On Target Newsletter

In this issue:

  • Planning your global finances
  • Ukraine lies
  • Safeguarding your wealth
  • Covid hoaxes
  • California a nightmare
  • US geopolitical risks
  • Singapore metrics
  • China
  • Woke investing
  • Portfolio selection metrics
  • Beating inflation

Planning Your International Affairs

Planning and managing your personal finances – a process that I have dubbed moneycraft – is a skill that I’ve written about for more than half a century. And I’m still learning. Only a few weeks ago I was introduced to the concept of usufruct, an old legal structure of property ownership that is now rarely employed, but can be useful in a handful of places such as Thailand, where onerous restrictions limit what foreigners, such as myself, can do.

Although there is plenty of advice about moneycraft available, nearly all of it is about the reader’s own country. If you need to think globally, taking into account several jurisdictions, residential locations and citizenships, planning is complicated. Here are some of the basic principles for you to follow…

Practicality. It’s important to structure your affairs for simplicity and convenience, particularly if you’re going to do things the legal route, as most people prefer.

Unless you are particularly keen and have a considerable amount of time to monitor and manage your affairs, you need a simple long-term structure that will work for you without frequent switches. In any case, lots of chopping and changing is a bad idea. The expenses mount up and depress your returns.

It usually pays to channel all or most of your business through a single intermediary or financial institution – one you know and trust that provides you with consistently good reporting, processing and advice.

Confine your investments to a very small number of funds or individual stocks. They’ll be easier to keep an eye on and your expenses will be minimized. One simple way to do this is to use a multi-manager fund that does the selecting and monitoring for you. Just make sure that it delivers a reasonable performance for the fees it charges.

Investment returns. Intermediaries will tell you that most clients want high returns without risk. Those are contradictory requirements, as rate of return is usually related to the level of risk.

Don’t expect to get anything greater than average returns for the asset classes in which you invest. If you do better, you’ll be lucky. Most people do worse than average because of expenses and mediocre performance.

Currencies. Investing outside your home country may bring you exchange rate profits, but the downside could be yields significantly lower.

You need to select a base currency in which to denominate your offshore wealth and keep the summary of your investments. You can do that in your local currency, which gives you a good comparison with the local investments with which you’ll be most familiar. However, it’s more usual, and convenient, to “think” in terms of a major unit such as US dollars, pounds or euros.

Remember that what counts is the currency of the underlying asset in which you have invested, not of the fund holding it. For instance, a dollar-denominated fund investing in Japan will be driven by the yen value of its assets over time.

Asset allocation. It’s also wise to seek some kind of balance among the various kinds of assets in which you invest. The primary asset classes are equities, property, bonds and fixed deposits. Some important ones such as insurance policies are a combination of several classes in their underlying funds.

Ideally your money should be where the best returns are being achieved, but in practice judging where that will be at any time is very difficult even for the most highly-skilled fund managers. The most sensible course is to hold a balanced mixture of several asset classes.

How that balance emphasizes high-return assets such as equities rather than low-return ones like fixed deposits will depend on the level of risk you’re willing to accept in your portfolio as a whole, how wealthy you are (the more capital you have, the better your capacity to absorb losses), and your age (the older you are, the lower your level of portfolio risk should be).

Planning for predictable future expenses

Some assets are difficult to accommodate in a small portfolio because they’re “lumpy” – the minimal amount you need to invest in some attractive Japanese shares is $40,000; to buy a British property with a mortgage loan to rent out, perhaps more.

Liquidity. You need to plan for cashing in some of your investments for a predictable expense such as financing a child’s university education, or an unpredictable one such as buying into a small business.

Some investments, in particular bank accounts, are liquid at any time with little or no penalty. Others such as equities and bonds can quickly be cashed, but you may find yourself having to sell them at a bad time when their capital values are depressed. Property, of course, is relatively illiquid as it usually takes months before you can get your cash.

If you have a balanced portfolio, with what you regard as a reasonable amount for both planned and unpredictable cash expenses always readily accessible in bank accounts or a money market fund, liquidity should not be a problem.

Expenses. You can’t avoid paying for the facilities you get from banks, brokers and investment funds, but it’s important to know what they charge, and that their fees are reasonable.

Insurance companies are notorious for their high charges, often hidden – which is why their policies nearly always give mediocre returns. However, they are not alone in this. Mutual fund (unit trust) managers, for example, usually have hidden expenses in addition to those they disclose. One study revealed that actively-managed equity funds investing in the Far East claimed their annual management fees averaged 1.29 per cent. But their total expense ratios, taking into account extra charges not normally disclosed, averaged 2.63 per cent.

Managers with high charges normally argue that you should expect to pay more for better performance, but the evidence is that this is rarely true. In fact on average high-expense funds underperform low-cost ones. Even where they have a margin of outperformance, it isn’t enough to offset their higher costs.

Privacy. If you want to keep your affairs confidential, for whatever reason, that requires some careful planning.

Banking secrecy is under attack by governments. The usual reason given for this is the need to counter “laundering” of money – conversion of proceeds of crime, in particular drug traffic, into assets apparently of innocent origin. But the main reason is that they want to make tax evasion much more difficult.

However, unless you are a money launderer, you can be reasonably sure that any of your affairs handled by a bank, trust company, fund manager or attorney based in a tax haven will remain confidential. In many of them, there are tough laws that protect your privacy as a client.

As an additional safeguard, follow sensible practices such as not having any paperwork sent through the mails to your home country, being careful about what you say on the telephone or social media, and regularly clear sensitive material from your personal computer and smartphone such as copies of e-mails.

Estate planning. Remember that when you pass on, any assets you own outside your home country will be subject to the inheritance laws of the jurisdictions in which they are registered. They may contain some surprises. An American acquaintance living in Thailand discovered that ownership of assets of his suddenly-deceased wife passed, not to him, but to her parents.

There are simple way of dealing with potential problems such as joint accounts, local wills and offshore trusts. It is best to get professional advice, which is often available cost-free from investment companies and intermediaries.

Security. There are lots of crooks out there trying to steal your money, and lots of others attempting to enrich themselves without doing anything criminal, so it’s important to be careful about who you deal with.

Never buy an investment that someone tries to sell you over the telephone.

Always deal either with a large and reputable financial institution, with a person or business that you are comfortable with from a reasonable period of personal experience, or with one that comes highly recommended by someone whose judgment you trust.

Remember that integrity, a clear concern for your interests, regular detailed reporting, and a good personal relationship, are more important than the prospect of wonderful returns. In fact, if that’s what you’re promised, it’s a danger signal.

Lies About the War in Ukraine

Most of the Ukraine’s soldiers are sent into battle with very little training. Colonel Andrew Milburn, who retired after 31 years with the US Marines and is now chief executive of a group training and equipping Ukrainian frontline units, gives the example of just 20 per cent of one unit “had even fired a weapon before heading to combat.” Facts belie “the relentless optimism that has pervaded Ukrainian representation of the war from the outset.”

Grim reports indicate that casualties are high “and perhaps in the long term, unsustainable.” President Volodymyr Zelensky says that 60 to 100 soldiers are killed and 500 wounded in combat, every day. “To put that in context, during the 1968 Tet offensive in Vietnam, one of the bloodiest periods of the war, US deaths were roughly 200 a week.

“Of course the Russians continue to take even higher casualties, but with their vastly greater pool of manpower.” They have switched from hasty single-axis attacks to “slow but inexorable advances preceded by massive artillery bombardments.”

Jim Rickards of Daily Reckoning says: “Almost everything you heard about the war in Ukraine from US media over the course of March, April and May was a lie. You heard that Putin as losing the war… that Russians had poor training and low morale and were deserting in droves, that Ukrainians were destroying Russian armour in large numbers. None of this was true. In fact Russian troops have achieved major victories.”      

The end-game will be the takeover of Odessa, which will give Russia control of Ukraine’s coastlines. “A negotiated settlement that cedes Russian control over Crimea and the Russian-speaking parts of eastern Ukraine is probably the most realistic solution available to end the war. But the US doesn’t want the war to end. Its plan is to wear Russia down through a protracted conflict… no matter how much the Ukrainian people suffer.”

Rickards predicts: “Russia will take somewhere between a third and half the country and keep it. The parts that Russia is taking control of include the industrial nexus, the largest natural resource deposits and the most fertile land, Russia will be able to finance the reconstruction of their conquests using the very industrial capacity, mining and agricultural output they have captured.

“Russia will also control the ports and major rivers, and will be able to tax the remainder of Ukraine for access. The gradual result will be a prosperous part of Ukraine controlled by Russia and a desperately poor part of Ukraine left to the corrupt oligarchs under Zelensky.”

Safeguarding Your Personal Wealth

For most people, the term “investment” means buying and holding something for its anticipated rise in value in future — but there is another category of investment, generally referred to as “retention of wealth,” Jeff Thomas writes in International Man. They are investments that may well increase in value over time – but their principal purpose is not profit, but to assure that if other investments fail, the investor will still have a portion of his wealth to fall back on.

When bad economic times are on the horizon, as they are now, retention of wealth becomes, or should become, important.

Your personal wealth is threatened in many countries. There is the threat of greater taxation, devaluation of currencies, collapses in markets, even outright confiscation of bank accounts.

More people are realizing, particularly if they live in Europe or North America, that these threats are virtually certain to occur in the foreseeable future. You need to determine the safest havens for your wealth and act to make use of them.

Basic truth No.1 is that precious metals and real estate will become the safest investments.

Basic truth No.2 is that ownership of these are only safe if they are located outside an endangered jurisdiction.

If the threat to your wealth is your own government, it is essential to remove it from the country in which you live. If it remains in the country where you are a citizen, it’s more likely that your government will regulate it, tax it, cause it to lose value through inflation, or simply confiscate it.

It is far more difficult for your government to destroy your wealth if you have expatriated it as it does not have free control over the laws and administration of the country where you have invested it. It would be hard for your government to force the repatriation of your precious metals and downright impossible for it to demand that your overseas real estate be transferred to your home country.

The investor should choose a country that is not likely to be a candidate for major decline in any coming economic collapse, not likely to cave in to demands made by other countries, and has laws that impose as little as possible on foreign-owned investments.

The safest countries are those unlikely to fall prey to dictatorships or to dramatic changes in laws such as the harsh restrictions on personal behaviour imposed during the pandemic. In the next few years we are likely to see leaders of even most “respected” countries throw out their rule books and resort to grabbing their citizens’ wealth.

Basic truth No.3 is that the ideal jurisdiction in which to own property is one that does not tax real estate. Any country that imposes income, capital gains or wealth taxes may well, in hard times, suddenly decide to tax precious metals or property ownership.

Several countries have no income tax including Bahamas, Bahrein, Bermuda, Brunei, Cayman Islands, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates. 16 nations have no property tax – Bahrein, Cayman Islands, Croatia, Cook Islands, Dominica, Fiji, Israel, Kuwait, Liechtenstein, Malta, Monaco, Oman, Qatar, Saudi Arabia, Turks & Caicos and the UAR.

The time to investigate the best jurisdiction to safeguard your personal wealth is now, before it is at risk from governments.

Hard Facts Reveal a Massive Hoax

The political-media-pharma complex has silenced all reporting about “the colossal failure of the mass vaccination programme against Covid,” argues Spanish commentator Fernando del Pino Calvo-Soleto.

The incentives for both pharmaceutical companies and regulatory agencies to claim good results for vaccines were enormous, but there were doubts about their efficacy from early days. Several studies showed rapid early decline within a few weeks, and that the vaccines do not prevent either infection or transmission of the disease.

“Are they so useless that in a few months we need to take four doses, potentially putting our immune system at risk, as the European Medicines Agency warns? Have you ever had to be re-vaccinated [against a disease] three or four times in a few months because the vaccine lost its effect in a few weeks?”

Those in power imposed a “Covid passport” that restricted the freedom of the unvaccinated under the pretext that the vaccinated were automatically free of the disease. That was untrue. They demonized those who did not wish to be vaccinated by making the population believe that their health depended on their neighbour being vaccinated. Also untrue.

“Those who orchestrated this manoeuvre knew perfectly well that all this was a gigantic hoax, but they went ahead anyway because the motive was not about health but about power and money.” Pfizer’s CEO admitted in January this year (reported on YouTube) that two doses offered “very little, if any” protection against Omicron, while three doses offered only “reasonable” protection against hospitalization and death, but “less than that” against contagion.

In Spain, according to official data from the Ministry of Health, 90 per cent of those infected and 84 per cent of those who died from Covid in the first quarter of this year were fully vaccinated.

The most recent official data from the Netherlands and Canada suggest that the effectiveness of the vaccines against Covid severity and death drops to zero within a few months, and then turns negative – those vaccinated with two doses would be at greater risk than the unvaccinated. “How can this be possible; do these vaccines damage our immune system?”

Last year pharmaco-vigilance services in many countries began to reveal that vaccines and gene therapies were having an unprecedented level of adverse effects. The number of deaths after vaccination have multiplied. “There have never been so many adverse effects, so many serious effects, and so many deaths following a vaccine.”

Calvo-Soleto says “the indiscriminate vaccination programme against Covid has been the fruit of an aggressive campaign based on lies. First the media terrorized the population with a daily bombardment of horror stories. Then, promising early treatments to prevent hospitalization of those falling ill were systematically boycotted. Finally, natural immunization was grossly neglected… making the population believe that only vaccines… could protect them.

“The main health policies put in place to fight the epidemic have turned out to be a fraud. Lockdowns have ruined the health and economy of thousands of people without any epidemiological benefit. The masks’ farce has only succeeded in enriching crony commission agents of politicians and making fear chronic.”

Data from the Vaccine Adverse Event Reporting System suggest that doctors and emergency services are witnessing “a bizarre increase in sudden deaths, strokes, heart disease, pulmonary embolisms, thrombosis… and a variety of rare conditions of all kinds.”

Doctors from around the world are beginning to argue, in publications such as the Virology Journal, that being vaccinated against Covid “is a major risk factor for infections in critically ill patients.”

California: a Failing Nightmare

Nick Clegg of Facebook has announced that he’s returning to Britain to spend half his time there. The well-known Brit – a former deputy prime minister in the UK — is the latest high-profile figure to turn his back on California.

Bad Leftwing policies are re-shaping the Golden State into a failing nightmare, Zoe Strimpel reports. Billionaires Larry Ellison, founder and chairman of Oracle, Joe Lonsdale the founder of Palantir, and Elon Musk of Tesla, have all relocated their companies to cheaper, friendlier states.

Net emigration has hit record highs; the state’s population fell by 117,000 last year. “People are fed up of soaring taxation, the high cost of living, groaning regulation… and stagnating job growth. The heavy-handed state continually fails to solve the lethal social problems that are on permanent display from mass shootings… to spiralling homelessness.

“The sad truth is that California is reaping what it has sown; not simply with its heavy-handed regulation but in its deep and committed embrace of wokeness, which permeates from its courts via Hollywood to schools and hospitals.” Amid soaring crime rates, both Los Angeles and San Francisco announced plans to defund the police, slashing their budgets. The state’s committed progressivism has meant its embrace of illegal immigrants, who have been granted drivers’ licences and free healthcare. Yet Blacks and Hispanics fare worse in California than almost anywhere else in the US.

The state’s schools are failing children from all background, with their warped social justice teaching resulting in the worst scores for Black students. The Los Angeles Unified school district has adopted a “trans-affirming” curriculum to ensure that classes are “queer all school year.” Strimpel says that a state “that values mad delusions about gender, and conjures the existence of vicious ‘systemic’ inequalities, while ignoring the millions failing to learn to read, was always going to fail.”

America’s Geopolitical Risks

They’re now “much higher than markets are reflecting, says The Credit Strategist’s Michael E Lewitt. Years of “questionable foreign policy decisions” mean that the US now faces “the most threatening international environment since the darkest days of the Cold War.”

The conflict in Ukraine disrupts order in Europe, Iran is well on its way to developing nuclear weapons, China’s shadow looms ever-larger over Taiwan. China, Russia and Iran are deepening their ties, doubling down their assault on America and its allies. The Middle East is plagued by conflict and militias. In Asia Sri Lanka has collapsed, Myanmar’s civil war grows uglier by the day, the threat from North Korea continues to grow. Europe may be facing its worst energy and economic crisis since the 1940s. Jihadist violence is raging across Africa.

Lewitt says “our leaders seem ill-prepared to address these problems. Many of them appear incapable of comprehending these issues, but even the few who possess the intellectual ability to address them aren’t doing an effective job doing so.

“In the period ahead the West will almost certainly have to respond to China moving on Taiwan and Iran achieving nuclear capability. Unlike Russia, China is too important economically to sanction.” In any case, Russian sanctions have been largely ineffective and have hurt the West more than Russia.

Lewitt says he doesn’t believe that Americans would support military action to support Taiwan. It and Iran “present our leaders with two of the most dangerous foreign policy challenges in years. The consequences of getting them wrong for markets and beyond are enormously consequential. Investors should prepare now by dialling back risk in their portfolios.”


Setback for woke policies: Portfolio managers have started to retreat from their woke policies of giving preference to investing in ESG projects (those following environment, social and governance principles).

One example is that BlackRock, the giant investment bank, has halved the support it has been giving to environment and social issues. It says that many of the proposals advanced by activist shareholders give little regard to consequent disruption caused to financial performance.

Some US states controlled by Republicans have started to penalize banks pursuing woke policies from doing business in them. West Virginia, for example, has banned banks that it accuses of “policies aimed at weakening our energy industries.”

Russia: It’s not just winning the military war… “it’s winning the global financial and economic war launched by Biden and our European allies,” says American commentator Jim Rickards.

Russia’s revenues from oil and natural gas exports are at all-time highs. Its currency is much stronger today than when the war began. China and India are buying all the Russian oil that Europe is refusing to buy. “Across the board, Biden’s economic sanctions have backfired and are hurting the US and Europe far more than they are hurting Russia.”

Only half the bloc of G20 countries have imposed sanctions on Russia. Japan is backsliding – only 5 per cent of its companies with operations there have pulled out. Latvia has quietly agreed to pay in roubles for Russian gas.

A divided party: Britain’s Conservatives have been quick to blame their current collapse in political support, which threatens their survival in the election they must face in two years’ time, on prime minister Boris Johnson’s character defects. But a “less comfortable truth” says The Economist, is that he was an answer to the contradictions within his party. “Many of today’s Tory MPs belong to the low-tax, more libertarian and free-market tradition. But others, many from Northern [English] constituencies, cleave to the new big-spending, interventionist and protectionist wing. They won Mr Johnson an 87-seat majority in the last election and are vital to Conservative fortunes in the next.”

Targeting tax avoidance: Drugmaker Merck is one of several US-based multinationals under scrutiny from a congressional committee that is investigating how Big Pharma uses a combination of offshore subsidiaries, tax exemptions and legal loopholes to slash their tax bills. Last year the company paid an effective tax rate of 11 per cent, almost half the US corporate rate of 21 per cent.

The committee is investigating one example of its tax planning for its blockbuster cancer drug Keytrude, whose sales reached $17 billion in 2021. Merck holds the intellectual property rights in the Netherlands and manufactures all of it in Ireland, a low-tax jurisdiction. That’s the way to pay least tax.

Police priorities: Police in the British county of Wiltshire opened a “non-crime hate incident” file on an 11-year-old boy for taunting another boy in the street by calling him “shorty”. This is the latest report of how the British police have focused on woke policing while largely abandoning their concern with fighting crime.

Every year about 10,000 cases are reported of incidents where, although no crime is committed, “it is perceived… that the incident was motivated by hostility or prejudice.” By contrast, fewer than one in 20 thefts and one in 15 burglaries result in a criminal being caught and charged. It’s said that the best way to get the police to attend promptly to a crime scene, or indeed come at all, is to claim that the cause is racism.

China: The boycott of payments by home buyers that started at an Evergrande development in Jingdezhen in June because of failure to complete projects has now spread to at least 301 projects in about 91 cities. Bloomberg reports that some suppliers to real estate developers have joined the home buyers, refusing to repay bank loans because of their unpaid bills.

There has also been a resurgence in Covid, which has made local authorities reimpose full or partial restrictions on 114 million people in 11 cities.

Financial crunch: The valuation of Klarna, once Europe’s most valuable private tech company has seen its price tag plunge from $46 billion to less than $7 billion in a difficult fund raising. Temasek, the Singapore state-owned fund that is one of the world’s largest investors, has seen its return to shareholders plunge to below 6 per cent for the 12 months to March compared to a previous year’s 25 per cent. Poor performance from its investments in the technology sector is principally blamed.

Extreme weather: While the mass media have been making much of the heatwaves in Europe, they’ve ignored very different conditions in the Southern Hemisphere, where it’s been extremely cold. April to September last year the South Pole experienced its coldest-ever six-month period on record. The cold is persisting, with the first negative 80-degree reading for this season on July 8. Australia and South America, the hemisphere’s largest land masses, have noted record-breaking cold conditions. Australia is experiencing its coldest winter ever on record after the snowiest start.

Taxation: The OECD has raised pressure on governments to implement the planned global tax reform, setting a deadline for the middle of next year. Its principal target is the US, whose Congress is divided on the issue. The proposed international treaty is intended to ensure that the largest companies, including big American technology groups, pay more. But it’s said to be “fanciful” to expect ratification “as the Senate has spent years blocking even relatively innocuous measures to tighten tax measures on the corporate giants.”

Not enough jobs: A perfect storm of factors has propelled unemployment among 16- to 24-yearolds in Chinese cities to a record 19 per cent – more than twice the comparable rate in America. Layoffs caused by the hardline anti-Covid strategy and regulatory crackdowns on residential property and private education have produced a shortage of jobs for youngsters. A record number of college and vocational school graduates – 12 million – will enter the job market this summer.

Windfalls: Spain is imposing temporary taxes on banks and energy companies to offset their gains from rising interest rates. The government plans to use the €7 billion proceeds to offset the impact on consumers of inflation. Measures will include building 12,000 houses in Madrid, making most state railway journeys free for a limited period, and providing €2 billion for scholarships.

Climate change policy: America is divided by issues that you wouldn’t expect to be politicised, such as Covid vaccination… even motoring. Los Angeles plans to ban new, filling stations to encourage people to switch to electric cars. Lawmakers at Raleigh, North Carolina, want to do the opposite – destroy battery charging stations unless more filling stations are built next to them.

Oil: US producers are inclined to ignore the federal government’s contradictory policies – which are hostile to fossil fuels, while simultaneously urging the industry to produce more of them. Instead of using big profits to finance expansion, they are opting for higher dividends and share buybacks.

Poland: The government has given home owners an eight-month suspension of their mortgage loan payments as compension for inflation, which has produced sharp rises in the payments. Banks, the main source of loans, are furious.

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