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Allocating AssetsPosted by securities on: 2006-09-19 11:10:26
Allocating Assets By William Cate My theme in scores of articles and lectures is simple. Don't put all of your eggs in one basket. It's common sense in the best of times. It's imperative as we devolve into the worst of times. You need not agree that our political system is moving toward an authoritarian model. You need not agree that our economy is in a slow slide into failure. However, if you see any chance that the 21st Century is going to see the end of Civilization as we know it, the logic of spreading your economic risk seems self evident. Of course, you may not have net assets to allocate. But, if you do have more money than you need to live, you should consider moving about twenty percent of your assets offshore. This practice gives you enough resources to start over, if it becomes necessary to flee the U.S. for a safer haven. If the dark clouds on our horizon today clear and the world moves back toward sanity and economic balance, then your offshore nest egg will grow and you will be able to pass more wealth down to your children and grandchildren. Plan to move, over the next five years, about 20% of your wealth offshore. If you have a net worth of $1,000,000, this means a plan to move about $200,000 elsewhere. There are three investments you should consider making with this money. 1. You should hold enough money in a liquid form to cover your living costs for six months. This money should be held in a major currency other than the U.S. Dollar. It should be held in some format that allows you to honestly tell the Government that you do not have signatory control over money held outside the United States. If worse comes to worse and you have to bundle your family us some night and take the bus to the border, you know you will have a cash nest egg not in American Dollars to support you and your family for six months. For example, you might allocate 30% of your $200,000 to a liquid Euro account. This means you would have US$60,000 in Euros to support your family for six months. 2. You should own a cash producing asset in another country. This can be a rental home, a small resort or whatever you believe would be a good investment. The cash producing aspect of your investment should allow you to own the investment without additional investment from your American holdings. This means the cash produced will pay the real estate taxes, upkeep and management services. For example, if you buy a home in Canada for US$100,000 and rent it, you have allocated 50% of your offshore funds to hard assets held in Canada and valued in Canadian Dollars. 3. You should use the last 20% of your offshore capital to speculate in a low risk investment that pays better than the inflation rate in whatever country you choose to risk your money. If you are earning more than the inflation rate and not subject to taxes, you are actually earning money (buying power) from this investment. As your wealth grows, you can allocated more money to hard-asset, cash-producing investments. Eventually, you will not only be relatively wealthy in the States, you will be relatively wealthy in the Global Village. As with any advice, it is easier to give the advice than to use the advice. You shouldn't be in a rush to move money offshore. You should be willing to take the time to learn about offshore speculation and investment. There is no shortage of risks, swindles and costly mistakes that investors make investing elsewhere. You should take your vacations in whatever country or countries that appear to offer sold cash-producing asset acquisition opportunities. Spend some of your vacation time investigating your apparent investment opportunity. I believe that most Americans have built their futures on an earthquake fault or in the path of a hurricane. Time in the form of the Mother of All Depressions will eventually show them the folly of their plan. The wise may choose to live on the earthquake fault. But they have built a cabin well away from the almost certain future disaster. About the author: He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinves tmentclubwelcome/] |
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