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A record 3,415 Americans ditch their passports

CNN Money, Feb 12, 2015

Goodbye, sayonara, ciao, Uncle Sam!

The number of Americans choosing to give up their passports hit a record 3,415 last year, up 14% from 2013, and 15 times more than in 2008, when only 231 people renounced their citizenship.

Experts say the recent surge is coming from expats who no longer want to deal with complicated tax paperwork, a burden that has only gotten worse in recent years.

Unlike most countries, the U.S. taxes all citizens on income, no matter where it is earned or where they live. The mountain of paperwork can be so complicated that expats are often forced to fork over high fees to hire an accountant — some say they pay as much as $1,000.

One new law designed to catch tax cheats — the Foreign Account Compliance Act — requires individuals to report certain foreign assets, and for banks to disclose all foreign accounts held by Americans. That’s in addition to another provision that mandates Americans to disclose foreign bank holdings worth more than $10,000.

“More and more are considering renouncing,” said Vincenzo Villamena of Online Taxman, an accountant who specializes in expat taxes. “There are a lot of uncertainties about FATCA and [its] implementation; I don’t think we’ve seen the full effect that FATCA can have on people’s lives.”

As both expats and financial institutions rush to understand the new law, some banks have chosen to kick out their Americans clients rather than comply. If a bank mistakenly fails to report accounts held by Americans outside the U.S. — even checking and savings accounts — they can face steep penalties.

As new procedures are put in place, “the pace of U.S. citizenship relinquishments is likely to slow,” said Nigel Green, CEO of the deVere Group, a financial advisory firm. “People are becoming aware of the various compliant ways they can mitigate the negative effects of FATCA, without having to take the drastic and often emotional step of giving up their American citizenship.”

But it’s going to be a few years before renunciations start to taper off, Villamena said.

“You do have a lot of people queuing…there are people still waiting to get their second passport [before they] renounce,” he said. “Obviously, you can’t give up your [U.S.] passport unless you have another one.”

Of course, some Americans giving up their passports could very well be fat cat tax cheats, fleeing to known tax havens to preserve their wealth. But it’s illegal to renounce your U.S. status to escape paying taxes, and giving up your citizenship now doesn’t mean Uncle Sam won’t come after you later for back taxes.

“From an international perspective, the world is split into two halves — the people who are desperate to get U.S. citizenship, and the people who are desperate to give it up,” Chris McLemore, senior counsel at Butler Snow, told CNNMoney in December.

Source

BLOG: Letter #558 is sent, including a ‘New Investment Idea’ + a portfolio trade

Gecko Research, Feb 12, 2015

Just now we sent our Newsletter #558 to our subscribers. It includes a new portfolio holding of ours, a junior that we think really stands out from the heard.

We also included in the letter a short motivation on why we took a trading position in Semafo yesterday at C$3.70. See our ‘Portfolio & Trades’ page for changes.

A few words on our newsletter… We have had issues and even though we have overcome most of the problems (the new website design is a direct result to mention one change), we are still having some issues with our newsletter sendouts. First, Hotmail addresses can still not receive our letters, with exceptions as a few do receive them randomly . Second, the letter takes a long time to be sent out, too long for us to be happy. In the next few weeks we hope to have this sorted as well and after that we should “be back to normal”.

Team Gecko Research

Gold Miners Are on the Hunt for Assets as Prices Climb

Bloomberg, Feb 11, 2015

Gold producers with cash on hand are on the hunt for cheap mining assets as rising prices drive shares higher.

During a 12-year bull run that ended last year, about $30 billion in debt was racked up by companies that mine gold. Those that minimized borrowing then are in the best position now to scoop up mines from rivals with weaker balance sheets, said executives at the Investing in African Mining Indaba conference in South Africa, the biggest such gathering on the continent.

Already, $2.7 billion in deals have been announced or completed this year within the industry, including Monday’s $1.1 billion offer for Rio Alto Mining Ltd. by Tahoe Resources Inc. It’s an early leg-up on the $10.5 billion in deals last year.

“Gold is one of the brighter spots out there in the commodities space today,” said Rajat Kohli, head of metals and mining at Standard Bank Group Ltd., Africa’s largest lender. “I would expect corporate activity to be reasonably pronounced in gold, not just in Africa but globally. We will see a few transactions, definitely.”

The price of gold jumped 8.1 percent last month in the biggest rally since January 2012. Currencies in Europe and Asia are sliding, and as policy makers introduce stimulus packages to battle cooling growth, investors are flocking to the metal.

Randgold Resources Ltd., the best-performing gold-mining company in the past decade, has been “flat out” besieged with offers to buy assets, Chief Executive Officer Mark Bristow said in an interview.

‘Bidding Process’

“People are a bit more confident to move from the sidelines into a bidding process,” Srinivasan Venkatakrishnan, CEO of AngloGold Ashanti Ltd., said in an interview today. The world’s third-largest gold miner is looking to sell assets or form joint ventures to reduce debt, he said.

Kinross Gold Corp., Canada’s third-biggest producer, is also optimistic about the opportunity for deals.

“As the clock ticks on with this gold environment, balance sheets, access to capital, those all sometimes become catalysts for M&A,” CEO Paul Rollinson said Dec. 10. “Our strategy has positioned us well to perhaps be opportunistic in that regard.”

For signs that the gold M&A market is recovering, look at Tahoe Resource’s $1.1 billion cash-and-stock offer Monday for Rio Alto, the largest gold deal in almost 10 months.

Acacia Mining Plc has said it’s looking to do a transformational deal this year, and the best ground in Africa has never been cheaper.

That view is shared by B2Gold Corp. President Clive Johnson. The Africa-focused gold producer paid $570 million for Papillon Resources Ltd. to gain control of a project in Mali last year.

‘Licking Wounds’

“A lot of people in our sector are a little scared to do deals, to step up and do something that may be considered a risk,” he said. While some companies “are licking their wounds, we’re out doing acquisitions and growing the company very aggressively.”

There’s also more appetite for gold in the public markets. The 14-member Bloomberg Intelligence Global Senior Gold index is up 22 percent this year, outperforming the 42-member MSCI World Metals and Mining index, which is down 0.3 percent.

Gold companies are taking advantage by raising $852 million through public offerings this year, including more than C$900 million ($719 million) last month from Canadian producers Romarco Minerals Inc., Detour Gold Corp., Osisko Gold Royalties Ltd. and Yamana Gold Inc.

Rising share prices are also helping fuel deals, said Andrew Lapping, who helps manage $39 billion at Allan Gray Ltd. in Cape Town.

“Not many companies could make acquisitions for cash so the higher share prices give them some more currency,” Lapping said Tuesday in an interview. “If you’re an astute buyer of assets in this market you’re going to do well.”

Source

Axel G Merk: Repression Investing – Got Gold?

By Axel G Merk, Feb 11, 2015

Gone are the ZIRP days – the ‘Zero Interest Rate Policy’ is being replaced by negative interest rates in various countries. ZIRP is a form of financial repression, where savers earn less than the inflation rate to discourage saving. Pundits suggest the U.S. has chosen a different course, as ‘liftoff’ may soon take U.S. rates higher. We’ll try to separate reality from fiction, discussing investment implications for the U.S. dollar and gold.

Much of investing is about trying to retain or enhance purchasing power. Even conservative investors are enticed to take risks, as hoarding dollar bills is an all but certain way to lose purchasing power when there is inflation. Real interest rates, i.e. nominal interest rates net of headline inflation, have been negative for some time, making holding cash a losing proposition. The chart below shows that when using the headline consumer price index as a reference point, financial repression has been rampant for some time.

Below are real interest rates in the U.S. and Eurozone, i.e. nominal interest rates minus headline consumer price index (CPI) based inflation:

This chart shows:

  • Financial repression has been rampant.
  • Despite all the talk of a U.S. “exit,” real interest rates in the U.S. not only continue to be negative, but they are lower than in the Eurozone.
  • Eurozone real interest rates recently inched into positive territory because headline CPI inflation has been negative of late.

We wouldn’t want to talk anyone out of holding cash. However, investors need to be aware of what it is: in our assessment, when real interest rates are negative, cash cannot be considered “safe.” We have long warned that there may be no such thing as a safe asset anymore and investors may want to consider a diversified approach to something as mundane as cash.

Let’s look at gold. Critics decry it as an unproductive, barbarous relic. It’s correct that this shiny metal doesn’t pay any interest and may be ‘unproductive.’ But we just saw that cash, another unproductive asset, yields negative real interest. Gold may be a formidable competitor when real interest rates are negative, i.e. in an era of financial repression.

Now, clearly, the risk profile of gold is different from that of cash. Most have their daily expenses priced in their local currency rather than ounces of gold, making the value of cash more predictable for short-term expenses.

A business can be valued based on various models taking future earnings into account (e.g. through a discounted free cash flow model). Similarly, when looking at gold, investors may want to consider what the future may bear. It’s not that the gold will change, but the currency in which it is valued: since 1970, the price of gold has had an average return of 8.3% per annum through the end of 2014:

If we chose to look at the past 100 years, we would also get attractive returns, although U.S. investors weren’t allowed to hold gold during part of that time. Most investors appreciate an 8.3% annual return; there are a couple of challenges, though:

  • It’s not been a smooth ride; investors buying gold at the peak in 1980 would have had to wait a long time for the price of gold to recover.
  • There’s no guarantee that the price of gold will continue to rise over time.

It also turns out that the purchasing power of gold hasn’t changed all that much: a gallon of milk or a suit cost about as much in gold 100 years ago as they do today. This suggests:

  • Over long time horizons, gold has been able to retain its purchasing power.
  • Just as gold may be an unproductive piece of metal, the CPI may well underreport inflation. That, in turn, suggests that positive real interest rates may only be a competitor to gold if investors truly are able to retain or enhance their purchasing power holding with cash like instruments.

Let’s look at the crystal ball of what the future may bear. A valid criticism of the ‘real interest rate’ chart above is that it looks at current rather than future inflation. Central banks have various ways to gauge future inflation expectations. Without getting into technical details, the charts below, one for the U.S. and one for the Eurozone, are supposed to eliminate short-term noise, focusing on longer-term inflation expectations:

The red line refers to the 2% inflation target; central bankers get worried when expectations of longer run inflation are at risk of falling ‘too low.’ That’s why European Central Bank head Draghi is ringing the alarm bell. In the U.S., Bernanke historically announced another round of QE when the above chart approached 2%. So while the ECB turns on the printing press, the Fed, looking at similar trends, shrugs them off, blaming low oil prices for distortions in this way of looking at the data. Never mind that this way of looking at the data is supposed to filter out the short-term effects of oil.

We draw from this:

First, central bankers are prone to interpret the data to serve their agenda. We can make lots of arguments why QE in the Eurozone is inappropriate; and, conversely, the Fed appears to engage in a make believe assessment of the economy. The future policy course may increasingly be driven by ideology.

With interest rates low, we have our doubts real interest rates are going to move high anytime soon. In the context of this discussion, it is high real interest rates that pose a threat to the price of gold.

Let’s look at another forward-looking measure: the Congressional Budget Office’s (CBO’s) outlook on deficits. No, this isn’t about the budget proposal projecting deficits over the next decade, but the most recent CBO outlook projecting long-term deficits:

Many criticize CBO numbers as being notoriously inaccurate. Maybe. But in our analysis, in a decade from now, the U.S. may be paying $1 trillion more a year in interest expense alone should the average cost of borrowing go back up to its historic levels. There may not be money for other government programs left; one way of looking at the challenge is that the biggest threat to national security may be the deficit because there may not be any money left for the defense budget. Let’s not scoff at Greece and Europe: the U.S. has related challenges.

To us, this avalanche of expenses may provide an incentive to keeping real interest rates low to help the government finance itself. Indeed, we think it may be difficult to have positive real interest rates for an extended period of time over the next decade. I would like to caution that when I explained my concern to a Fed policy maker, he said this outlook is unrealistic as it wouldn’t provide a stable equilibrium. My response: I never suggested this would be stable.

We can avoid the explosion of deficits with major entitlement reform. We could introduce means testing to receive benefits; we could increase the age at which social security gets paid. There are solutions to these problems, but they are politically very difficult to implement, no matter who controls Congress. The Europeans have tried austerity. In the U.S, we may favor the magic wand of the Fed. Having said that, many U.S. benefits are indexed to inflation, causing the printing press to be of little relief unless unless the CPI under-states inflation.

Another way to look at this is that this is the first time in U.S. history that both the government and consumers have what we believe is too much debt. Foreigners – that don’t vote – own much of this debt. This provides an incentive to debase the value of the debt. Differently said: interests of the government and savers are not aligned. More broadly speaking, investors – be that in the U.S., Japan, Europe, can’t rely on their government to preserve the purchasing power of their savings.

We don’t need to be right about the future. As long as there’s a risk that we are right, it may be prudent to take it into account in an asset allocation.

This article is written by Axel G Merk of Merk Investments LLC and with his kind permission, Gecko Research has been privileged to publish his work on our website. To find out more about Merk Investments, please visit:

Unconventional Investing for Unconventional Times

By Marin Katusa, Chief Energy Investment Strategist, Feb 10, 2015

What is Casey’s Club?

Let me first share the evolution of Casey Research and why I think if you’re a serious speculator, you need to be part of Casey’s Club.

A little over a decade ago, I was a Casey subscriber. At the time, there was only the International Speculator, and the firm was made up of only Doug Casey and David Galland.

But as I got to know the power players in the industry, I learned that the savvy speculators made their millions investing via private placements (PPs) and clip and collect warrants.

Out of the gates, investors in PPs have an advantage over investors who buy in the open market. First off, you pay no buying commission to your broker when you buy via a private placement. More important, by buying into a PP, the investor gets exposure to warrants.

A warrant is essentially the right to buy a stock for a predetermined period of time at a fixed cost.

In the Casey Energy Confidential, we recommend both buying in the open market and private placements.

In an energy market where investors are getting slaughtered, we made money in 2014. How? Warrants. And we don’t even include the warrants in our portfolio performance until the warrant position is sold and gains are realized.

In 2014, I sent out 59 alerts to Casey Energy Confidential subscribers.

Let’s use an example of a stock we made great money on in 2014.

On October 29, 2013, I sent out an alert for subscribers to buy Blackbird Energy (BBI.V) in the open market under C$0.06 or in the private placement.

The PP units were priced at C$0.09 with a full, five-year transferable warrant priced at C$0.15.

Here’s a video with the president of Blackbird Energy, Garth Braun, for everyone to see not only the current success the company has achieved, but how Casey Research was the first firm to initiate coverage on Blackbird Energy.

In the summer of 2014, Garth boarded a bus with other industry experts, including Frank Holmes, Stephen Quin, Marcel de Groot, Nolan Watson, Amir Adnani, Paul Matysek, and many others, along with many Casey’s Club members, for a day trip that I organized to two operating mines in British Columbia.

During this trip, I put together a booklet of every company and president who joined me on the bus trip that day.

The Casey’s Club members who joined the trip literally got to sit beside and watch the best in the business talk about their companies, their goals and challenges, and most important, got to know the key players in the industry.

I put together that trip not because it’s my job, but because I love this business, and it was a fun way to spend a Saturday in the summer.

Now, the only oil and gas executive I invited on this specific trip was Garth Braun, and as with all the executives, I called up Garth and asked him to give his pitch to everyone on the bus.

I stated while on that bus that I believe Garth’s company, Blackbird Energy, would at least double, and everyone should consider investing in it. I clearly explained that we took a big chunk of the late-2013 financing, and our subscribers made over 300% gains in a choppy market, including the warrants.

Garth’s stock went up over 100% shortly after that bus trip, and the only people on the bus who had heard of the company were the Casey’s Club members who read the Casey Energy Confidential alert in late 2013, and the subsequent updates.

I think BBI will go higher, for all the reasons you will see on the video link above.

Our Casey Energy Confidential subscribers made a good score on an early-stage oil company in a market where energy stocks have suffered.

When you join Casey’s Club, you get access to all of my favorite PPs that Doug and I are writing checks for at the same price as not only us, but other industry experts. This is how retail investors, stock brokers, and fund managers can get exposure to what I’m doing in the resource sector.

Some may look at what Casey’s Club costs and think it’s pricey. I see it as completely the opposite. I would have paid many times the price a decade ago to have access to what Rick Rule, Doug Casey, and other industry experts are doing with their own money.

It didn’t exist then, so I started including the best available private placements in addition to the other services the alerts provide. The first newsletter in the world to recommend participating in PPs in the junior resource sector was mine, which I started in 2007.

If you’re a serious speculator, I believe you owe it to yourself to try out Casey’s Club and see what I’m doing. The markets are awful, but it’s your choice if you want to make the markets work to your advantage and get exposure to full five-year warrants like the Blackbird example above.

You may think you’re a contrarian, but to succeed you need to take action, and I’m offering you a chance to get in on the deals that I am doing, at the same price.

It’s your portfolio, so do yourself a favor and try it out.