have nothing in common and nothing to say. Remember that lily pad in the Mediterranean I spoke of earlier? Let us just say I am a very lonely wayward dragonfly from an ecosystem far, far away.

You may already know how this will end.

My gut feeling when I made the decision to come to Malta was that I could live here part of the year but not all year round. So far I have not changed my feelings. As far as my son goes he also likes it here but, like most students here, he will have to leave Malta to find opportunities elsewhere. Even though he may do this he will always be a dual-citizen and have the option to return in his later years.

Malta's greatest export to the world has been its people. They are a hardworking lot with "jack of all trades" skills. They also speak English very well. All college, private schools and University courses are taught in English. This is to their benefit when they emigrate to another country. The problem is jobs are few here in Malta and there is a dog for every bone. You have to have an edge over your competitor so everyone has some type of scam going on. It is the opposite to Vancouver where there is a serious labour shortage due to retiring baby boomers.

Although the cost of living is cheaper here by North American standards wages are very low. Low cost of living and wages go hand in hand. An average wage in Malta is about C$300.00 a week before taxes. There is also age discrimination in Malta. Job postings advertise for people between 20 to 30 years of age. You do not want to be over 50 and unemployed in Malta. If you come to Malta you should not expect to work unless you start your own business. Let me repeat that for the slightly dense out there. "DON’T EXPECT TO FIND WORK IN MALTA!!!"

The real estate is another issue to deal with. Do you buy or rent? As rental prices are reasonable in Malta I do not think I would ever buy a place of my own. The property here is way overpriced and is not based upon the usual supply and demand rule laws one might find elsewhere in the world. There is something hinkey about real estate dealings over here. With over 50,000 vacant suites, unfinished buildings, no property taxes and offshore "grey" money the last thing you want (in my opinion) to do is get involved in buying real estate in Malta. With other European countries like Bulgaria and Croatia getting into the investment real estate game and with the collapse of the Spanish resort real estate market, Malta is heading towards a real estate meltdown and it is going to be ugly.

Well I guess I've said all that I can say to date. This June we should see how things will go with our son's schooling as this will determine our length of stay in Malta. At this time we will also have to evaluate how we feel about living here, working and can we afford to stay long term or just part of the year.

I realize after reading about my experiences you may be critical about the way things were done but do not judge me too harshly. There is no book or night school class on immigrating to Malta to my knowledge. All I had was the internet, e-magazines, books, relatives and television programs to provide me with base line knowledge. Useful but all fluff and no grit. The important information can only come from living in that country as a resident and not as a tourist. All one can do is complete as much research as possible, hold your breath and take that big scary leap into the unknown.

In summary Malta has sublimely stolen my heart with its Mediterranean scenery, life style and its people. I have even started to talk loudly while flailing my hands. I do, however, feel a bit of loneliness in my heart at times and I suspect it is because I am a country boy at heart, trapped in a big city. I also feel that I have unfinished business to deal with back home with regards to my parents and eldest son. So with the words, "You can never go home again" echoing in my ear, I suspect, from what I have written, you may already know how this will end.

August 5, 2008

Last week we featured an article from Lifehack titled "How to Make the Right Decision in Any Situation." We bring them back for this piece on general skills, i.e., those not specific to any one occupation, that are invaluable aids to succeeding in life. As noted, it is not enough to just possess the skills. You have to actively use them as well.

What does it take to succeed? A positive attitude? Well, sure, but that is hardly enough. The Law of Attraction? The Secret? These ideas might act as spurs to action, but without the action itself, they do not do much.

Success, however it is defined, takes action, and taking good and appropriate action takes skills. Some of these skills (not enough, though) are taught in school (not well enough, either), others are taught on the job, and still others we learn from general life experience.

Below is a list of general skills that will help anyone get ahead in practically any field, from running a company to running a gardening club. Of course, there are skills specific to each field as well -- but my concern here is with the skills that translate across disciplines, the ones that can be learned by anyone in any position.

1. Public Speaking

The ability to speak clearly, persuasively, and forcefully in front of an audience -- whether an audience of 1 or of thousands -- is one of the most important skills anyone can develop. People who are effective speakers come across as more comfortable with themselves, more confident, and more attractive to be around. Being able to speak effectively means you can sell anything -- products, of course, but also ideas, ideologies, worldviews. And yourself -- which means more opportunities for career advancement, bigger clients, or business funding.

2. Writing

Writing well offers many of the same advantages that speaking well offers: good writers are better at selling products, ideas, and themselves than poor writers. Learning to write well involves not just mastery of grammar but the development of the ability to organize one's thoughts into a coherent form and target it to an audience in the most effective way possible. Given the huge amount of text generated by almost every transaction -- from court briefs and legislation running into the thousands of pages to those foot-long receipts you get when you buy gum these days -- a person who is a master of the written word can expect doors to open in just about every field.

3. Self-Management

If success depends of effective action, effective action depends on the ability to focus your attention where it is needed most, when it is needed most. Strong organizational skills, effective productivity habits, and a strong sense of discipline are needed to keep yourself on track.

4. Networking

Networking is not only for finding jobs or clients. In an economy dominated by ideas and innovation, networking creates the channel through which ideas flow and in which new ideas are created. A large network, carefully cultivated, ties one into not just a body of people but a body of relationships, and those relationships are more than just the sum of their parts. The interactions those relationships make possible give rise to innovation and creativity -- and provide the support to nurture new ideas until they can be realized.

5. Critical Thinking

We are exposed to hundreds, if not thousands, of times more information on a daily basis than our great-grandparents were. Being able to evaluate that information, sort the potentially valuable from the trivial, analyze its relevance and meaning, and relate it to other information is crucial -- and woefully under-taught. Good critical thinking skills immediately distinguish you from the mass of people these days.

6. Decision-Making

The bridge that leads from analysis to action is effective decision-making -- knowing what to do based on the information available. While not being critical can be dangerous, so too can over-analyzing, or waiting for more information before making a decision. Being able to take in the scene and respond quickly and effectively is what separates the doers from the wannabes.

7. Math

You do not have to be able to integrate polynomials to be successful. However, the ability to quickly work with figures in your head, to make rough but fairly accurate estimates, and to understand things like compound interest and basic statistics gives you a big lead on most people. All of these skills will help you to analyze data more effectively -- and more quickly -- and to make better decisions based on it.

8. Research

Nobody can be expected to know everything, or even a tiny fraction of everything. Even within your field, chances are there is far more that you do not know than you do know. You do not have to know everything -- but you should be able to quickly and painlessly find out what you need to know. That means learning to use the Internet effectively, learning to use a library, learning to read productively, and learning how to leverage your network of contacts -- and what kinds of research are going to work best in any given situation.

9. Relaxation

Stress will not only kill you, it leads to poor decision-making, poor thinking, and poor socialization. So be failing to relax, you knock out at least three of the skills in this list -- and really more. Plus, working yourself to death in order to keep up, and not having any time to enjoy the fruits of your work, is not really "success". It is obsession. Being able to face even the most pressing crises with your wits about you and in the most productive way is possibly the most important thing on this list.

10. Basic Accounting

It is a simple fact in our society that money is necessary. Even the simple pleasures in life, like hugging your child, ultimately need money -- or you are not going to survive to hug for very long. Knowing how to track and record your expenses and income is important just to survive, let alone to thrive. But more than that, the principles of accounting apply more widely to things like tracking the time you spend on a project or determining whether the value of an action outweighs the costs in money, time, and effort. It is a shame that basic accounting is not a required part of the core K-12 curriculum.

What Else?

Surely there are more important skills I am not thinking of (which is probably why I am not telling Bill Gates what to do!) -- what are they? What have I missed? What lessons have you learned that were key to your successes -- and what have you ignored to your peril?

August 11, 2008

Libertarian and "individualist feminism" Wendy McElroy writes that that U.S. police state is likely to get far worse when the current economic crunch hits in earnest, so it is time to get yourself and your assets outside the borders. She speculates that the resulting police state will be the biggest ever, best ever, in typical American fashion.

Her reasons given for securing you wealth outside the reach of the authorities are reasons we have been preaching for years: (1) Whatever avenues for relocating it still exist, they could be wiped out overnight. (2) With government starved for revenues to support itself and pay off its constituents, it will resort to taxation and outright confiscation under increasingly flimsy pretexts. Moreover, come the economic collapse the number of supplicants for state aid and their willingness to overlook traditional niceties like due process and justice will both increase.

It is time -- arguably, it is past time -- for you to get your family and your wealth safely outside the borders of the United States. America has become a police state that is moving quickly toward total surveillance and, in typical American fashion, the resulting society will almost certainly be the "the best and the biggest" tyranny in the world.

Make plans right now while opportunities still exist to secure your wealth outside of the authorities' rapacious reach because that door of opportunity may be slammed in your face in the near future. It is not merely that government at all levels is starving for the cash that has dried up from property taxes and, so, will steal and confiscate like a drunken highwayman. Many factors point to rise of the Total State, which will grind up your freedom, your future and the lives of those who resist.

I read about 12 news sources a day, from far-left to the Religious Right. Month by month, there is a dramatic increase in reports of police brutality, government surveillance, crack-downs, the control of daily life down to the minutia of which oils you may cook french fries. ... And there seems to be precious little opposition to the arrival of totalitarianism. Perhaps the flood of oppression is too overwhelming and has caused a general paralysis. At times, that is my reaction. But, mostly, I think people are either focused on financial survival or they actually applaud the Total State.

Even those who believe they believe in freedom are among the applauders because they buy the justifications being offered for the annihilation of civil liberties. For example, consider just one of the incredible and successful assaults on the due process and liberties of us all. In the name of defending women and children, the campaign against sex offenders has created a class of "untouchables" in class-free America -- people whom the government tells where to live, how to make a living, which sites they can e-visit, etc., etc. In the name of noble goals, the government has erased the idea of serving out a time in jail (which used to be called "paying your debt to society") and, instead, established the idea of indefinite sentences and "forever" punishments. But the establishment of this caste system is just one aspect of the wild plunge into tyranny.

What should worry you the most is that everything has occurred before the economic collapse of the United States, which I believe will happen in the near future. (The timing depends somewhat on when "too many" foreign-held dollars are dumped back into America.) I expect a severe depression to unfold over the next few years. And nothing, nothing, nothing encourages the growth of State as much as people who are frightened and hungry/homeless. An entire population can turn to a leader much as children turn toward a parent ... and for the same reason: to feel safe.

If an economic depression is added to the convergence of the police state with a total surveillance society, then I honestly do not know what will happen. But I do know that you do not want to be there to find out. Don't be fooled by those who say "but America has too strong a tradition of freedom for this to happen." Pre-Nazi Germans thought their culture was too sophisticated and fine to allow the triumph of barbarism. Leave.

August 15, 2008

Things can change fast in expat-favored destinations, and this blog entry claims Panama's once promising future is open to question due to a variety of factors. Not surprisingly, real estate prices are softening. The glut in condos could choke the whole sector, as others have warned along the way. But also, crime is increasing, the country's corruption level is not getting any better, the military may be on the ascendency again, and -- most surprising of all -- the country's commitment to protecting the assets of those who use it as a haven may be waning.

The piece was written by a Canadian expat, Rebecca Tyre, who moved to Panama in 2005 and who blogs extensively about her experiences there. Perhaps these straws in the wind she flags will not kill the deal in the longer run. Indeed, she does not appear to be overly pessimistic about the situation. But the warnings should be carefully heeded before buying into Panama. The consistent advice coming from all quarters is to get to know an area by living there as a renter or guest before buying in.

"The outcome of next year's elections will probably say a lot about whether Panama wants to embrace tourists and retirees or if they would be happier that we all just get out and stay out," assesses Ms. Tyre. "We foreigners can suggest and complain all we want, but in the end it is for the Panamanians to decide. ... We chose to live or visit and we have the same choice to leave. Many Panamanians do not have that same option."

Panama is currently dealing with a number of issues that will determine whether or not the country will continue to be a top destination for tourists and retirees. Much of the future will depend on who is elected to run the country next year.

Security Reform

The current administration is hashing out details of new security reform which has some wondering if the new measures will lead to a return of Panama's military. President Martin Torrijos was granted "special powers" by the National Assembly but has been pretty quiet about the details of his decisions. What is known is that though currently prohibited, future leaders will be able nominate a uniformed head of the National Police, a practice which is currently prohibited. These reforms have some expats worried that Panama will reinstate the military and leave the doors open to a situation which lead to the rise of General Noriega.

Cinta Costera Controversy

It has now come to light that the $190 million Coastal Beltway in Panama City may be the financial responsibility of area residents. The beltway is currently under construction through the bay of Panama and is expected to ease traffic problems in the capital. The Public Works Ministry believes residents of Punta Pacifica, Punta Paitilla, Marbella, Bella Vista and Calidonia should foot the bill for the work, since it will increase the values of their homes. Hundreds of people who bought houses or condos in this area are now shocked to learn they could be paying up to $8,000 a year (for 10 years) in taxes to pay for the project. For a country that is trying to encourage international investment, this hardly seems like a wise move. If you own a condo in these areas right now, good luck trying to sell it in the next 10 years.

Tourism Laws Changing

Panama's new tourism laws are due to come in to effect next month and if the current proposal remains intact, far fewer foreigners will be eligible for the pensioners visa. Currently to apply for a pensionado visa one must have a retirement income of $500 (plus $100 for every dependant) per month but the new law states that every person applying must have an income of at least $1000/month. The proposed law will exclude many foreigners who were once considering Panama as a retirement destination.

Real Estate Boom to Bust

Real estate prices in Panama are certainly not what they used to be. The ever increasing prices are locking a lot of people out of being able to invest in this country. People who have already purchased here and are hoping to resell their units could have a very hard time if there are thousands of condo units on the market. Panama is building too fast and the demand is not increasing. Something will have to give. There is a economic downturn going on around the globe, and the U.S. is seeing the worst real estate market in decades. Where will the people come from to fill the glut of condos being built? Panamanian developers just need to slow down and wait things out before they destroy the real estate sector for good.

Not so Cheap Living

The cost of living is increasing around the world, but it is very apparent in Panama. The poverty rate in Panama is between 30 and 40 percent. That means more than a third of the population is having a very hard time meeting their basic needs. The poverty rate will increase as the cost of the basics rise. More poverty equals more unhappy, desperate people. The countries in Latin America with the highest crime rates are also the countries with some of the highest numbers of impoverished people. If the government doesn't step in and help (cap electricity rates, subsidise more food products, etc - take a hint from Mexico) then there will be many more desperate Panamanians.

Corruption Continues

Transparency International gave Panama a 3.2 when rating the corruption perception in 2007. A 10 on the scale is highly clean, and a 0 is highly corrupt. Corruption is an every day occurrence in Panama and it ranges from crooked lawyers and police to crooked politicians and companies. Every foreigner moving to Panama has been told that money will grease any wheel. It can be very confusing and frustrating if you are actually trying to do the right thing and follow the rule of law. In many cases you cannot get anywhere by being honest and trying to do what is right. Corruption can sometimes work in favor of the expat or tourist, but it can also ruin them.

Rising Crime Rate

The crime rate in Panama is on the rise. Last year 444 people were murdered in Panama. Panama is quickly creeping up the list of countries with the highest murder rates per capita. High crime rates justifiably scare tourists and potential investors away, especially when crimes are committed against foreigners. In the past few weeks there have been a couple of cases where North Americans were shot during robberies in Panama. These are the types of crimes that will put an end to Panama's potential as a tourism hot spot. With any luck, the proposed security reforms will help curb Panama increasing crime rate.

Diminished Security of Asset Protection

Panama has long been known as a top site for asset protection and offshore accounts. Recently the Supreme Court of Panama ruled that funds in Private Interest Foundations can be sequestered even when the PIF has nothing to due with the reason the person is being sued. The decision stems from a libel suit filed by HSBC against a Canadian retiree living in Panama. The Canadian made negative comments about the bank on an internet chat room (never mentioning he was speaking on behalf of his PIF) and the bank successfully petitioned to have the funds of his anonymous foundation sequestered. This decision may hinder the current ease that money launderers have hiding their money, but it is going to scare off a lot of legitimate businesses and retirees who have opened bank accounts using a corporation or foundation. Panama is no longer a safe place to keep clean or dirty money.

More Talent Needed

Panama needs more skilled workers and a better service culture if it wants to compete with other tourism and retirement destinations. The government can invest all the money it wants in tourism campaigns, but when travelers arrive and are greeted by a mono-lingual immigration officer and the clerk at the hotel they check in to would rather talk to her boyfriend on her cellphone then hand over the room keys, you certainly will not see many repeat visitors.

Panama has an incredibly bright future if it treads carefully. The outcome of next year's elections will probably say a lot about whether Panama wants to embrace tourists and retirees or if they would be happier that we all just get out and stay out. We foreigners can suggest and complain all we want, but in the end it is for the Panamanians to decide. This is not our country. We chose to live or visit and we have the same choice to leave. Many Panamanians do not have that same option.

August 11, 2008

Rule No. 1: Never lose money. Rule No. 2: Never forget Rule. No. 1 ~~ Warren Buffett

We have some differences in political philosophy with billionaire Warren Buffett, who has no problem with the state acting as a wealth redistribution. He seems blissfully unaware of the idea that the state is the ruling class's wealth aggregator. Nevertheless, Buffett is no hypocrite. For someone of his net worth, his current consumption level is surprisingly small, e.g., he still lives in the same simple home in Omaha, Nebraska that he has for decades. That choice is consistent with his articulated philosophy on life, which boils down the idea that happiness and simplicity go together. This includes limiting ones material consumption even if one can afford it.

The website Success Soul, whose motto is "Abundance and simplicity for mind, body, and soul," summarized certain things Buffett has said over the years into a useful compendium. As one of the article commenters offered: "I reckon that these are not secrets, but the majority of us are blind to them because of our inherent lusting consumerism."

Are you sold on the fake notion that owning possessions is the touchstone of your self-worth? Have you felt jealous and self-pity when a neighbor bought a new Mercedes or a new yacht that you always wanted to possess? We all have.

If your paycheck is not keeping up the pace with your cravings for the new iPhone, why not learn the secrets of simplicity from the richest man on the earth who still lives without a cell phone? Before you sink your money for the latest gadget what if you were to know that the Oracle of Omaha still has no desk computer in his modest office?

In this world full of the rich and famous, Warren Buffett remains the greatest investor ever born not due to his acumen for the wise investments that he has made during his life but more for exemplifying the greatness with simplicity. He is full of wit and happiness and this is at the core of everything that he does.

Secret #1 : Happiness comes from within.
In my adult business life I have never had to make a choice of trading between professional and personal. I tap-dance to work, and when I get there it is tremendous fun. ~~ Warren Buffett
This is the man who truly does what he loves. The battle between productivity and anti-productivity blogs stems from their convoluted chains of frequently twisted rationale to substantiate their claim that productivity is a force of an external demand -- from an employer or a competitor. In reality, productivity comes from within. It comes from doing what we love and loving what we do. When we start trading time between our professional and personal life, we wage war in our own mind to justify our passion in terms of a personal benefit. In my business I have felt more stress and angst when I have not given all of my talent, hard work and passion to help others on a given day. The myth of working hard to make more money to buy more things throws us in the vicious circle of hallucination. Our happiness always remains imprisoned when we do work that we abhor yet justify doing it to pay bills for those things that we do not need. I used to work even after buying my first hotel for many years to justify the fake notion that I needed additional income to pay bills. What I needed was to change my lifestyle to free myself from this never-ending rut chase.

Secret #2 : Find happiness in simple pleasures.
I have simple pleasures. I play bridge online for 12 hours a week. Bill and I play, he is “chalengr” and I am “tbone”. ~~ Warren Buffett
If the man richer than God can find happiness in the simple pleasure of playing bridge online with another billionaire, I have to learn to be happy with the simple pleasures of playing cards with friends or playing with my children or taking a walk in the wilderness. All of these simple pleasures do not need extravagant spending. I used to go play golf with other businessmen when the local chamber of commerce sponsored an event. I never found happiness in those events as they were centered on generating more business and exchanging business cards than on truly enjoying the moment. I was allowing myself to be run ragged by trading business cards after hours in a vain hope of making more money whereas that time deserved a dinner with my family.

Secret #3 : Live a simple life.
I just naturally want to do things that make sense. In my personal life too, I do not care what other rich people are doing. I don’t want a 405 foot boat just because someone else has a 400 foot boat. ~~ Warren Buffett
The sad truth is that our ever-sophisticated advertising industry has conditioned our mind to find happiness from consumption by spending our hard-earned money on the possessions that never bring us lasting happiness. We spend our life-energy on those possessions that we seldom use. We worry about making payments for a luxury car that sits in our garage collecting dust only for the right to brag about it at an occasional social gathering. Keeping up with the Joneses is the worst epidemic among those who should never contemplate that notion in the first place.

If a man who can possibly buy a nation with his cash never espouses the mantra of "more the better", I need to learn not to spread my legs beyond the reach of the blanket. We are conditioned to spend money before we earn it. We are sold on the fake happiness of "Buy now, pay later dearly" -- It is nothing more than buying possessions that we cannot afford. I have my share of insanity when it comes to mindless spending, but lately I try to pay for most of my purchases with cash. It creates awareness towards the impulse buy when I pay by cash. I have also started redlining items on the credit card statement that I consider useless spending. All of these efforts have built my awareness towards my impulse purchases. I have been using mantra of "less is more" to simplify every aspect of my life. It is a work in progress but the results are astounding.

Secret #4 : Think simply.
I want to be able to explain my mistakes. This means I do only the things I completely understand. ~~ Warren Buffett
There lies one of the greatest secrets of simplicity. Warren Buffett invests only in the businesses that he understands. If you ever read research reports from an accomplished Wall Street guru, you will find a plethora of details that make you dizzy. The success of Warren Buffett as the greatest investor ever lies in his ability to think simply.

I used to invest in the stock market in the mid '90s when everyone wanted to make overnight millions in an exuberant market. I used to read Investor's Business Daily only to look at the movers and shakers. These were the stocks that made a significant upward move a day before. A few days before Christmas, I made $52,000 in one stock in a matter of a few days. I knew nothing about the company. I created a new reality for my thoughts that I had figured out how the Wall Street works. I was on my way to the riches. I applied the same thought model on the next several stocks. Needless to say, I lost all that I made and much more. I was lacking in a basic human quality that Warren Buffett has mastered well -- common sense. It says a great deal about the character of a man who invested a measly amount in Microsoft despite the fact that Bill Gates is one of his closest friends. I learned a valuable lesson of life from this experience -- "Not losing hard-earned money is far more important than making more money."

If I apply this rule in my life, I can develop clarity and sanity in my thoughts. Clarity is the mother of simplicity. Life is not a roulette; life is about simple yet profound choices.

Secret #5 : Invest simply.
The best way to own common stocks is through an index fund. ~~ Warren Buffett
It is astounding to know that the greatest investor in the world is not bragging about intricate financial maneuvering to impress the rest of the world with his financial genius. Instead, Warren Buffett shows us the most simplistic approach to our financial freedom -- "Flow with the market rather than pretending to be smarter than God."

In this world full of so-called financial experts, Warren stands tall by showing us the simplest way to the riches. The stock market has moved upward for the last 100 years despite numerous setbacks. He is using a long historical view to back his argument rather than making a futile effort to predict how we can make a quick fortune. After losing most of my capital in the late '90s, I have precisely followed the simple advice of investing in the no-load index funds. I am happier than ever and while my assets have not skyrocketed, they have not dwindled either.

Secret #6 : Have a mentor in life.
I was lucky to have the right heroes. Tell me who your heroes are and I will tell you how you will turn out to be. The qualities of the one you admire are the traits that you, with a little practice, can make your own, and that, if practiced, will become habit-forming. ~~ Warren Buffett
We are worshipers of celebrity demi-gods. All of us have this acute desire to look and live like these celebrities. However, are they truly the ones with character and moral compass to lead us? Having a mentor is as important as having a purpose in our life but having a wrong mentor is as devastating as having a wrong purpose in our life. The mentor has to be someone whom we can trust and have an unwavering faith in his/her guidance. The mentor has to be the one who has made outstanding strides in advancing the greater and guiding purpose of happiness in his/her own life. You will find that person in your inner circle if you think hard enough. Write down why you admire them. Try to emulate their traits and as Warren has shown by his exemplary life, with a little practice, you can form a habit to clone the life that you admire the most.

Secret #7 : Making money is not the backbone of our guiding purpose; making money is the by-product of our guiding purpose.
If you are doing something you love, you are more likely to put your all into it, and that generally equates to making money. ~~ Warren Buffett
How do you rationalize the richest man on the earth still living in a small 3-bedroom house that he purchased 50 years ago? Warren Buffett never travels in a private jet despite the fact that he owns the largest private jet company. His character and way of life speak volume about his greatness. This is the man who spent his personal time investigating a $4 line item on his tax return to hunt down the specifics of it while giving away billions of dollars to Bill Gates foundation. It is rare to find the richest man on the earth living without luxuries that we want to possess even by mortgaging our future. He has demonstrated that while valuing the worth of money is vital for our ingenuity and success, money shall never become the object and end all of our motivation.

I am an avid admirer of simplicity, but I am an even bigger fan of the man who has mastered the greatness by living and breathing simplicity amid an ocean of wealth.

August 24, 2008

In a perhaps inevitable "after the horse has escaped the barn" move: Subsequent to the theft of client data from a Liechtenstein bank, followed by the turning over of that data to German and other tax authorities, Liechtenstein clients worrying about being similarly outed are transferring their money to Singapore and other perceived safer havens. Given how vigilant the other Liechtenstein banks must now be against similar breaches, it is not clear how much sense this tactic makes. Perhaps the customers are worried that international pressure will lead to more voluntary disclosures by Liechtenstein banks, protestations to the contrary notwithstanding.

Tax dodgers are transferring money from Liechtenstein to Panama, Singapore and other secretive offshore centers, intelligence from foreign tax authorities shows. One official said the switch had been prompted by the greater focus on evasion after the theft of client details from LGT and Liechtensteinische Landesbank.

The banks themselves have said little about the extent of outflows from the principality. LGT revealed earlier this year it had suffered only limited damage. However, updated information when the two banking groups report first-half results later this month should show accelerated withdrawals, according to some local financiers.

One beneficiary could be Panama. The Sovereign Society, a U.S. publisher specializing in offshore planning, says the country has "iron-clad financial privacy laws" and describes it as "an ideal 21st century offshore haven in a world where few remain."

But Panama has constraints for Europeans, being less accessible than favored havens such as Switzerland and Liechtenstein. Sue Holmes, a specialist in investigations at Smith & Williamson, a professional services firm involved in several cases involving Liechtenstein, said Panama was perceived as less secure. "It is a fairly risky place."

Singapore, the world's fastest-growing private banking center, expected to gain from Liechtenstein's troubles, Daniel Truchi, global head of Société Générale's private banking business, told the Financial Times in March. "Because of what happened in Liechtenstein, we will see a higher flow of funds into Singapore. The momentum is accelerating."

Singapore and Hong Kong benefited from a 2005 clampdown on European tax secrecy, says the Institute for Fiscal Studies, the independent think-tank. "In 2003 Hong Kong and Singapore experienced a massive influx of capital, apparently from European sources, as the adoption of the savings tax directive began to seem a realistic possibility."

Tax experts say evaders can reduce, but not eliminate, the risk of detection by transferring money from one haven to another.

"Families with undeclared money can run, but they cannot hide," says Philip Marcovici, a private banking specialist at Baker & McKenzie in Zurich. Ms. Holmes says many people wrongly think they will not face detection. "My recommendation is to come clean. Tax havens are pretty vulnerable to attack."

In a speech in June, Jeffrey Owens, director of the tax policy center at the OECD, condemned at least 10 countries for failing to recognize that secrecy is a "relic of the past."

Panama was dropped from the OECD's list of "uncooperative tax havens" -- which now features only Monaco, Liechtenstein and Andorra. But there is widespread frustration among OECD members that Panama has not improved transparency. Panama has responded angrily. Along with other small financial centers, it has told the OECD it will increase transparency only if there is a "level playing field" created by member states meeting the same standards.

August 18, 2008

Canadian expat Rebecca Tyre, who lives in Panama and who wrote an entry we flagged last week, writes about the challenges of dealing with bad news from the home country when living abroad, such as the death of friends and loved ones. Do you fly home and lend comfort, or pursue an alternative course? Best to plan ahead about how to deal with such situations.

Moving to a country far from your roots presents many challenges. There will no doubt be cultural differences, language barriers and the occasional bout of homesickness. No matter how much you enjoy your adopted country, these issues are sometimes unavoidable.

This weekend I had to deal with what is probably the worst part of living away from home. I received a phone call from my best friend telling me the father of a very good friend of ours just had a massive heart attack and passed away. These are the kinds of phone calls everyone dreads no matter where you live, but it makes it that much harder when you are living in a country thousands of kilometers away.

I know a number of expats living in Panama that have had to deal with the death of a loved one back home. It is terrible to get sad news no matter where you live, but being so far away makes one feel totally helpless. Do you get on the next plane home? Do you send your condolences from afar? It is a terrible situation to be in, but if you are living in a foreign country it is something you have to consider.

If you already live in Panama, or are considering moving here, it may be worth it to have a game plan in place should the terrible happen. Planning for the worst ahead of time may make such situations a little easier to deal with should the unfortunate happen. Know ahead of time which situation necessitates a trip home. Have someone in place in Panama that can look after your affairs for you should you have to leave on a moments notice.

No one wants to have to think of the worst happening, but having a plan in case of the worst, can make the situation a little bit easier. The death of my friend's father was a total shock to me and his entire family. This was a healthy, very active, nonsmoker who could still knock out opponents half his age on the tennis court, but I guess sometimes there is no rhyme or reason.

This guy taught me how to drive standard, he improved my tennis swing and he challenged my political views on a daily basis since high school. I will miss him terribly, but after debating with myself endlessly, I have decided not to go home for the funeral. I have already sent my condolences and will be donating to the charity of the family's choice in lieu of flowers.

This is now the second death I have dealt with since living in Panama. This situation is certainly something I never anticipated when I decided to move thousands of kilometers away, but stuff happens. Always have a plan in place, should the worst happen.

On the flip side, do you and your family have a plan in place should something happen to you while living in Panama? It is another situation no one wants to think about, but you never know when the worst will happen.

August 24, 2008

Bill Kauffman reviews The Selected Essays of Gore Vidal.

Bill Kauffman, author of Look Homeward, America: In Search of Reactionary Radicals and Front-Porch Anarchists and Ain't My America: The Long, Noble History of Antiwar Conservatism and Middle American Anti-Imperialism (also see here and here), and possessor of a hyper-erudite vocabulary, reviews Jay Parini's The Selected Essays of Gore Vidal. Vidal is one of the last remaining champions of the American Republic of his generation, and is also an inordinately literate man of letters. The book of his essays sounds like a real treat.

"Gore Vidal is America's premier man of letters," says Jay Parini in his introduction to The Selected Essays of Gore Vidal, and if after reading Vidal on William Dean Howells, Tennessee Williams, various dead Kennedys, and "American sissy" Theodore Roosevelt the reader denies it -- well, hie on back to the Masters of Fine Arts prison

The Selected Essays were written over the course of a half-century (1953-2004), or almost one-quarter of the lifespan of the Republic that is Vidal's primary subject -- though it might more accurately be said that Vidal has been a contumacious [insubordinate] patriot of the Old Republic for nigh the entirety of the post-Republic era. As such, he is a man out of time in the United States of Amnesia, as he calls his native and beloved land.

What a pleasure these essays are. One imagines Gore Vidal at his writing desk, hint of a smile creasing his mouth as he mints Saint-Gaudens gold-piece witticisms with Lincoln-penny frequency. Here he is on Ohio's greatest novelist: "For a writer, Howells himself was more than usually a dedicated hypochondriac whose adolescence was shadowed by the certainty that he had contracted rabies which would surface in time to kill him at sixteen. Like most serious hypochondriacs, he enjoyed full rude health until he was eighty."

"It should be noted that Vidal is conservative in many respects," writes Parini. "He stands behind individual choice, the limitation of executive power, and preservation of the environment. Like his grandfather, he dislikes the empire. ... He would return us, if possible, to the pure republicanism of early America."

That grandfather, the blind Sen. Thomas P. Gore (D-Oklahoma), was a first-rate populist foe of war and FDR. He was a peace Democrat, which is why no one has ever heard of him. Vidal's education owed more to home than academy, as he read aloud to the senator, from whom he inherited an isolationist opposition to foreign wars, a populist suspicion of concentrated capital, a freethinker's hatred of cant, and a patriot's detestation of empire.

Like Mencken, Ray Bradbury, Hemingway, and other original Americans, Vidal escaped a college sentence. He is the scourge of sciolism [superficiality], of credentialed arrogance. As he writes of his friend's mistreatment while speaking to snotty drama students at Yale: "Any student who has read Sophocles in translation is, demonstrably, superior to Tennessee Williams in the unruly flesh."

The foaming and thoroughly ideologized haters of Vidal are simply incapable of writing prose anywhere near as tautly conversational, as confidently but never pedantically erudite, as amaranthine [unfading] as the master. Vidal commits an unforgivable sin in our age of the national hall monitor: humor. Is it any wonder they hate him? Vidal inevitably gets the best of the carpers in any exchange because he is funny and they are not. Or in his words, "I responded to my critics with characteristic sweetness, turning the other fist as is my wont."

His best essays are often sympathetic readings of such forgotten or undervalued American writers as the Ohio (again!)-bred satirist Dawn Powell (who "always knows how much salt a wound requires"); Tarzan creator Edgar Rice Burroughs (a talented action writer who was "innocent of literature" but as a drifter, cowboy, gold miner, and railroad cop was, like Vidal, "perfectly in the old-American grain"); and Tennessee Williams, "the Glorious Bird," whose work Vidal assesses with an affectionately critical eye. The personal anecdote he deploys expertly. Of a dinner with Williams and his magnificently termagant [shrewish] mother:

Tennessee clears his throat again. "Mother, eat your shrimp."

"Why," counters Miss Edwina, "do you keep making that funny sound in your throat?"

"Because, Mother, when you destroy someone's life you must expect certain nervous disabilities."

One of my favorite Vidal essays is his appreciation of William Dean Howells, who brought Ohio into the Atlantic and championed the new realists and regionalists of the late Gilded Age. He is a man after Vidal's own heart: "Since Howells had left school at fifteen he had been able to become very learned indeed."

Howells was barely of shaving age when he wrote a campaign biography of Lincoln. Precocious -- "an ambitious but not insane poet" -- he obtained a consulate in Venice thanks to his connection with Salmon P. Chase, the Free Soil Buckeye and constitutionalist who, as Lincoln's secretary of the Treasury and later chief justice of the Supreme Court, is one of those men like Robert A. Taft and Bob LaFollette who really ought to have been president.

Howells later wrote another campaign biography, this time of Rather-fraud Hayes, for whom the 1876 election was stolen from Samuel Tilden, the pornography connoisseur known in real-estate circles as "The Great Forecloser." But Howells's legacy was one of the truly great American novels, The Rise of Silas Lapham (1885). Again, Vidal's subject is vivified through a close reading of the novels and perfectly placed anecdotes. I liked Mark Twain's line about Elinor, Howells's wife, entering a room: "Dialogue ceased and monologue inherited its assets and continued business at the old stand." ...

Vidal is also fond of his kindred spirit Edmund Wilson, another proprietary patriot. The country was founded by such as Vidal and Wilson, their people shaped it, and they will not let it go without a fight, which is why in its collapse they turned withering fire upon its enemies. Wilson and Vidal were brave, though it was really a sense of patriotic duty, I think, that impelled their lonely stands against the empire that was erasing their ancestral Republic.

Wilson -- "the most interesting and the most important" critic of mid-century -- was a polymathic [learned] old American autodidact [self-taught individual] (Princeton years excluded) of the Vidal school: "When he died, at seventy-seven, he was busy stuffing his head with irregular Hungarian verbs." Vidal appreciates Wilson in his late autumn, when he really hit his stride with Patriotic Gore (whose introduction, comparing Lincoln to Lenin and Bismarck, got the energetic Bunny expelled from the warren), The Cold War and the Income Tax, Upstate, and Apologies to the Iroquois.

Like Wilson, Vidal regards federal taxes as confiscatory and the fuel by which an anti-American war machine is run. "Why," he asks in his 1972 essay "Homage to Daniel Shays," do we allow our governors to take so much of our money and spend it in ways that not only fail to benefit us but do great damage to others as we prosecute undeclared wars -- which even our brainwashed majority has come to see are a bad proposition because of the cost of maintaining a vast military machine, not to mention a permanent draft of young men (an Un-American activity if there ever was one) in what is supposed to be peacetime? Whether he knows it or not, the middle-income American is taxed as though he were living in a socialist society.

In 1951, most self-described "conservatives" would have nodded their heads in agreement with this observation. But that was before the "conservative movement" sacrificed hearth, home, peace, liberty, and tenderness on the block to wars without end and tanks with 501(c)(3) treads.

Vidal dislikes Wilson's clinical diaristic record of his sexual irruptions. "In literature, sexual revelation is a matter of tact and occasion," writes Vidal, who, contrary to the idiotic canard that he is a "gay writer," has written about his own sex life sparingly. He is impatient with those modern writers who, once they "could put sex into the novel, proceeded to leave out almost everything else." He is what he calls a same-sexer, though where sex intercrops with politics he is libertarian, demanding only that the state leave adults alone to pursue whatever consensual conjugations they please.

He disdains the hatchet, though no one levels the critical boom quite as crushingly, in a single sentence, as Gore Vidal. Of John Updike's memoir Self-Consciousness (1989): "Dental problems occupy many fascinating pages." Of Herman Wouk's The Caine Mutiny (1951): "from Queequeg to Queeg, or the decline of American narrative." Reviewing Donald Barthelme's Guilty Pleasures (1974): "This writer cannot stop making sentences. I have stopped reading a lot of them." (This is in the midst of a hilarious essay based on voluntary exposure to the academy-bound American metafictionists, who provide "the sense of suffocation one experiences reading so much bad writing.")

The inevitable Arthur Schlesinger, ineligible receiver in those Kennedy touch football games, is noticed and dismissed: "A Thousand Days is the best political novel since Coningsby." Unlike "Professor Pendulum," who fretted over the imperial presidency only when Richard Nixon darkened the White House, Vidal, as a good Anti-Federalist, views the president, whether Democrat or Republican, as "a dictator who can only be replaced either in the quadrennial election by a clone or through his own incompetency." Executive orders, executive agreements, executive privileges: he would scrap them all. He admires the Swiss cantonal system and would borrow from it to revive our torpid federalism. He favors national referenda, a pet cause of his grandfather, one of the first proponents of the war referendum that later took shape as the Ludlow Amendment. He would "stop all military aid to the Middle East," repeal "every prohibition against the sale and use of drugs," and "withdraw from NATO."

He is very much in the American libertarian vein, though his conviction that "monotheism is the greatest disaster ever to befall the human race" is unlikely to appeal to many conservative readers. He is a Bill of Rights stalwart, however, who takes the now wildly unfashionable view that kooks and outcasts have liberties, too. These include the Branch Davidians, who "were living peaceably in their own compound at Waco, Texas, until an FBI SWAT team ... killed eighty-two of them." As early as 1953 he spoke of "these last days before the sure if temporary victory of that authoritarian society which, thanks to science, now has every weapon with which to make even the most inspired lover of freedom conform to the official madness."

He patriotically detests the National Security State, which hijacked the country circa 1950 and has not given up the controls yet. In the late 1980s, Vidal called for a "neo-Clayite" candidate to campaign on internal improvements and avoidance of foreign quarrels. I wish he had run the race himself. But by 1992, three such men were running: Ross Perot, Jerry Brown, and Pat Buchanan, in the most interesting political year of the post-Republic era. Each, in his particular way, appealed to heirs and offshoots of the old Thomas P. Gore/Bob LaFollette/America First populist tradition. Vidal sensed a "potentially major constituency -- those who now believe that it was a mistake to have wasted, since 1950, most of the government's revenues on war." He scorned Buchanan's Catholic understanding of sexuality but conceded that "he is a reactionary in the good sense -- reacting against the empire in favor of the old Republic, which he mistakenly thinks was Christian."

Every now and again the reader is reminded that Vidal's bloodlines run south. He chides G. William Domhoff, who is "given to easy liberal epithets like 'Godforsaken Mississippi'" even though "except on the subject of race, the proud folk down there are populist to the core." So is Vidal. He is with Shays, with Bryan, with the America Firsters. He envisages an alliance of the "not-so-poor" and the poor and predicts that the "politician who can forge that alliance will find himself, at best, the maker of a new society; at worst, in a hole at Arlington."

While his subject has been America and the push-pull debate over its empire, Vidal rejects novels "which attempt to change statutes or moral attitudes" as "not literature at all" but arid propaganda. Thus he is capable of the greatest fictive rendering of Abraham Lincoln in all of American literature -- the novel Lincoln (1984) -- despite being largely out of sympathy with Lincoln's politics. For Vidal desires the president to be cut down to constitutional size, and Lincoln, he writes, "levied taxes and made war; took unappropriated money from the Treasury; suspended habeas corpus."

Yet Lincoln, that most confounding of presidents, was also thoughtful, wise, and an erstwhile critic of expansion. His old law partner Billy Herndon claimed that Abe never read a book straight through, but at least he did not make fun of book-writers. The contrast with the current war-maker in the White House reflects well on the 19th century, or poorly on us.

And so I must end with a lovely and poignant passage from Vidal's Howells essay. It is the kind of vignette that would appeal only to a man with a country:

"For some years I have been haunted by a story of Howells and that most civilized of all our presidents, James A. Garfield. In the early 1870s Howells and his father paid a visit to Garfield. As they sat on Garfield's veranda, young Howells began to talk about poetry and about the poets that he had met in Boston and New York. Suddenly, Garfield told him to stop. Then Garfield went to the edge of the veranda and shouted to his Ohio neighbors, 'Come over here! He's telling about Holmes, and Longfellow, and Lowell, and Whittier!' So the neighbors gathered around in the dusk; then Garfield said to Howells, 'Now go on.'"

Today we take it for granted that no living president will ever have heard the name of any living poet. This is not, necessarily, an unbearable loss. But it is unbearable to have lost those Ohio neighbors who actually read books of poetry and wanted to know about the poets.

Thus speaks Gore Vidal, American patriot.

August 27, 2008

Tax Justice Network notes that the recent news from and pressure on Liechtenstein and Switzerland has hardly caused a dent in the aggregate business of the world's "tax havens." TJN is a rabidly leftist organization that lives inside the paradigm of the benign, munificent state, and thus sees the depriving of governments of tax revenues as a bad thing. Naturally, in that view the more business the tax havens get, the worse off things are.

The thing is, the TJN points to symtom which derives from a legitimate issue: The increasing concentration of wealth among the haves and the widespread poverty among the have-nots. But they are blissfully unaware of -- or stubbornly resistant to -- an alternative theory of the state that has it being the source of these issues. E.g., if the U.S. government was not so busy killing people, stealing money and then wasting it on war-making labor and machines, supporting oppressive governments who steal from their own people and sell their country's output on the cheap to multinationals, and so on, the just maybe a lot of poverty would be alleviated. (Never mind all the governments that steal and oppress on their own initiative.) In short, the state is the primary oppressive tool of the ruling class, not the offshore tax havens which allegedly help them escape their obligations. The anti-offshore initiative is to keep the "Little People," as Leona Helmsley called them, on the plantation -- not their overlords.

The TJN is an organization of ideologs who would turn over Zimbabwean tax evaders to Mugabe, so buried are they in their world view. Admittedly, state-as-oppressor is a theory about how things work rather than a cold hard fact, but the purveyors of the alternative have had the run of things for a good long time and how yet to provide any evidence that their perspective and management generates anything but misery and wealth destruction.

Recent news from Liechtenstein and Switzerland, where bank secrecy has been coming under serious fire and seems to be prompting some changes, have led some to wonder whether the world of tax havens is shrinking. It is a problem, some would love to conclude, that no longer needs tackling.

If you think that, think again. Look at this recent report from a tax haven website, lowtax.net (no friend of TJN's; see the longer version of their report here.) Here are a couple of excerpts:

"According to the 12th annual World Wealth Report, released in June 2008 by Merrill Lynch and Capgemini, the wealth of the world's high-net-worth individuals (HNWIs) increased 9.4% to US$40.7 trillion in 2007. The number of HNWIs in the world increased 6% in 2007 to 10.1 million, the number of ultra-high-net-worth individuals (Ultra-HNWIs) increased by 8.8%, and for the first time in the history of the Report, the average assets held by HNWIs exceeded US$4 million."

Since civil society campaigners like the Tax Justice Network began using data from McKinsey's, Boston Consulting Group, and others estimating the scale of global offshore assets, and the resulting tax losses, this kind of information appears to have rather dried up. Perhaps they are embarrassed about it. Perhaps there are other reasons for not disclosing. But we, like Raymond Baker (who canvassed thousands of top people for his book Capitalism's Achilles Heel) think the trend remains firmly upwards. The report continues:

"There are no consolidated figures for the growth in offshore assets -- many jurisdictions simply don't release figures. But for those that do, it is clear that the rate of increase in banking, trust and fund assets dramatically outpaces McKinsey's global figure. In Jersey, for instance, banking and investment fund assets were approaching £500 billion at mid-year, up 40% in the last two years. In Guernsey, bank deposits rose 14% last year to £92 billion, and fund assets rose 45% to £210 billion in the year to June, 2008."

Lowtax.net says this too:

"So where does it all come from? From rich people, stupid! They are the new kids on the block, the new rulers of our world. They are going to get richer, and there are going to be more of them. There are already more than 10 million dollar millionaires in the world, and that number has seen more than 10% annual growth in the last few years. It is estimated that the assets of these 10 million rich people top US$50 trillion. And beneath them are tens of millions of 'mass affluent' people with free, investible assets in excess of US$100,000. And beneath them ..."

The report then dives off into a celebratory romp through the strategies that wealthy people can use to deprive governments of their tax revenues. We prefer other analyses which express concern about this phenomenon, such as from David Rothkopf, whose recent book Superclass was written very much from an insiders' perspective.

"The combined net worth of the world's richest thousand or so people -- the world's billionaires -- is almost twice that of the poorest 2.5 billion ... setting aside both the fanciful and the insidious theories of puppet masters and their cabals, we must recognize that there is something new afoot, a huge imbalance in the global distribution of power."

TJN is one of the first civil society groups to address these challenges head-on. Slowly, people are starting to wake up.

August 29, 2008

If you are looking for good deals on housing, check out China. The country may be entering a period depressingly familiar to Americans.

China's real estate market is going the way of the American real estate market (and the real estate markets of many other countries) and its own stock market. As usual with emerging markets, the fall looks like it has been more dramatic than in mature markets. Price declines of over 40% are cited in some parts of southern China. Home sales are down 50% year-over-year in previously booming cities. The cause, however, is the same: When credit inflation turns to credit contraction, those assets that previously benefited from lender group-think get hit the worst.

The sales hall at the Oasis housing development welcomes customers with multicolored streamers, water fountains and marble floors. Sales agents announce that only a few units are available from the first two phases of the project and that 70 of the 130 or more buildings are almost completed. But a few hundred feet behind the sales hall some of the "almost completed" buildings look like neglected, hulking shells. Construction workers idling nearby say they have not been paid in five months. Prices have been slashed from $95 per square foot to $55. Market experts estimate that as few as 300 units have been sold out of the first 2,000 put up for sale.

Sounds like another sad-sack Florida condo development, yet this scene is in the northern Chinese industrial city of Shenyang. Over the last five years real estate prices in China, in dollar terms, doubled on average to $50 per square foot and the country added 20 billion square feet of new residential property. But the once seemingly limitless real estate boom is going into reverse.

Home sales dropped by half in June from a year earlier in Shanghai, Shenzhen, Guangzhou, Chongqing and Chengdu, according to data compiled by jpmorgan. Conditions are worst in southern China, where undeveloped parcels are going unsold and home prices are expected to continue falling despite a drop of 40% from last autumn in some neighborhoods. Now the market malaise appears to be spreading northward. If not for an Olympic boost, Beijing's market would be weak, too. "We are entering a bust now," insists Andy Xie, an Asia economist and bear on Chinese property.

The chief causes: credit tightening because of inflation (now at 7%) and government efforts to cool off the real estate market after years of rampant speculation on hyped-up luxury properties. Last year the People's Bank of China toughened the requirements for non-first-home mortgages, punishing speculators and the builders who were selling to them. (First-home mortgages became easy to get this decade and have stayed that way, and until recently rising prices shielded borrowers from the unfamiliar nightmare of negative equity.) The government also has begun imposing penalties for holding land undeveloped, further squeezing cash-poor developers.

Many publicly traded property companies have lost more than 2/3 of their market value since their fall 2007 peaks, initial public offerings have been put off, and companies that indulged in fevered land-buying sprees now find themselves overextended and thirsting for cash. The developer of that 23-million-square-foot Oasis project, Hengda Real Estate Group, known in English as Evergrande, aborted a $2.1 billion IPO at the last minute earlier this year. Saddled with a reported $1.5 billion in debt to banks, Hengda instead had to drum up $500 million in financing in June from Merrill Lynch, Deutsche Bank and other investors. The company insists that its operations are normal but declines to provide numbers.

Housing is not the only problem. In Beijing at least 60 million square feet of office space has become available recently or will be open by the end of next year, estimates Jack R. Rodman, president of Global Distressed Solutions. That dwarfs the 40 million square feet on the market at the end of 2006. "For office space I would now contend we are grossly overbuilt," Rodman says. "It is another one of these 'If you build it, they will come' -- except they built too much."

It is always perilous to predict a bust for any industry in modern China. Just look at those books gathering dust on store shelves with titles like The Coming Collapse of China. The property market remains one of the few convenient places for Chinese to park their cash, and it should continue to benefit in the long run from urbanization and export surpluses. Also, the cash-rich government routinely steps in to prop up flailing sectors with new gushers of credit or directed investment. But for now Chinese property owners are feeling pangs of anxiety just like Americans.

August 27, 2008

The most sophisticated security measures still depend on people.

Security, of a website or database, e.g., can be usefully viewed as analogous to a chain, and, as the old aphorism goes, a chain is only as strong as its weakest link. While lots of effort is devoted to detecting and fixing programming code errors and strengthening encryption algorithms, those are not necessarily the weakest links that deserve the most attention. A general candidate for weakest link turns out to be the human beings that oversee and a part and parcel to the whole system. They can be tricked into disclosing important information, or into granting access to critical facilities.

The interesting pair of articles below feature a man who is paid by customers to detect holes in their security systems, in effect by adopting the mindset of the "black-hat" hackers who are trying to break in an steal valuable information. The first emphasizes the use of "no-tech hacks" which exploit the fallibility of humans discussed above. The second discusses how surprisingly sensitive security information can be found using Google, including information that could be used to obtain access to information the holder had no intention of granting access to.

The general concept applies to areas outside those discussed. This year's notorious news concerning client data stolen from a major Liechtenstein bank is a good example. Liechtenstein has all kinds of legal protections for its financial services clients' information, which defend it against government and private investigators' inquiries. But those protections were rendered moot when an employee with a less than illustrious past was granted access to the a bank database with that information -- an employee who proceeded to steal it and then sell it to various national tax authorities. No "hacking" of Liechtenstein's legal system was needed. The equivalent of the "no-tech hack" was far more effective.

Hackers have a lot of fancy names for the technical exploits they use to gain access to a company's networks: cross-site scripting, buffer overflows or the particularly evil-sounding SQL injection, to name a few. But Johnny Long prefers a simpler entry point for data theft: the emergency exit door.

"By law, employees have to be able to leave a building without showing credentials," Long says. "So the way out is often the easiest way in."

Case in point: Tasked with stealing data from an ultra-secure building outfitted with proximity card readers, Long opted for an old-fashioned approach. Instead of looking for vulnerabilities in the company's networks or trying to hack the card readers at the building's entrances, he and another hacker shimmied a wet washcloth on a hanger through a thin gap in one of its exits. Flopping the washcloth around, they triggered a touch-sensitive metal plate that opened the door and gave them free roam of the building. "We defeated millions of dollars of security with a piece of wire and a washcloth," Long recalls, gleefully.

In other instances, Long has joined employees on a smoke break, chatted with them casually, and then followed them into the building. Sometimes stealing data is as simple as wearing a convincing hard hat or walking onto a loading dock, before accessing an unsecured computer or photocopying a few sensitive documents and strolling out the front door.

Fortunately for his victims, the companies that Long invades are also his customers. As a penetration tester for Computer Sciences Corporation security team, Long is paid to probe weak points in a company's information security. His job as a "white-hat" hacker is to think like the bad guys -- the more evil genius he can summon up, the better.

And if tactics like tailgating an employee through a backdoor or picking a lock with a washcloth do not seem like real hacking, Long would suggest fine-tuning the word's definition. To bring that other side of hacking to the public's attention, he wrote a manual cum manifesto titled No Tech Hacking ... The book's goal, aside from pumping Long's already significant notoriety in the world of cyberpunks and script kiddies, is to show that hacking is not always the realm of high technology.

Instead, he argues, it is still rooted in old-fashioned observation and resourcefulness. To obtain a corporate password, for instance, a hacker can pose as an employee and call a company's help desk or simply look over an employee's shoulder while is on his laptop at a local cafe. To access a network, Long will photograph an employee, fake his badge or even his uniform, and slip past the front door security to find an unguarded terminal.

That kind of no-tech hacking is not a new idea, but it is one worth remembering, says Jeff Moss, the organizer of cyber-security conferences Black Hat and Defcon. "There is a tendency in our industry to focus on the latest and most interesting attack," he says. "But Johnny is trying to show that the simple security problems that were spotted a long time ago have not gone away, and the bad guys will use whatever is available."

That is a lesson that the security industry should heed: The average cost of a data breach rose to more than $6.3 million last year, up from $4.8 million in 2006, according to research by the Ponemon Institute. And physical security played a growing role: Lost or stolen equipment accounted for about half of those breaches last year

With those kinds of costs at stake, hiring hackers like Long is not cheap: For basic vulnerability assessment, CSC ... charges a minimum of $35,000. For complete penetration testing, which often involves obtaining specific files to demonstrate a firm's security flaws, the team can charge as much as $90,000.

But for the most in-depth hacking missions against well-protected companies, Long and the rest of CSC's security team are also rewarded with the illicit thrill of intrusion. "When you get that James Bond feeling of espionage, it's a huge adrenaline rush," he says. Long admits that the night before a major case, his team often watches the geek thriller Sneakers. "Penetration tests that involve a human element are so much more exciting than sitting in front of a computer screen, poking through a company's firewall."

As a kid in suburban Maryland during the 1980s, Long's hacking career began under less sensational circumstances. Surfing the pre-Web Internet, he browsed bulletin boards looking for pirated copies of video games. To pay for the growing long distance bills from his modem, he started charging his Web surfing to calling card numbers that he found on semi-legal sites. And when those phone-card sites started forcing users to pay for access, he found ways to circumvent the sites' security measures.

Soon, the challenge of bypassing firewalls and accessing distant networks was more interesting than any video game. "I would be on my Commodore 64, talking to a Unix system somewhere far away," Long says. "It was like traveling -- the fascination of being in a place with a different culture and speaking a different language."

When he graduated from high school, Long skipped college and got a job at a local university as a systems administrator. Before he was 20, he moved on to a major health insurance provider that was in the midst of bringing its systems onto the Internet. Long wrote up a report detailing all the company's security vulnerabilities. It was ignored by his superiors. Feeling demoralized, he eventually left the company and landed at CSC's offices in Falls Church, Virgina.

At CSC, Long found his niche. In 1998, for instance, he suggested a simple social engineering method to gain access to a company's server that was not attached to the Internet. Long tracked down the name of the company's technical contact person on the Web, and made a phone call to its help desk pretending to be that person. The help desk's staff switched on the server's modem, and CSC's team was inside. "Once I connected with the security team, I brought some of the perspective that the security community was just starting to get then, a street-level hacker mentality," Long says.

From there, CSC began to experiment with the physical security hacks it now uses today, and Long began developing a set of techniques he calls "Google Hacking": using simple search engine queries to find hackable vulnerabilities in Web sites. [See immediately below.] Today CSC has one of the security industry's better-known penetration testing teams, and Long is a celebrity in hacker circles.

Since he first became a professional penetration tester, cyber-security has evolved dramatically, Long says. No Tech Hacking is partly about the latest social engineering methods used by a new generation of cyber-criminals. Instead of searching for holes in companies' increasingly tight security perimeters, their attacks are about drawing the target out, bringing employees to a compromised Web site that infects their network, or convincing an administrator to give up his or her password in an e-mail.

But the other lesson of the book , Long says, is that some things have not changed. "No matter how savvy we think we are, the oldest attacks are still possible, and they are still prevalent," he says. "The smartest systems are still falling for simple tricks, and that is what keeps us in business."

August 30, 2008

Bill Bonner explains why things are likely to go as they have been going for a while yet.

After the biggest spending and borrowing binge in history, Americans need time and money. They need to pay their debts. They need to build savings for their retirements. They need time and money to recover from their mistakes.

What kind of mistakes?

Well, down near the bottom of the ladder, people bought houses they could not really afford to own in places they could not afford to live. And cars they could not afford to run. Those mistakes need to be undone. Which is why there are so many foreclosed houses on the market ... and why house prices generally are falling. ...

Further up on the ladder, the rich are now embarrassed by their own housing mistakes. New Yorker magazine reports that it is the "season of white elephants" in Greenwich, Connecticut. Speculators began huge mansions -- in the "Georgian Stockbroker" style, for example, complete with indoor swimming pools, wine cellars, movie theatres, dozens of bathrooms, even ice-skating rinks -- and now find the buyers have disappeared. Want to buy a $28 million spec house? Go to Greenwich.

At the investment level there were plenty of mistakes too. Subprime mortgage lending dominated the headlines for the last 12 months, but the same reckless spirit found its way into transactions all over the economy. Private equity, IPOs, student loans, shopping malls, fast-food joints -- while the going was good, everyone wanted to go along.

And now, they all need time and money to pay for their errors.

The baby boomers say they are postponing retirement. Some are going back to the office. A county in Alabama says it will have to declare bankruptcy. The FDIC says its "problem list" of banks lengthened by 30% during the second quarter. Bank earnings fell to their second lowest level in 19 years, says Bloomberg.

In London, tens of thousands of jobs have already been lost in the financial sector, says the Financial Times. IPOs, where the City (equivalent to Wall Street in New York) made much of its money, have "fallen off a cliff."

We have lived through the biggest credit expansion ever. Ahead is perhaps the biggest credit contraction ever. Why? Because it takes time and money to correct mistakes. The bigger the mistakes; the longer and more expensive the correction. Corrections can be tough on the economy -- and on the individual consumer. Most have no idea what lies ahead ...

When money and credit flow, they tend to raise prices. You get inflation -- first of asset prices ... later, of consumer prices. When money stops flowing, prices come down. As George Soros puts it, the willingness to lend is directly related to the value of the collateral. Both tend to rise and fall together.

Currently, lenders are wary and the value of the collateral is falling. Everyone knows house prices are going down. But U.S. stock prices are going down too. Adjusted for consumer price inflation, they have been going down since the end of 1999. That is, a $50 stock is still worth about $50 ... but the 50 bucks ain't what it used to be. It buys only 1/5th as much oil, for example.

This trend, towards lower asset prices, is likely to last a long time. To protect ourselves, we began buying gold in 2000. So far, so good.