Where are you putting your investment $$$ ??

[masayako]

With the current U.S. economy, where are you investing your $$$ ?

– Housing slump – sub-prime fear
– Fear of inflation

[Stu949]

I’ve got a 401K that I can’t do much with, so that will stay diversified in bonds,small and large cap, and international. I’m still in my 20s, so I’m not going to concern myself much with the fact that it may lose some significant value in the coming year or two.

For my other investment money, I’m preserving what money I have by investing in foreign currencies (Euro, Swiss, Swedish) and gold. I like the Merk Hard Currency fund, but the expense ratio is kind of high (1.3%). The fund is up 12%+ YTD, but it should be relatively low risk. No other fund like it though – the other dollar short funds are more risky, but could suit your needs (Pro Funds, Ryder, Templeton).

I also play around with a smaller amount of money. Right now I’m in energy but looking to possibly take some profits. I’ll play until the end of 2007, then probably go even more conservative with everything. Once the China/India bubbles pop, we’ll see a worldwide sell off. Not sure when it will happen, but just waiting like I am with real estate.

[pertinazzio]

Currencies are a mystery to me. Regarding, however, your elections within your retirement plan, I think you are too conservative. Your time frame is longterm since you are young. To me that argues for being 100% equities. I also think that it wouldn’t be irrational to put 100% in international stocks. My reasoning is that global growth is likely to be far stronger than US growth over the coming decade and beyond. Just my opnion.

Beatus ille qui procul negotiis … paterna rura bobus exercet suis, solutus omni fenore….. Horace

[nostradamus]

I’m at 27% high-liquidity stocks, 66% CDs and 7% cash in high-yield. I want a lot of liquidity in the coming months/years to be ready to take advantage of the bloody aftermath of current events. My longest term on a CD is 10 months.

[susa]

Vanguard Total Stock Market Index Fund (30%)
Vanguard Total Bond Market Index Fund (30%)
Vanguard Total International ex US Fund (30%)
Vanguard Prime Money Market Fund (10%)

[cr]

Thanks RB.

I’m really just want something that I can put my savings into, and not worry about. Wishful thinking right? If I was confident stocks would return 10% a year I’d leave it in there, but I personally am not that optimistic, even before weeks like this one.

What do you use to trade your funds? I’m certainly open to other recommendations.

Has anyone here invested in any other currencies outside the Euro, Yen, or Pound? What about Eastern Europe, South America, or even Mexico? How has that done?

[cr]

Thanks RB.

I’m really just want something that I can put my savings into, and not worry about. Wishful thinking right? If I was confident stocks would return 10% a year I’d leave it in there, but I personally am not that optimistic, even before weeks like this one.

What do you use to trade your funds? I’m certainly open to other recommendations.

Has anyone here invested in any other currencies outside the Euro, Yen, or Pound? What about Eastern Europe, South America, or even Mexico? How has that done?

[susa]

Vanguard Total Stock Market Index Fund (30%)
Vanguard Total Bond Market Index Fund (30%)
Vanguard Total International ex US Fund (30%)
Vanguard Prime Money Market Fund (10%)

[nostradamus]

I’m at 27% high-liquidity stocks, 66% CDs and 7% cash in high-yield. I want a lot of liquidity in the coming months/years to be ready to take advantage of the bloody aftermath of current events. My longest term on a CD is 10 months.

[pertinazzio]

Currencies are a mystery to me. Regarding, however, your elections within your retirement plan, I think you are too conservative. Your time frame is longterm since you are young. To me that argues for being 100% equities. I also think that it wouldn’t be irrational to put 100% in international stocks. My reasoning is that global growth is likely to be far stronger than US growth over the coming decade and beyond. Just my opnion.

Beatus ille qui procul negotiis … paterna rura bobus exercet suis, solutus omni fenore….. Horace

[Stu949]

I’ve got a 401K that I can’t do much with, so that will stay diversified in bonds,small and large cap, and international. I’m still in my 20s, so I’m not going to concern myself much with the fact that it may lose some significant value in the coming year or two.

For my other investment money, I’m preserving what money I have by investing in foreign currencies (Euro, Swiss, Swedish) and gold. I like the Merk Hard Currency fund, but the expense ratio is kind of high (1.3%). The fund is up 12%+ YTD, but it should be relatively low risk. No other fund like it though – the other dollar short funds are more risky, but could suit your needs (Pro Funds, Ryder, Templeton).

I also play around with a smaller amount of money. Right now I’m in energy but looking to possibly take some profits. I’ll play until the end of 2007, then probably go even more conservative with everything. Once the China/India bubbles pop, we’ll see a worldwide sell off. Not sure when it will happen, but just waiting like I am with real estate.

[Running Bear]

I just got back from Zurich and opened a Swiss bank account in a small private bank. They don’t do loans of any kind and have a 75% liquidity ratio. I have yet to allocate all of my funds because I am waiting for a few market moves but my investments will be as follows:

70% Euro 3 month paper
10% Yen
20% Gold

Back here in my trading accounts I will play in commodities(energy and grains)and some shorts.

[cr]

Short of visiting Credit Suisse in Zurich, is there a way online to open a Swiss account and convert US$ to Euros?

[34f3f3f]

Short of visiting Credit Suisse in Zurich, is there a way online to open a Swiss account and convert US$ to Euros?

You can try through their New York branch. They probably won’t talk to you in Zurich. I was advised to leave the US borders anytime I needed to give Credit Suisse instructions. On a visit to Zurich I was grilled by a US airline as to the purpose of my visit (none of their damn business). Banking has really tightened up in Europe as a result of US pressure to fight terrorism, and has become paranoid. At least it was a couple of years ago. It may have cooled down now. You have to remember that the point of a Swiss account was anonymity, and privacy laws which has now been eroded. If you just want a foreign bank account banks like Citi have branches in London and are probably more flexible. Credit Suisse does not offer savings accounts, only money markets, and some are waiting to see if they have any exposure to the subprime mess. Citi is offering 6.27% on a flexible savings account. But remember there is not usually FDIC insurance in other countries. Aside from all that, I’m not sure converting dollars to Euros is such a good idea in the present climate. The horse has bolted.

[34f3f3f]

Short of visiting Credit Suisse in Zurich, is there a way online to open a Swiss account and convert US$ to Euros?

You can try through their New York branch. They probably won’t talk to you in Zurich. I was advised to leave the US borders anytime I needed to give Credit Suisse instructions. On a visit to Zurich I was grilled by a US airline as to the purpose of my visit (none of their damn business). Banking has really tightened up in Europe as a result of US pressure to fight terrorism, and has become paranoid. At least it was a couple of years ago. It may have cooled down now. You have to remember that the point of a Swiss account was anonymity, and privacy laws which has now been eroded. If you just want a foreign bank account banks like Citi have branches in London and are probably more flexible. Credit Suisse does not offer savings accounts, only money markets, and some are waiting to see if they have any exposure to the subprime mess. Citi is offering 6.27% on a flexible savings account. But remember there is not usually FDIC insurance in other countries. Aside from all that, I’m not sure converting dollars to Euros is such a good idea in the present climate. The horse has bolted.

[cr]

Short of visiting Credit Suisse in Zurich, is there a way online to open a Swiss account and convert US$ to Euros?

[Diego Mamani]

I just got back from Zurich and opened a Swiss bank account in a small private bank. They don’t do loans of any kind…

This reminds me of the Saturday Night Live pseudo commercial for the “First National Bank of Change.” We don’t accept deposits, we don’t do loans. We only change your large bills. How do we make money? Our secret is: VOLUME.

Running Bear: Assuming your Swiss bank isn’t a charity, how do they make money?

[Eugene]

RB, I’m mostly with you, but with one important caveat. Right now foreign investment in the U.S. is 80% fixed-interest dollar denominated debt and 20% stocks and DI. Printing money can tip the balance in favor of “tangible assets” (stocks). There was a short period of time recently when share of stocks in foreign investment exceeded 50%. It was in 1998 and 1999.

[Eugene]

RB, I’m mostly with you, but with one important caveat. Right now foreign investment in the U.S. is 80% fixed-interest dollar denominated debt and 20% stocks and DI. Printing money can tip the balance in favor of “tangible assets” (stocks). There was a short period of time recently when share of stocks in foreign investment exceeded 50%. It was in 1998 and 1999.

[(former)FormerSanDiegan]

We don’t accept deposits, we don’t do loans. We only change your large bills. How do we make money? Our secret is: VOLUME.

LOL. That was a classic.

I had the same question. If that bank makes no loans, they must either pay no interest, Or they do one or more of the following:
1. Pay old depositors with the money from new deposits (Ponzi-style).
2. Use the funds to trade the markets/invest in companies.
3. Invest the deposits in real estate.
4. other ideas ?

[stockstradr]

Myself I’m mostly in cash, gold, and TIPS, with a few speculative bets against the American consumer (SCC, retailer put options). My expectations include continued dollar decline, falling discretionary consumer spending during the winter gradually developing into recession, eventually second round of credit crunch, this time driven by mass defaults in Prime/Alt-A sectors. When the dust settles, time will come to buy a house and move into stocks.

Brilliant. Totally agree, with minor exception that I have far more than “a few speculative bets” on the American Consumer (stopping their credit card / refi spending, causing a recession and and stock market collapse)

Weeks like this one are 7% (up) weeks for my portfolio. Yes, I understand the risks (and benefits!) of LEVERAGE. However, in the spirit of “full disclosure” I admit I’m getting my butt kicked on the Bear positions I took on oil at $82/bbl.

Regarding future Dow moves…
Let that American Consumer go home now and get frightened from reading scare headlines about how the Dow dropped 3.5% this week, ahead of the 1987 Crash anniversary. Let some tasty panic build ahead of Mondays market open. A 500+ point drop in the Dow on Monday would be just what the Doctor ordered. I’m not predicting it, just saying it is within the realm of possibility.

[Coronita]

Myself I'm mostly in cash, gold, and TIPS, with a few speculative bets against the American consumer (SCC, retailer put options). My expectations include continued dollar decline, falling discretionary consumer spending during the winter gradually developing into recession, eventually second round of credit crunch, this time driven by mass defaults in Prime/Alt-A sectors. When the dust settles, time will come to buy a house and move into stocks.

Brilliant. Totally agree, with minor exception that I have far more than "a few speculative bets" on the American Consumer (stopping their credit card / refi spending, causing a recession and and stock market collapse)

Weeks like this one are 7% (up) weeks for my portfolio. Yes, I understand the risks (and benefits!) of LEVERAGE. However, in the spirit of "full disclosure" I admit I'm getting my butt kicked on the Bear positions I took on oil at $82/bbl.

Regarding future Dow moves…
Let that American Consumer go home now and get frightened from reading scare headlines about how the Dow dropped 3.5% this week, ahead of the 1987 Crash anniversary. Let some tasty panic build ahead of Mondays market open. A 500+ point drop in the Dow on Monday would be just what the Doctor ordered. I'm not predicting it, just saying it is within the realm of possibility.

 

I knew you would post today. You're getting to be pretty predictable. 🙂

BTW, I'm curious? Does your 7% increase in your portfolio include 7 percent from the lowest of the loss, or 7% returns? The only reason why I ask, is that I recall you mentioned you went "heavy" into the SDS reverse index fund a few days after the rally inspired 1/2 point interest cut. and I recall trading in the mid to upper 52's. Just wondering that 7% increase would take you around to the 55's which SDS isn't currently trading at. Yes, I have a good memory. 🙂

 

 

 

[Coronita]

Myself I'm mostly in cash, gold, and TIPS, with a few speculative bets against the American consumer (SCC, retailer put options). My expectations include continued dollar decline, falling discretionary consumer spending during the winter gradually developing into recession, eventually second round of credit crunch, this time driven by mass defaults in Prime/Alt-A sectors. When the dust settles, time will come to buy a house and move into stocks.

Brilliant. Totally agree, with minor exception that I have far more than "a few speculative bets" on the American Consumer (stopping their credit card / refi spending, causing a recession and and stock market collapse)

Weeks like this one are 7% (up) weeks for my portfolio. Yes, I understand the risks (and benefits!) of LEVERAGE. However, in the spirit of "full disclosure" I admit I'm getting my butt kicked on the Bear positions I took on oil at $82/bbl.

Regarding future Dow moves…
Let that American Consumer go home now and get frightened from reading scare headlines about how the Dow dropped 3.5% this week, ahead of the 1987 Crash anniversary. Let some tasty panic build ahead of Mondays market open. A 500+ point drop in the Dow on Monday would be just what the Doctor ordered. I'm not predicting it, just saying it is within the realm of possibility.

 

I knew you would post today. You're getting to be pretty predictable. 🙂

BTW, I'm curious? Does your 7% increase in your portfolio include 7 percent from the lowest of the loss, or 7% returns? The only reason why I ask, is that I recall you mentioned you went "heavy" into the SDS reverse index fund a few days after the rally inspired 1/2 point interest cut. and I recall trading in the mid to upper 52's. Just wondering that 7% increase would take you around to the 55's which SDS isn't currently trading at. Yes, I have a good memory. 🙂

 

 

 

[stockstradr]

Myself I’m mostly in cash, gold, and TIPS, with a few speculative bets against the American consumer (SCC, retailer put options). My expectations include continued dollar decline, falling discretionary consumer spending during the winter gradually developing into recession, eventually second round of credit crunch, this time driven by mass defaults in Prime/Alt-A sectors. When the dust settles, time will come to buy a house and move into stocks.

Brilliant. Totally agree, with minor exception that I have far more than “a few speculative bets” on the American Consumer (stopping their credit card / refi spending, causing a recession and and stock market collapse)

Weeks like this one are 7% (up) weeks for my portfolio. Yes, I understand the risks (and benefits!) of LEVERAGE. However, in the spirit of “full disclosure” I admit I’m getting my butt kicked on the Bear positions I took on oil at $82/bbl.

Regarding future Dow moves…
Let that American Consumer go home now and get frightened from reading scare headlines about how the Dow dropped 3.5% this week, ahead of the 1987 Crash anniversary. Let some tasty panic build ahead of Mondays market open. A 500+ point drop in the Dow on Monday would be just what the Doctor ordered. I’m not predicting it, just saying it is within the realm of possibility.

[(former)FormerSanDiegan]

We don’t accept deposits, we don’t do loans. We only change your large bills. How do we make money? Our secret is: VOLUME.

LOL. That was a classic.

I had the same question. If that bank makes no loans, they must either pay no interest, Or they do one or more of the following:
1. Pay old depositors with the money from new deposits (Ponzi-style).
2. Use the funds to trade the markets/invest in companies.
3. Invest the deposits in real estate.
4. other ideas ?

[Diego Mamani]

I just got back from Zurich and opened a Swiss bank account in a small private bank. They don’t do loans of any kind…

This reminds me of the Saturday Night Live pseudo commercial for the “First National Bank of Change.” We don’t accept deposits, we don’t do loans. We only change your large bills. How do we make money? Our secret is: VOLUME.

Running Bear: Assuming your Swiss bank isn’t a charity, how do they make money?

[New_Renter]

Running Bear,
Care to reveal which Swiss Bank you chose, and also what others you considered? What is the minimum account size they will accept? I have heard everything from $50K to $1M, depending on the bank. I am seriously considering making a trip over there myself.

Until then, Everbank foreign currency CD’s are the hot ticket. My understanding is that the only way to open a Swiss account is to go there in person…..is this true?

[New_Renter]

Running Bear,
Care to reveal which Swiss Bank you chose, and also what others you considered? What is the minimum account size they will accept? I have heard everything from $50K to $1M, depending on the bank. I am seriously considering making a trip over there myself.

Until then, Everbank foreign currency CD’s are the hot ticket. My understanding is that the only way to open a Swiss account is to go there in person…..is this true?

[Running Bear]

I just got back from Zurich and opened a Swiss bank account in a small private bank. They don’t do loans of any kind and have a 75% liquidity ratio. I have yet to allocate all of my funds because I am waiting for a few market moves but my investments will be as follows:

70% Euro 3 month paper
10% Yen
20% Gold

Back here in my trading accounts I will play in commodities(energy and grains)and some shorts.

[Deserted]

We will not solve this here.

Investment advice will always be controversial. Variations in short-term markets will prove fools to be geniuses and vis versa.

That being said, I feel compelled to respond to this blog.

In my opinion, investing in foreign currencies is a poor strategy. Currency markets are a zero sum game. It is fraught with hazard (it has bankrupted giant banks). If you believe that you can outwit literally thousands of full-time currency traders at the game they rig — go for it.

On the other hand, foreign (international) stocks are not a zero sum game. They represent an ever-expanding (I hope) world economy. In the long run they should be excellent investments when paired with holdings in the world’s largest economy, the US.

In World history since the industrial revolution, stocks have been the preferred investments. There is no reason to expect a change in the future. Forget the numerous naysayers — I’ve already heard them all. The vast majority of reputable advisors will agree with my opinion.

I will refer the young, the naive, and the misinformed to a site put out by Ken Fisher Investments. Mr. Fisher may be more informed than you. He is a billionaire investor. He has written an investment column for Forbes Magazine for 25 years. He runs one of the more successful private investment companies (I’m a very happy client).

The short advice:
Don’t bet on foreign currencies
Don’t buy gold or commodites (though gold stocks may be worthwhile)
Don’t buy bonds when you’re in your 20s

http://www.marketminder.com/

I don’t know if Rich agrees with me. From lurking here over the last year and now finally posting, I have come to highly respect his real estate insights. I would love to hear his opinion.

[Daniel]

Contrarian,

I 100% agree. You’re not a “contrarian”, you’re simply the voice of reason. OK, you maybe are one on this forum 🙂

Many people chase the latest investment fad, which these days is commodities and foreign currencies. Most young people should be just fine with a few index funds, and not sweat it too much. Gold has been a terrible long-term investment, and unless you think USA is going Zimbabwe, there is really not much reason to own gold. Ever. It is billed as “safe”, but it’s probably the most speculative investment someone can make. For everything else (stocks, bonds, real estate) you can have some idea of its value based on the underlying cash flow. Gold? For all I know, it could be worth a million dolar an ounce, or just a hundred. I don’t know and I don’t care. The point is, there is no long-term income from it, so its value (to me) is simply a random number on a Bloomberg screen.

PS: not a big fan of Mr Fisher’s firm though. They keep writing and calling me in the hope that I’ll have them manage my money 🙂

[Daniel]

Contrarian,

I 100% agree. You’re not a “contrarian”, you’re simply the voice of reason. OK, you maybe are one on this forum 🙂

Many people chase the latest investment fad, which these days is commodities and foreign currencies. Most young people should be just fine with a few index funds, and not sweat it too much. Gold has been a terrible long-term investment, and unless you think USA is going Zimbabwe, there is really not much reason to own gold. Ever. It is billed as “safe”, but it’s probably the most speculative investment someone can make. For everything else (stocks, bonds, real estate) you can have some idea of its value based on the underlying cash flow. Gold? For all I know, it could be worth a million dolar an ounce, or just a hundred. I don’t know and I don’t care. The point is, there is no long-term income from it, so its value (to me) is simply a random number on a Bloomberg screen.

PS: not a big fan of Mr Fisher’s firm though. They keep writing and calling me in the hope that I’ll have them manage my money 🙂

[Arraya]

http://piggington.com/gold_is_a_bubble

Here is Mr. Toscano’s view of gold.

[Daniel]

I’m well aware of Rich’s views on this. I happen to disagree with him on this one.

PS: incidentally, I’m not claiming that gold is in a “bubble”. My claim goes even deeper, that gold does not even qualify as an investment. It’s simply a hedge in case terrible things happen. Investments are things that produce cash flows. Gold does not.

[Daniel]

I’m well aware of Rich’s views on this. I happen to disagree with him on this one.

PS: incidentally, I’m not claiming that gold is in a “bubble”. My claim goes even deeper, that gold does not even qualify as an investment. It’s simply a hedge in case terrible things happen. Investments are things that produce cash flows. Gold does not.

[Rich Toscano]

Hi Contrarian — Thanks for the compliment. Unfortunately I am not able to easily engage in back and forth discussions on securities or anything security-like (eg gold) –boring details of why are at this post.

I can however point you to some stuff I’ve previously written on gold here in these two comments

http://piggington.com/gold_is_a_bubble#comment-48413

http://piggington.com/gold_is_a_bubble#comment-49544

I can also talk about people, so I can say that I am not a big fan of Fisher. I think he’s done some very interesting work on the behavioral finance side of things (I have not yet read his book but it’s on my shelf and I intend to). That said he loses major points for having continuously and stridently denied the existence of the housing bubble throughout. For instance, a quick googling comes up with this utterly misguided Forbes article by Ken Fisher, Feb 26 2007:

Don’t buy it. For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007’s housing disaster turns out to be. Well, there won’t be any housing disaster. We won’t have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.

You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn’t be so strong now.

What’s happened since those words were written provides commentary enough so I won’t add to it.

I’ve got some other thoughts on what you wrote, some in agreement and some in disagreement, but that would get more into the kind of stuff I’d have to get approved so I will leave it at that. As always anyone is welcome to email me at [email protected].

Thanks,

Rich

[Rich Toscano]

Hi Contrarian — Thanks for the compliment. Unfortunately I am not able to easily engage in back and forth discussions on securities or anything security-like (eg gold) –boring details of why are at this post.

I can however point you to some stuff I’ve previously written on gold here in these two comments

http://piggington.com/gold_is_a_bubble#comment-48413

http://piggington.com/gold_is_a_bubble#comment-49544

I can also talk about people, so I can say that I am not a big fan of Fisher. I think he’s done some very interesting work on the behavioral finance side of things (I have not yet read his book but it’s on my shelf and I intend to). That said he loses major points for having continuously and stridently denied the existence of the housing bubble throughout. For instance, a quick googling comes up with this utterly misguided Forbes article by Ken Fisher, Feb 26 2007:

Don’t buy it. For months now the debate has been over whether America will have a hard landing or soft landing, the answer hinging on how big 2007’s housing disaster turns out to be. Well, there won’t be any housing disaster. We won’t have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.

You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn’t be so strong now.

What’s happened since those words were written provides commentary enough so I won’t add to it.

I’ve got some other thoughts on what you wrote, some in agreement and some in disagreement, but that would get more into the kind of stuff I’d have to get approved so I will leave it at that. As always anyone is welcome to email me at [email protected].

Thanks,

Rich

[Eugene]

Stock market is a zero sum game. Close to it, anyway. Dividend paying stocks are okay, anything else is prone to bubbles.

It’s the same story as with houses. Long term houses are good investments but it does not mean that you should drop everything and buy a house in Carmel Valley. Long term, stocks are even better investments. With any bubble, if you get in at the peak, you stand to lose much more (and faster) than you stand to gain from normal growth of the asset.

Right now there are bubbles of varying degrees in most foreign stock markets. Shanghai composite index is up 6x in two years. Is that because of world economy growth?

Currencies are _not_ good investments long term. They are temporary solutions when you think that market correction is likely. Euro CDs and bonds give you guaranteed 5% a year. Stock markets historically give 10% on average. In any given year they might give you 20% and might give you -25%. Given deflating global housing bubble, credit problems, and American consumers rapidly running out of money, which one do you think is more likely?

Myself I’m mostly in cash, gold, and TIPS, with a few speculative bets against the American consumer (SCC, retailer put options). My expectations include continued dollar decline, falling discretionary consumer spending during the winter gradually developing into recession, eventually second round of credit crunch, this time driven by mass defaults in Prime/Alt-A sectors. When the dust settles, time will come to buy a house and move into stocks.

[Eugene]

Stock market is a zero sum game. Close to it, anyway. Dividend paying stocks are okay, anything else is prone to bubbles.

It’s the same story as with houses. Long term houses are good investments but it does not mean that you should drop everything and buy a house in Carmel Valley. Long term, stocks are even better investments. With any bubble, if you get in at the peak, you stand to lose much more (and faster) than you stand to gain from normal growth of the asset.

Right now there are bubbles of varying degrees in most foreign stock markets. Shanghai composite index is up 6x in two years. Is that because of world economy growth?

Currencies are _not_ good investments long term. They are temporary solutions when you think that market correction is likely. Euro CDs and bonds give you guaranteed 5% a year. Stock markets historically give 10% on average. In any given year they might give you 20% and might give you -25%. Given deflating global housing bubble, credit problems, and American consumers rapidly running out of money, which one do you think is more likely?

Myself I’m mostly in cash, gold, and TIPS, with a few speculative bets against the American consumer (SCC, retailer put options). My expectations include continued dollar decline, falling discretionary consumer spending during the winter gradually developing into recession, eventually second round of credit crunch, this time driven by mass defaults in Prime/Alt-A sectors. When the dust settles, time will come to buy a house and move into stocks.

[Arraya]

http://piggington.com/gold_is_a_bubble

Here is Mr. Toscano’s view of gold.

[Deserted]

We will not solve this here.

Investment advice will always be controversial. Variations in short-term markets will prove fools to be geniuses and vis versa.

That being said, I feel compelled to respond to this blog.

In my opinion, investing in foreign currencies is a poor strategy. Currency markets are a zero sum game. It is fraught with hazard (it has bankrupted giant banks). If you believe that you can outwit literally thousands of full-time currency traders at the game they rig — go for it.

On the other hand, foreign (international) stocks are not a zero sum game. They represent an ever-expanding (I hope) world economy. In the long run they should be excellent investments when paired with holdings in the world’s largest economy, the US.

In World history since the industrial revolution, stocks have been the preferred investments. There is no reason to expect a change in the future. Forget the numerous naysayers — I’ve already heard them all. The vast majority of reputable advisors will agree with my opinion.

I will refer the young, the naive, and the misinformed to a site put out by Ken Fisher Investments. Mr. Fisher may be more informed than you. He is a billionaire investor. He has written an investment column for Forbes Magazine for 25 years. He runs one of the more successful private investment companies (I’m a very happy client).

The short advice:
Don’t bet on foreign currencies
Don’t buy gold or commodites (though gold stocks may be worthwhile)
Don’t buy bonds when you’re in your 20s

http://www.marketminder.com/

I don’t know if Rich agrees with me. From lurking here over the last year and now finally posting, I have come to highly respect his real estate insights. I would love to hear his opinion.

[Coronita]

stocks in high tech. The weak dollar should make these companies number shine. Also, lots of acquisitions I'm guessing.

[SD Realtor]

FLU I have been pretty happy with Broadcom lately.

SD Realtor

[Coronita]

SD R,

 

Yes BRCM seems to be a winner, except with all the lawsuits against QCOM, buying it would be going against several friends and family I know.

I've been pretty happy with Intel, Nokia, Yahoo, HP…especially after finding out that they didn't puke on earnings. I've also been happy with BEA, Motorola, and just about everything else Icahn is trying to pump and dump, or slice and dice. Unfortunately, party isn't going to go on forever some I'm unloading some this week.

I'm thinking of getting into enterprise storage tech/failover technology such as NetworkAppliance, EMC. Namely because I'm seeing a lot of demand for some of these products, as more and more software companies start moving to the SAAS business models (software as a service) and grid computing. The storage needs, fault tolerance, failover, etc is reaching beyond anything I've seen before, as companies are hosting and cramming more and more stuff into services. Unfortunately, these storage tech companies i think are already pretty expensive, so I've been patiently waiting (and unfortunately watching these go up and up.) The only two I don't like is Veritas because it's now part of Symantec and VMWave which is ridiculously priced. My company pretty much uses every one of these companies, and my peers in the industry have been seeing similar buying trends. Some of our tech budgets have been going up for awhile.

But what do I know. I'm just fat and lazy 🙂

 One funny thing. I've been reading a lot about analysts talking about BEA and how they think there will be a competing offer more than Oracle. I sort of chuckled at some of the potential bidders.

 

1) IBM: uh, unless they are going to buy BEA to shut them down, I doubt it. IBM has websphere.

2) SUN: uh, they are moving to an open source model and have glassfish. Uh, doubt that.

3) SAP: possible, especially with the weak dollar. Still, don't think SAP wants to move into markets where things are commoditized.

4) HP,CA,EMC,CSCO: doubt it. Doesn't make sense. Software suite is different space.

My opinion, ORCL will be the only suitor. Final answer.

 

But what do I know. I'm just fat and lazy 🙂

 

 

 

[Coronita]

SD R,

 

Yes BRCM seems to be a winner, except with all the lawsuits against QCOM, buying it would be going against several friends and family I know.

I've been pretty happy with Intel, Nokia, Yahoo, HP…especially after finding out that they didn't puke on earnings. I've also been happy with BEA, Motorola, and just about everything else Icahn is trying to pump and dump, or slice and dice. Unfortunately, party isn't going to go on forever some I'm unloading some this week.

I'm thinking of getting into enterprise storage tech/failover technology such as NetworkAppliance, EMC. Namely because I'm seeing a lot of demand for some of these products, as more and more software companies start moving to the SAAS business models (software as a service) and grid computing. The storage needs, fault tolerance, failover, etc is reaching beyond anything I've seen before, as companies are hosting and cramming more and more stuff into services. Unfortunately, these storage tech companies i think are already pretty expensive, so I've been patiently waiting (and unfortunately watching these go up and up.) The only two I don't like is Veritas because it's now part of Symantec and VMWave which is ridiculously priced. My company pretty much uses every one of these companies, and my peers in the industry have been seeing similar buying trends. Some of our tech budgets have been going up for awhile.

But what do I know. I'm just fat and lazy 🙂

 One funny thing. I've been reading a lot about analysts talking about BEA and how they think there will be a competing offer more than Oracle. I sort of chuckled at some of the potential bidders.

 

1) IBM: uh, unless they are going to buy BEA to shut them down, I doubt it. IBM has websphere.

2) SUN: uh, they are moving to an open source model and have glassfish. Uh, doubt that.

3) SAP: possible, especially with the weak dollar. Still, don't think SAP wants to move into markets where things are commoditized.

4) HP,CA,EMC,CSCO: doubt it. Doesn't make sense. Software suite is different space.

My opinion, ORCL will be the only suitor. Final answer.

 

But what do I know. I'm just fat and lazy 🙂

 

 

 

[SD Realtor]

FLU I have been pretty happy with Broadcom lately.

SD Realtor

[Coronita]

stocks in high tech. The weak dollar should make these companies number shine. Also, lots of acquisitions I'm guessing.

[stansd]

40% international stocks
30% Treasury inflation protected securities (TIPS)
10% US Stocks
20% in the money options in the company I work for (High Tech).

Stan

[stansd]

40% international stocks
30% Treasury inflation protected securities (TIPS)
10% US Stocks
20% in the money options in the company I work for (High Tech).

Stan

[patientrenter]

I just made a big long post on this that got lost in cyber-space, so here’s the short version:

1. About 50 mostly high-dividend stocks*.

Spread across the world, industries, company sizes… Examples: Israel high-tech, Chile pension fund mgmt, Russia mining, Aussie pearls, Singapore stocbroker, Finnish paper, UK water, China oil, China coal power, China utility, UK tobacco… Because they dominate high-div stocks, I have a lot of banks, but I tried to spread the bank risk across different countries, bank sizes, and I avoided high residential mortgage banks (except for National City – I missed their big res mortg sub in the disclosures). In the US, I have low-leverage medical REIT, infrastructure, venture capital, theme parks…

2. Two Vanguard index funds – the most diversified domestic and foreign ones.

3. Cash for the purchase of a home some time in the next 5 years

4. 401k’s mostly in cash

I bought Yen/dollar futures in June, but am out now. I am considering yen/euro futures, but don’t feel they’re fully ripe yet. The Euro is sharply overvalued on a consumer buying power basis, and the yen is slightly under. I see the dollar as too fragile to bet on against the Euro, but I think the yen is resilient.

*I’m unhappy only 1/4 of the time that way, when the stocks go down AND the dividend goes down.

Patient renter in OC

[patientrenter]

I just made a big long post on this that got lost in cyber-space, so here’s the short version:

1. About 50 mostly high-dividend stocks*.

Spread across the world, industries, company sizes… Examples: Israel high-tech, Chile pension fund mgmt, Russia mining, Aussie pearls, Singapore stocbroker, Finnish paper, UK water, China oil, China coal power, China utility, UK tobacco… Because they dominate high-div stocks, I have a lot of banks, but I tried to spread the bank risk across different countries, bank sizes, and I avoided high residential mortgage banks (except for National City – I missed their big res mortg sub in the disclosures). In the US, I have low-leverage medical REIT, infrastructure, venture capital, theme parks…

2. Two Vanguard index funds – the most diversified domestic and foreign ones.

3. Cash for the purchase of a home some time in the next 5 years

4. 401k’s mostly in cash

I bought Yen/dollar futures in June, but am out now. I am considering yen/euro futures, but don’t feel they’re fully ripe yet. The Euro is sharply overvalued on a consumer buying power basis, and the yen is slightly under. I see the dollar as too fragile to bet on against the Euro, but I think the yen is resilient.

*I’m unhappy only 1/4 of the time that way, when the stocks go down AND the dividend goes down.

Patient renter in OC

[Running Bear]

coop,

If you want to take advantage of being out of the dollar and in other foreign currencies you can in several ETFs. FXY, FXB, FXE etc. They pay a dividend based off of the interest rate of their central banks.

As far as where to put your money I would recommend asking yourself some questions, doing some research, then base your investments off of that so you can sleep at night.

1. What do you see for the future of the US economy? If you are on this board I assume you are negative on the housing market. How do you think this will impact the US consumer? They are 66% of US GDP.

2. How do you think Helicopter Ben will react to a slowing US economy? How do you think this will impact the dollar?

3. If you look at and research emerging markets do you think their near vertical rises are sustainable? Most of the graphs look like vertical lines.

4. Where do you see the US stock market headed? Take a look at the drop in foreign investment in our market and what impact do you think that will have.

5. Commercial Paper markets backed by loans are in free fall. Without the free flow of easy credit and cash what effect do you think this will have on asset values in the future?

As you can tell by my name I am very negative on many of these things. I like the Yen because it has been so undervalued for a long time by the BOJ. I don’t think they will be able to keep their current interest rate forever and will be forced to raise rates as china exports inflation to the world. The other event that will help the Yen is the unwinding of the Yen carry trade. If you watched the Yen when the market took its 10% shave the yen got dramatically stronger. This will happen again when our market drops.

I could talk for hours on my investment philosophy and why I am doing what I am doing. However, I am just one voice in the crowd. I do much of my own research and also subscribe to a variety of investment letters to help get other perspectives on the investments I am doing. The bottom line is you need to invest in such a way that allows you to sleep at night. Right now getting a 4% return on the Euro is much better then a 5% return from the dollar along with a 35% drop against the Euro over the last 6 years. In just this year alone the dollar has lost 7+% against the Euro. Having just returned from Zurich, it is eye opening just how little the dollar buys in Europe. For the longest time this has been masked by China exporting every cheaper goods. Starting just this year the export prices in China are on the rise. Americans in the coming month are going to fully understand the impact of the falling dollar.

Just an FYI on commodities, China plans to spend a large percentage of their 200 billion SWF on commodities, infrastructure and private equity.

Good luck with your investments. I hope I was able to give you some positive feedback.

[Running Bear]

coop,

If you want to take advantage of being out of the dollar and in other foreign currencies you can in several ETFs. FXY, FXB, FXE etc. They pay a dividend based off of the interest rate of their central banks.

As far as where to put your money I would recommend asking yourself some questions, doing some research, then base your investments off of that so you can sleep at night.

1. What do you see for the future of the US economy? If you are on this board I assume you are negative on the housing market. How do you think this will impact the US consumer? They are 66% of US GDP.

2. How do you think Helicopter Ben will react to a slowing US economy? How do you think this will impact the dollar?

3. If you look at and research emerging markets do you think their near vertical rises are sustainable? Most of the graphs look like vertical lines.

4. Where do you see the US stock market headed? Take a look at the drop in foreign investment in our market and what impact do you think that will have.

5. Commercial Paper markets backed by loans are in free fall. Without the free flow of easy credit and cash what effect do you think this will have on asset values in the future?

As you can tell by my name I am very negative on many of these things. I like the Yen because it has been so undervalued for a long time by the BOJ. I don’t think they will be able to keep their current interest rate forever and will be forced to raise rates as china exports inflation to the world. The other event that will help the Yen is the unwinding of the Yen carry trade. If you watched the Yen when the market took its 10% shave the yen got dramatically stronger. This will happen again when our market drops.

I could talk for hours on my investment philosophy and why I am doing what I am doing. However, I am just one voice in the crowd. I do much of my own research and also subscribe to a variety of investment letters to help get other perspectives on the investments I am doing. The bottom line is you need to invest in such a way that allows you to sleep at night. Right now getting a 4% return on the Euro is much better then a 5% return from the dollar along with a 35% drop against the Euro over the last 6 years. In just this year alone the dollar has lost 7+% against the Euro. Having just returned from Zurich, it is eye opening just how little the dollar buys in Europe. For the longest time this has been masked by China exporting every cheaper goods. Starting just this year the export prices in China are on the rise. Americans in the coming month are going to fully understand the impact of the falling dollar.

Just an FYI on commodities, China plans to spend a large percentage of their 200 billion SWF on commodities, infrastructure and private equity.

Good luck with your investments. I hope I was able to give you some positive feedback.

[Running Bear]

Gents,

I had a nice little chuckle with your surprise that a bank can’t be real if it doesn’t do loans. I discussed with some friends recently how our current banking system is not the 0% risk that people assume it is. Let me ask you a simple question. Why were banks created in the first place? Was it an investment vehicle? Or a place to hold and protect your wealth? How about this one. Do you want your money where you tell your bank to put it or leveraged over and over again on residential and commercial loans in bubble markets? So far this year we have had 3 banks taken over by the FDIC. With the coming housing crash and following commercial market tank, do you really think we won’t lose any more banks?

The answer to your question about how the bank makes its money is through fees charged to customers like me. I pay a small fee for the investments I make just like a broker charges and for holding my deposits in their bank. I have no problem paying these fees in order to know that my money is sitting in their bank and not in a high rise condo project in Miami.

Opening a bank account like the one I did is for one main reason, wealth protection. I searched for the bank with the cleanest balance sheet and as little risk to financial turmoil. It will cost me a fee to have that protection but because of the size of the money I am moving there it is worth it to me. This isn’t necessary for every person.

For the person asking whether you have to go over there to open an account the answer is yes for the private banks.

I am not expecting large gains from this move. I think the short term outlook for the markets is negative and I will park liquid assets over there and wait for the right time to make my investments. Having a very safe 5% return on my investments for the next year is completely acceptable for me.

Hope I answered all your questions.

[mgubnyc1]

I was thinking this is a safe place to park 800,000, after all it does come with a 30,000 theatre! all window dressings and maybe they would even throw in the custom furniture for another 20 or 30K this is possibly the best deal in french valley at this time!!!

check it out, it won’t last long at this price!!

http://www.redfin.com/stingray/do/printable-listing?listing-id=962133

[mgubnyc1]

I was thinking this is a safe place to park 800,000, after all it does come with a 30,000 theatre! all window dressings and maybe they would even throw in the custom furniture for another 20 or 30K this is possibly the best deal in french valley at this time!!!

check it out, it won’t last long at this price!!

http://www.redfin.com/stingray/do/printable-listing?listing-id=962133

[nostradamus]

Hi Running Bear,

Can’t you safely get 5% on up to $50M with a local bank on the CDARS network? They spread your deposit amongst as many banks as necessary to ensure you get full FDIC coverage:

http://www.cdars.com

With your Swiss account are you hedged against the weakening dollar?

[Running Bear]

That is the point. I don’t want to be in dollar denominated assets right now. I think we will have a short term bounce in the dollar but my long term outlook is negative. We have lost over 40% of the value of the dollar over the last 6 years and that was when our economy was going strong and the Fed didn’t have its finger on the button ready to flood the market with credit and money at a moments notice.

I encourage you to do some reading on Helo Ben and see what you think his philosophy is. He was a student of the Great Depression and his conclusion was the Fed at the time didn’t cut rates fast enough and therefore caused it to last much longer then it should have. If our country is heading toward a large asset deflation and recession, what do you think he will do? I believe he will very aggressively cut interest rates and flood the market with cash and credit. What effect do you think this will have on the dollar and your wealth held in dollars?

If you believe the housing market is tanking and going down, you need to keep looking down that road and see what the greater consequences are for this economy. If you think that housing is going to drop by a large amount just so we can buy some good deals, you aren’t looking at the broader economy.

The last point is if you believe this country is the only place where there is a housing bubble and credit bubble you need to start reading some articles in England, Spain, Ireland, etc. There is a global asset bubble/credit bubble and I am prepared for the worse case scenario but hoping for the best. We will know much more in the next 18 months how a lot of this stuff will fall out and I will move out of my ultra conservative stance when I have a better read.

I see a large downside risk here in stocks without a huge upside benefit.

my2cents

[Allan from Fallbrook]

I’m not entirely sure I understand the need for a Swiss bank account.

All of the major international players, including Swiss banks, have branches in the Caribbean.

While I do understand the “white glove” nature of private Swiss banking, how does this equate to wealth protection?

Also, you’ve been asked a few times for the name of the bank in question, but that answer has not been forthcoming. Would you mind passing that along?

[nostradamus]

Swiss banks have branches in the U.S. as well. You don’t need to go there to open an account.

The biggest bank in Switzerland is UBS:

http://www.ubs.com

The 2nd biggest is Credit Suisse:

http://www.creditsuisse.com

[Coronita]

Credit Suisse:

Uh, and you folks trust this institution?…I mean, you guys do know who Frank Quattrone is, don't you? You know, the guy that almost went to jail, but dodged the bullet…You guys talk about the real estate cesspool. Nothing compared to what sort of sh!t happened here.

http://en.wikipedia.org/wiki/Frank_Quattrone

Talk to relatives and friends that worked in the ipo and m&a world under his watch..Or at least talk to the ones that still are willing to talk. He's scott free now.

 

[Coronita]

Credit Suisse:

Uh, and you folks trust this institution?…I mean, you guys do know who Frank Quattrone is, don't you? You know, the guy that almost went to jail, but dodged the bullet…You guys talk about the real estate cesspool. Nothing compared to what sort of sh!t happened here.

http://en.wikipedia.org/wiki/Frank_Quattrone

Talk to relatives and friends that worked in the ipo and m&a world under his watch..Or at least talk to the ones that still are willing to talk. He's scott free now.

 

[New_Renter]

I suspect Running Bear is more talking about the smaller private (sometimes family-owned) banks in Switzerland. The three I know about are Julius Baer, Vontobel, and Banque Privee Edmond de Rothschild. There are a number of others I’m sure with stellar reputations. I was just curious as to which one met his/her seemingly strict criteria.

The reasons for putting some funds there stem from a kind of survivalist type of mentality, and as a hedge against a hopefully unlikely massive depression or U.S. bankruptcy. During periods of geopolitical upheaval the Swiss Franc tends to outperform as it serves as a flight to safety. These small swiss banks have little to no exposure in the U.S. markets.

[nostradamus]

Yes, I’m sure Chief Running Bear was referring to one of the smaller private banks. After reading his posts I looked into it quite a bit but am still on the fence about getting an offshore account. I’m being conservative with most of my assets in CDs at the moment but this sucks when you think of taxes and the ever-sinking dollar. Foreign stocks are an option and I’ve done well with them in the past but the volatility of China and other markets scares me back to square one.

This is a 3-glasses-of-wine post BTW.

[nostradamus]

Yes, I’m sure Chief Running Bear was referring to one of the smaller private banks. After reading his posts I looked into it quite a bit but am still on the fence about getting an offshore account. I’m being conservative with most of my assets in CDs at the moment but this sucks when you think of taxes and the ever-sinking dollar. Foreign stocks are an option and I’ve done well with them in the past but the volatility of China and other markets scares me back to square one.

This is a 3-glasses-of-wine post BTW.

[New_Renter]

I suspect Running Bear is more talking about the smaller private (sometimes family-owned) banks in Switzerland. The three I know about are Julius Baer, Vontobel, and Banque Privee Edmond de Rothschild. There are a number of others I’m sure with stellar reputations. I was just curious as to which one met his/her seemingly strict criteria.

The reasons for putting some funds there stem from a kind of survivalist type of mentality, and as a hedge against a hopefully unlikely massive depression or U.S. bankruptcy. During periods of geopolitical upheaval the Swiss Franc tends to outperform as it serves as a flight to safety. These small swiss banks have little to no exposure in the U.S. markets.

[nostradamus]

Swiss banks have branches in the U.S. as well. You don’t need to go there to open an account.

The biggest bank in Switzerland is UBS:

http://www.ubs.com

The 2nd biggest is Credit Suisse:

http://www.creditsuisse.com

[34f3f3f]

While I do understand the “white glove” nature of private Swiss banking, how does this equate to wealth protection?

It doesn’t, except of course in the old fashioned sense of what is hidden is protected from litigious or divorce claims. Times have changed, and banks are now more open. However, Switzerland is one of the best places for banking. It’s their business and they are good at it. Offshore entities abound, not just in the Caribbean. The UK Channel Islands and the Isle of Man do huge offshore business, and have been serving the Captive Insurance market for a long time. However, islands don’t always attract quite the same caliber of personnel (IMHO). Little known to many, London is one of the biggest offshore centers, and the financial hub of Europe. Luxembourg is also very popular, and provided many services.

However, the only advantage of a foreign account is if it is in local currency, and you travel or make foreign purchases often. There are many investment restrictions and tax implications of having investments abroad, and you may be better served by taking professional advise. Things are not quite as untethered as you might think.

[Allan from Fallbrook]

qwerty007: I don’t think they are untethered at all, especially in the case of Swiss banks. These banks, for the most part, cooperate fully with the US Dept. of Justice as regards information sharing, and that does not bode well if you wish to protect your money from government intrusion.

I used to work for a large international insurance broker, Willis PLC, based out of London. We did a tremendous amount of business with captive insurance and reinsurance, based out of the Caribbean. We worked with Citi, Deutschebank, and Barclay’s, all of whom had offices down there. The quality of personnel was top-notch and, in point of fact, several of the larger Swiss banks posted senior personnel there solely to work the financing angle on captives.

A large oil company, which shall remain nameless, worked with us on creating a captive for its oil tankers and their cargo. The tankers were Bahamanian flagged, the oil cargo was owned by a shell in the Netherland Antilles, we handled the captive, AIG (through Ace in the Caribbean) did the reinsurance “layering” and Royal Bank of Scotland (through their correspondence branch in the Caribbean) did the finance and banking.

Plus, the weather is nicer and the flight is shorter.

[34f3f3f]

Alan, if you read my sentence again you will see we are saying the same thing. The experiences I was talking of was retail, and were not good. Some personnel definitely had cotton wool between the ears. Having said that I still bank offshore and with an excellent crew. BTW I also worked for Willis for a short while.

[Allan from Fallbrook]

qwerty007: Which Willis office(s), and when? I was CFO of San Diego and Orange County offices, and worked with them from 1989 through 1997.

Very good learning experience, but am glad to be out on my own, which I have been since I left in 1997.

[kewp]

40% International stock index
30% Diversified emerging markets index
20% Energy index
10% Gold index

[kewp]

40% International stock index
30% Diversified emerging markets index
20% Energy index
10% Gold index

[Allan from Fallbrook]

qwerty007: Which Willis office(s), and when? I was CFO of San Diego and Orange County offices, and worked with them from 1989 through 1997.

Very good learning experience, but am glad to be out on my own, which I have been since I left in 1997.

[34f3f3f]

Alan, if you read my sentence again you will see we are saying the same thing. The experiences I was talking of was retail, and were not good. Some personnel definitely had cotton wool between the ears. Having said that I still bank offshore and with an excellent crew. BTW I also worked for Willis for a short while.

[Allan from Fallbrook]

qwerty007: I don’t think they are untethered at all, especially in the case of Swiss banks. These banks, for the most part, cooperate fully with the US Dept. of Justice as regards information sharing, and that does not bode well if you wish to protect your money from government intrusion.

I used to work for a large international insurance broker, Willis PLC, based out of London. We did a tremendous amount of business with captive insurance and reinsurance, based out of the Caribbean. We worked with Citi, Deutschebank, and Barclay’s, all of whom had offices down there. The quality of personnel was top-notch and, in point of fact, several of the larger Swiss banks posted senior personnel there solely to work the financing angle on captives.

A large oil company, which shall remain nameless, worked with us on creating a captive for its oil tankers and their cargo. The tankers were Bahamanian flagged, the oil cargo was owned by a shell in the Netherland Antilles, we handled the captive, AIG (through Ace in the Caribbean) did the reinsurance “layering” and Royal Bank of Scotland (through their correspondence branch in the Caribbean) did the finance and banking.

Plus, the weather is nicer and the flight is shorter.

[New_Renter]

Thanks for the advice qwerty007. BTW, the object of a Swiss account isn’t to hide the money. I don’t believe there is anything in U.S. law to keep you from opening/maintaining foreign bank accounts, they just have to be fully reported on your U.S. tax return, and I assume there are also laws regarding the transfer of funds. Trying to hide money over there in a “numbered” account would be a really bad idea….;-)

[34f3f3f]

Trying to hide money over there in a “numbered” account would be a really bad idea….;-)

Yes, and not a good idea to discuss on an open forum either 🙂 but in Europe it was and still is a preoccupation of many. I realize that until quite recently, discussion of tax evasion in the US was taboo. In the Europe of latter days “runners” used to collect suitcases of cash for old retired Colonels and the like, who felt robbed by successive European socialist governments ‘exorbitant’ tax policies. Banks of telephones used to line the floors of Monaco apartments, and not furniture or occupants. You’d be surprised at the ‘professional’ advise still given to reduce one’s tax bill in some countries. In case anyone is wondering, I am a fully paid up tax payer 🙂

[pk92108]

How to transfer money?? Just wondering about you guys with foreign bank accounts – how do you transfer money to the account without a paper trail??? I assume if you write a U.S. check or wire the $$ and you get audited they could pick it up if the IRS supeonas your checking account..And also aren’t foreign transfers over $10,000 red flagged and reported to the governent??

Also do you report on your taxes that you have a foreign account??

Is it really worth it since you usually don’t get interest abroad so basically you are making a currency play and losing out on a guarrenteed 4.5% money market interest rate… would need to make more than that % in currency gains to make it worth while…..

just curious…..

[Anonymous]

I don’t remember anyone mentioning opening a foreign account for the purpose of avoiding taxes. I wouldn’t even have an idea how to do so, except i think that you would have to utilize a numbered account. I don’t even know how many banks still offer them, but some do I would think.

[Anonymous]

I don’t remember anyone mentioning opening a foreign account for the purpose of avoiding taxes. I wouldn’t even have an idea how to do so, except i think that you would have to utilize a numbered account. I don’t even know how many banks still offer them, but some do I would think.

[New_Renter]

pk92108, obviously you do it with a full paper trail. You report it on your tax return and you completely follow U.S. law. While I’m certainly not qualified to give any tax advice, Treasury Department Form 90-22.1 is used to report an aggregate amount over $10K. If you fail to report using this form, the penalties can be incredibly steep. Guys, there’s nothing sinister about maintaining foreign accounts. Also, I don’t know why people have the impression you can’t earn a return. These banks have many investment vehicles to choose from, just like a U.S. bank they have the full gamut. All income is reported on your tax return, just like a domestic account. Also, any foreign taxes paid may qualify for a foreign tax credit (Form 1116). All this info is easily found on the web…

[New_Renter]

pk92108, obviously you do it with a full paper trail. You report it on your tax return and you completely follow U.S. law. While I’m certainly not qualified to give any tax advice, Treasury Department Form 90-22.1 is used to report an aggregate amount over $10K. If you fail to report using this form, the penalties can be incredibly steep. Guys, there’s nothing sinister about maintaining foreign accounts. Also, I don’t know why people have the impression you can’t earn a return. These banks have many investment vehicles to choose from, just like a U.S. bank they have the full gamut. All income is reported on your tax return, just like a domestic account. Also, any foreign taxes paid may qualify for a foreign tax credit (Form 1116). All this info is easily found on the web…

[pk92108]

How to transfer money?? Just wondering about you guys with foreign bank accounts – how do you transfer money to the account without a paper trail??? I assume if you write a U.S. check or wire the $$ and you get audited they could pick it up if the IRS supeonas your checking account..And also aren’t foreign transfers over $10,000 red flagged and reported to the governent??

Also do you report on your taxes that you have a foreign account??

Is it really worth it since you usually don’t get interest abroad so basically you are making a currency play and losing out on a guarrenteed 4.5% money market interest rate… would need to make more than that % in currency gains to make it worth while…..

just curious…..

[34f3f3f]

Trying to hide money over there in a “numbered” account would be a really bad idea….;-)

Yes, and not a good idea to discuss on an open forum either 🙂 but in Europe it was and still is a preoccupation of many. I realize that until quite recently, discussion of tax evasion in the US was taboo. In the Europe of latter days “runners” used to collect suitcases of cash for old retired Colonels and the like, who felt robbed by successive European socialist governments ‘exorbitant’ tax policies. Banks of telephones used to line the floors of Monaco apartments, and not furniture or occupants. You’d be surprised at the ‘professional’ advise still given to reduce one’s tax bill in some countries. In case anyone is wondering, I am a fully paid up tax payer 🙂

[New_Renter]

Thanks for the advice qwerty007. BTW, the object of a Swiss account isn’t to hide the money. I don’t believe there is anything in U.S. law to keep you from opening/maintaining foreign bank accounts, they just have to be fully reported on your U.S. tax return, and I assume there are also laws regarding the transfer of funds. Trying to hide money over there in a “numbered” account would be a really bad idea….;-)

[Anonymous]

From my understanding any swiss bank which has offices outside of Switzerland and especially inside the US has a considerably weaker security (esp those with offices in the US where they are subject to US privacy laws and government intervention).

If you are looking for privacy, then a small private Swiss bank cannot be beaten.

But there is another reason to look at a Swiss account with a small private Swiss bank and that is their liquidity. Most small private Swiss banks are deposit institutions, meaning they actually hold your money and invest it or hold it solely at your discretion. They do not loan it out as they do in most large, public institutions, even Swiss ones, like UBS and Credit Suisse.

A savings account in the US actually holds no money only a ledger of what the Bank owes you. The bank has loaned that money out for an interest payment. For that right, you receive interest on your money. The Bank makes the difference between the two. Same is true for checking accounts (but only since the Fed has begun allowing overnight sweeps). You as the account holder have NO say in who, what, when, where or how your money is lent. And only the bank’s word and net worth (and the FDIC guarantee to their limits) that you will actually have your money when you want it. Works great when it works, but when it doesn’t then it can really bad. Just ask some of those depositors in the bank in Colorado that just went into receivership last month. Their money went to building condos in Miami. When loans couldn’t be paid back…oh well you get your FDIC limit back…any more is poof gone with the warm Miami wind.
If you are interested in wealth preservation, then a swiss account would be a good weapon in your arsenal.

[Eugene]

So, this bank will hold my money in their vaults, they won’t pay me any interest, and they will actually charge me fees for doing that? And I have to travel to Switzerland to open an account?
How is that better than having a wad of cash under my mattress?
More interestingly, how is that better than having a swiss franc valued CD @ Everbank (well under FDIC limits, of course)?

[Eugene]

So, this bank will hold my money in their vaults, they won’t pay me any interest, and they will actually charge me fees for doing that? And I have to travel to Switzerland to open an account?
How is that better than having a wad of cash under my mattress?
More interestingly, how is that better than having a swiss franc valued CD @ Everbank (well under FDIC limits, of course)?

[Anonymous]

From my understanding any swiss bank which has offices outside of Switzerland and especially inside the US has a considerably weaker security (esp those with offices in the US where they are subject to US privacy laws and government intervention).

If you are looking for privacy, then a small private Swiss bank cannot be beaten.

But there is another reason to look at a Swiss account with a small private Swiss bank and that is their liquidity. Most small private Swiss banks are deposit institutions, meaning they actually hold your money and invest it or hold it solely at your discretion. They do not loan it out as they do in most large, public institutions, even Swiss ones, like UBS and Credit Suisse.

A savings account in the US actually holds no money only a ledger of what the Bank owes you. The bank has loaned that money out for an interest payment. For that right, you receive interest on your money. The Bank makes the difference between the two. Same is true for checking accounts (but only since the Fed has begun allowing overnight sweeps). You as the account holder have NO say in who, what, when, where or how your money is lent. And only the bank’s word and net worth (and the FDIC guarantee to their limits) that you will actually have your money when you want it. Works great when it works, but when it doesn’t then it can really bad. Just ask some of those depositors in the bank in Colorado that just went into receivership last month. Their money went to building condos in Miami. When loans couldn’t be paid back…oh well you get your FDIC limit back…any more is poof gone with the warm Miami wind.
If you are interested in wealth preservation, then a swiss account would be a good weapon in your arsenal.

[34f3f3f]

While I do understand the “white glove” nature of private Swiss banking, how does this equate to wealth protection?

It doesn’t, except of course in the old fashioned sense of what is hidden is protected from litigious or divorce claims. Times have changed, and banks are now more open. However, Switzerland is one of the best places for banking. It’s their business and they are good at it. Offshore entities abound, not just in the Caribbean. The UK Channel Islands and the Isle of Man do huge offshore business, and have been serving the Captive Insurance market for a long time. However, islands don’t always attract quite the same caliber of personnel (IMHO). Little known to many, London is one of the biggest offshore centers, and the financial hub of Europe. Luxembourg is also very popular, and provided many services.

However, the only advantage of a foreign account is if it is in local currency, and you travel or make foreign purchases often. There are many investment restrictions and tax implications of having investments abroad, and you may be better served by taking professional advise. Things are not quite as untethered as you might think.

[Allan from Fallbrook]

I’m not entirely sure I understand the need for a Swiss bank account.

All of the major international players, including Swiss banks, have branches in the Caribbean.

While I do understand the “white glove” nature of private Swiss banking, how does this equate to wealth protection?

Also, you’ve been asked a few times for the name of the bank in question, but that answer has not been forthcoming. Would you mind passing that along?

[Running Bear]

That is the point. I don’t want to be in dollar denominated assets right now. I think we will have a short term bounce in the dollar but my long term outlook is negative. We have lost over 40% of the value of the dollar over the last 6 years and that was when our economy was going strong and the Fed didn’t have its finger on the button ready to flood the market with credit and money at a moments notice.

I encourage you to do some reading on Helo Ben and see what you think his philosophy is. He was a student of the Great Depression and his conclusion was the Fed at the time didn’t cut rates fast enough and therefore caused it to last much longer then it should have. If our country is heading toward a large asset deflation and recession, what do you think he will do? I believe he will very aggressively cut interest rates and flood the market with cash and credit. What effect do you think this will have on the dollar and your wealth held in dollars?

If you believe the housing market is tanking and going down, you need to keep looking down that road and see what the greater consequences are for this economy. If you think that housing is going to drop by a large amount just so we can buy some good deals, you aren’t looking at the broader economy.

The last point is if you believe this country is the only place where there is a housing bubble and credit bubble you need to start reading some articles in England, Spain, Ireland, etc. There is a global asset bubble/credit bubble and I am prepared for the worse case scenario but hoping for the best. We will know much more in the next 18 months how a lot of this stuff will fall out and I will move out of my ultra conservative stance when I have a better read.

I see a large downside risk here in stocks without a huge upside benefit.

my2cents

[nostradamus]

Hi Running Bear,

Can’t you safely get 5% on up to $50M with a local bank on the CDARS network? They spread your deposit amongst as many banks as necessary to ensure you get full FDIC coverage:

http://www.cdars.com

With your Swiss account are you hedged against the weakening dollar?

[New_Renter]

Running Bear, I would really appreciate it if you could respond with the name of the private swiss bank you chose. This would potentially save me (and anyone else considering this) alot of time doing the research. I’ve done a bit of of looking already, just enough to know that there a quite a few choices over there in private institutions. Thanks in advance.

[34f3f3f]

New_Renter, there are dozens of small banks in Zurich, many with good reputations. I spoke with Lloyds there, who are a respectable UK retail bank. They are situated just behind Credit Suisse (Paradeplatz Sq) but have a much smaller office, and are probably not under the same pressure as the big guys. Just remember though that Swiss accounts are a red flag. Singapore is where all the Swiss money is going.

[34f3f3f]

New_Renter, there are dozens of small banks in Zurich, many with good reputations. I spoke with Lloyds there, who are a respectable UK retail bank. They are situated just behind Credit Suisse (Paradeplatz Sq) but have a much smaller office, and are probably not under the same pressure as the big guys. Just remember though that Swiss accounts are a red flag. Singapore is where all the Swiss money is going.

[New_Renter]

Running Bear, I would really appreciate it if you could respond with the name of the private swiss bank you chose. This would potentially save me (and anyone else considering this) alot of time doing the research. I’ve done a bit of of looking already, just enough to know that there a quite a few choices over there in private institutions. Thanks in advance.

[Diego Mamani]

The answer to your question about how the bank makes its money is through fees charged to customers like me. I pay a small fee for the investments I make just like a broker charges and for holding my deposits in their bank. I have no problem paying these fees in order to know that my money is sitting in their bank and not in a high rise condo project in Miami.

RunningBear: So you have “investments” with zero risk? This sounds like a late night TV get-rich-quick scheme. There’s no way that your Swiss bank keeps your money locked in a vault, that would be a fairy tale.

On the other hand, if your money is truly invested as you say, then it’s not “sitting in their bank” (your words), and there is risk involved.

What are the investments in?

[Diego Mamani]

The answer to your question about how the bank makes its money is through fees charged to customers like me. I pay a small fee for the investments I make just like a broker charges and for holding my deposits in their bank. I have no problem paying these fees in order to know that my money is sitting in their bank and not in a high rise condo project in Miami.

RunningBear: So you have “investments” with zero risk? This sounds like a late night TV get-rich-quick scheme. There’s no way that your Swiss bank keeps your money locked in a vault, that would be a fairy tale.

On the other hand, if your money is truly invested as you say, then it’s not “sitting in their bank” (your words), and there is risk involved.

What are the investments in?

[Running Bear]

Gents,

I had a nice little chuckle with your surprise that a bank can’t be real if it doesn’t do loans. I discussed with some friends recently how our current banking system is not the 0% risk that people assume it is. Let me ask you a simple question. Why were banks created in the first place? Was it an investment vehicle? Or a place to hold and protect your wealth? How about this one. Do you want your money where you tell your bank to put it or leveraged over and over again on residential and commercial loans in bubble markets? So far this year we have had 3 banks taken over by the FDIC. With the coming housing crash and following commercial market tank, do you really think we won’t lose any more banks?

The answer to your question about how the bank makes its money is through fees charged to customers like me. I pay a small fee for the investments I make just like a broker charges and for holding my deposits in their bank. I have no problem paying these fees in order to know that my money is sitting in their bank and not in a high rise condo project in Miami.

Opening a bank account like the one I did is for one main reason, wealth protection. I searched for the bank with the cleanest balance sheet and as little risk to financial turmoil. It will cost me a fee to have that protection but because of the size of the money I am moving there it is worth it to me. This isn’t necessary for every person.

For the person asking whether you have to go over there to open an account the answer is yes for the private banks.

I am not expecting large gains from this move. I think the short term outlook for the markets is negative and I will park liquid assets over there and wait for the right time to make my investments. Having a very safe 5% return on my investments for the next year is completely acceptable for me.

Hope I answered all your questions.

[Author]

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