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How to Avoid Losing All Your Money

Politics / US Politics Apr 22, 2014 - 03:18 PM GMT

By: Jeff_Berwick

Politics

You know what's easier than making millions upon millions of dollars? Losing it...

This is the story of one sports great who thought he was investing conservatively. The problem? He was not investing conservatively at all. In fact he was investing in one of the riskiest assets available today - government bonds. His financial advisor did not advise him of that.


Before we get to his story, let's paint a picture of his home country, Puerto Rico. To put it bluntly, it is mired in debt. Lots and lots of debt. Sound familiar?

According to Puerto Rico's representative in Congress, Puerto Rico's debt crisis is the result of the island's status as a United States territory.

For 115 years Puerto Rico has been an US territory, and its people US citizens since 1917.

For nearly a decade the Puerto Rican economy has been contracting. It has had to borrow to pay bills. The island's $70 billion in debt has been downgraded to junk by credit rating agencies in recent weeks. It's solution? To beg for more subsidy from the US government.

What used to be a tax haven is no more when it comes to Puerto Rico. In fact, even Time Magazine has suggested that thousands of US-based mom and pop investors stand to lose their island shirts in "the next financial catastrophe", Puerto Rico. That is just what happens when an island of 4 million accumulates $70 billion in debt. 51% of the island's population is on welfare.

The island's debt crisis has not persuaded well-to-do people away from purchasing Puerto Rican government bonds. In so doing, many have nearly lost it all. Take Puerto Rican boxing legend Felix "Tito" Trinidad Jr., for example.

After winning belts in three different weight classes, earning $90 million throughout his career, Trinidad will be inducted into the International Boxing Hall of Fame in June, alongside Oscar De La Hoya. There's just one thing...He's basically broke...Despite his success, Trinidad has but $9 million in assets and a whopping $27 million in debt.

Where was his error? That is simple...He spent $63 million in Puerto Rican government bonds! The global economic crisis has not been kind to these bonds, making them practically worthless.

So, what is the moral of the story? Felix Trinidad lost everything, for all intents and purposes, because he invested in government bonds. This might seem like far-removed story for Americans, but the truth is this will happen to many Americans who are told that government and corporate bonds are safe assets, just as Trinidad thought.

While Trinidad was able to strike a debt deal because of his notoriety, let's face it - you probably wouldn't get the same treatment. He is a national hero.

PUERTO RICO AS AN ESCAPE PLAN?

Americans have moved to or put money in Puerto Rico for its tax benefits, but they will be dissapointed to learn that Puerto Rico is a nanny-state (in the most intimate way possible) of the US and the government there will likely be taken over by the US government if not the International Monetary Fund and forced to restructure the economy. As you can see, the nation is already suffering from a failing economy and too much debt.

It is not likely that any Puerto Rican tax benefits will last long. When considering the bigger picture, there are many places more desirable to live than Puerto Rico, which will continue going downhill economically due to its dependence upon the US. It will probably help the US in its own decline as well. The truth of the matter is this: Puerto Rico is too interconnected with the US to experience any meaningful growth.


A much better gateway to freedom is to procure a second passport in a low or no tax jurisdiction and then move outside of the West completely to a freer country than both the US and Puerto Rico and live as a Permanent Traveler globetrotting this beautiful little ball floating in space.

Puerto Rico basically has no hope of getting out of this mess if it continues on the path it has been on of slashing spending and raising taxes. This is not a blueprint for growth. To be fair, things have grown so dire in Puerto Rico, the country is thinking about legalizing marijuana and prostitution - a much better path than taxes. 

The TDV Wealth Management Crisis Conference is designed for people with the assets and abilities to move considerable funds offshore from the US. The major problem many of these folks face is sorting through the details of what makes most sense for them now. That is where The Dollar Vigilante comes in. Our team of international financial experts can do this with you and for you. There is no better time than now..Don't get stuck in-between like Trinidad did. Know the risks and make the right decisions for you and your family. 

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

© 2014 Copyright Jeff Berwick - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jeff Berwick Archive

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