Monday, June 20, 2016

Vintage Watch Collecting: An Economically Viable Alternative Investment Scheme?

Given the Brexit scare and an increasing number of  Eurozone banks resorting to negative interest rates, are rare vintage watch collecting fast becoming an economically viable alternative investment scheme? 

By: Ringo Bones 

With the Brexit scare and an increasing number of Eurozone banks resorting to negative investment rates – i.e. the client will have to pay these banks a set fee in order to keep their money safe instead of the bank client’s money earning a set interest rate, the investment savvy are increasingly looking into alternative investment schemes like prime real estate or vintage wine. But as of late, the once rarefied world of rare vintage watch collecting had attracted the attention of investment pundits. 

In major metropolitan centers of East Asia, like Hong Kong and Singapore, the amount of money changing hands in the rare vintage watch collecting scene had experienced a 68-percent rise over the last decade despite of the global credit crunch of 2008. Dr. Bernard Cheong a noted rare vintage watch collector who has been at it since the age of 15 has recently been on the East Asian investment spotlight after giving a press interview showing the ropes of how to make money in the relatively esoteric hobby of rare vintage watch collecting.   

But watch expert Su Jian Xian warns that potential investors should be careful because rare vintage watch collecting requires specialist knowledge, that more often than not, is only available to those seasoned rare vintage watch collectors – if you want to get the most out of your initial investment. The fickle sway of fashion often dictates item valuation. Rare vintage watches that fetched 10,000 to 12,000 US dollars back in 1998 and 1999 could have since doubled or probably have halved in value today, but who knows, that World War I era Patek Philippe wristwatch that you’ve inherited from your grandfather back in the early 1990s might probably cost a tidy sum by now which could make rare vintage watch collecting one of the most lucrative alternative investment schemes you ever delved into.    

Tuesday, April 5, 2016

Are Offshore Structures and Tax Havens Illegal?

With the recent Panama Papers Leaks of the offshore law firm Mossack Fonseca raising the issue yet again, are offshore structures and tax havens illegal? 

By: Ringo Bones
Ever since the Occupy Wall Street movement of few years ago went global, most of the world’s richest one percent had been viewed with increasing suspicion and trepidation by the rest of us and with the recent Panama Papers Leak of the offshore law firm Mossack Fonseca, it is as if a global class warfare is on the verge of inability. But given that most of us average income folks could serve lengthy prison terms if we fool around with paying our taxes, are offshore structures and tax havens technically illegal? 

At present, using offshore structures to lessen one’s tax burdens is entirely legal. There are many legitimate reasons for doing so. Business people in countries such as Russia and Ukraine typically put their assets offshore to defend them from “raids” by criminals and to get around hard currency restrictions, while others use offshore structures for reasons of inheritance and estate planning. But why is it that some people who use offshore structures are viewed as crooks? 

In a speech last year in Singapore, the UK Prime Minister David Cameron said “the corrupt, criminals and money launderers” take advantage of anonymous company structures. The government is trying to do something about this. It wants to set up a central register that will reveal the beneficial owners of offshore companies. From June, UK companies will have to reveal their “significant” owners for the first time.   

The records were first obtained from an anonymous source by the German newspaper Sϋddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners – including the Guardian and the BBC. The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among the 143 politicians, their families and close associates from around the world known to have been using offshore tax havens and a significant number of them are incumbent members and immediate families of the Beijing Communist Party. Ever since the news about the Panama Papers Leak went global, Baidu – The People’s Republic of China’s equivalent of Google and the only search engine authorized by the monolithic communist party to operate in Mainland China – had been blocking the story for frat that it may be just a “Western Plot” against the Beijing Communist Party.

A 2-billion US dollar trail leads all the way to Russian strongman Vladimir Putin via the Russian president’s best friend – a cellist named Sergei Roldugin – is at the center of a scheme in which money from the Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married. And despite the legality of the leaked documents, Russia’s official news agency had dismissed the revelations as a “Western plot” against Vladimir Putin. 

Among the other national leaders revealed by the Panama Papers Leak to have offshore wealth are Pakistan’s Prime Minister Nawaz Sharif, ex-interim prime minister and former vice-president of Iraq Ayad Alawi, president of Ukraine Petro Poroshenko, Alaa Mubarak – son of Egypt’s former president and the Prime Minister of Iceland, Sigmundur Davíỗ Gunnlsughsson. And what irked the international community most is on how Mossack Fonseca helped governments that are under imposed economic sanctions by the UN Security Council to still do business with impunity – like North Korea and Russia since the unlawful Donetsk Region annexation by the Putin regime.    

Mossack Fonseca is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee. Other services include wealth management. The firm is Panamanian but runs a worldwide operation. Its website boasts of a global network with 600 people working in 42 countries. It has franchises around the world, where separately owned affiliates sign up new customers and have exclusive rights to use its brand. Mossack Fonseca operates in tax havens including Switzerland, Cyprus and British Virgin Islands and in the British crown dependencies of Guernsey, Jersey and the Isle of Man. 

Monday, March 28, 2016

Is Inflation Good For The Economy?

Even though it is the ruin of every country’s mismanaged economy, but did you know that the right amount of inflation is vital for a thriving economic system? 

By: Ringo Bones 

It is one of those things that either too much or too little is a bad thing and even though there had been news in the past that it was already cited as the ruin of some country’s mismanaged economy, the right amount of inflation is vital for the sustainable management of a thriving economy. But if it is important, how much inflation is necessary to make an economic system truly sustainable? 

At present due to weak energy prices since the latter half of 2014, global inflation levels are currently at unsustainably low levels. An annual inflation rate within 3-percent, give or take a few percentage points, is necessary for economically viable conditions. While too much inflation – the rapid increase of price of goods in too short a time - is usually a sign of an mismanaged economy or a result of some economic sanctions that will eventually lead to economic collapse, too little of it will foster inflation’s “evil twin” called deflation – where prices of goods decline over time. Deflation can be disastrous for a thriving economy because consumers will keep on postponing their purchase until prices fall further which could stifle economic activity to a virtual standstill. 

Keeping inflation rates at just the right levels was the raison d’être for the decision of the U.S. Federal Reserve to increase the overall interest rates before the end of 2015 but the Fed indefinitely postponed further interest rate increases for fear that it may stifle the ongoing economic recovery of the United States. But most economic experts say that if the Fed keeps on postponing their other scheduled interest rate hikes, the U.S. economy could experience deflation problems by 2017.  

Sunday, March 27, 2016

Moody’s Downgrading Hong Kong’s Credit Rating: Unprecedented?

Despite being a traditionally viewed as a relatively safe investment for institutional investors, is the recent credit rating downgrade of Hong Kong by Moody’s unprecedented?

By: Ringo Bones 

Back in Marsh 12, 2016, the credit rating agency Moody’s downgraded Hong Kong’s credit crating to Aa1 and changed the outlook to negative from stable. Even after the July 1, 1997 handover back to China, Hong Kong has always been seen as a traditionally stable investment haven for institutional investors but the recent rationale for assigning a negative outlook by Moody’s is largely due to the increasing political risks of the hard-to-maintain policy of one country two systems as in “political linkages with China risk weighing on Hong Kong’s institutional strength. 

With the universal suffrage protests back in 2014 that virtually brought Hong Kong to a standstill to the recent “detainment” of bookstore proprietors who stock books who are critical with the Chinese communist party, it seems that China’s curbing of the political freedoms previously enjoyed by Hong Kong even after the 1997 handover from Britain are seen by many institutional investors around the world as a clear and present political risk that could affect the long-term economic outlook of Hong Kong despite enjoying a special administrative status. 

And given the recent economic slowdown of Mainland China many institutional investors see the economic and financial linkages of Hong Kong with the Mainland turn from positive to negative spillovers. Overall, Moody’s assessment is that banking-sector risk for Hong Kong’s government has increased. Although to most institutional investors who are worried about the declining freedoms in Hong Kong, Mainland China’s inability to maintain the one country two system policy of its special administrative cash cow of a region sends a big impression that it is the reason for the recent investment ratings downgrade. 

Sunday, March 6, 2016

UK Exit From The EU: Economically Catastrophic?

While Euro-skeptic MPs and economists of both sides of the issue weigh it out, is UK’s exit from the EU or “Brexit” as economically catastrophic as it is predicted to be?

By: Ringo Bones 

Euro-skeptic MPs often pointed out the several billion UK£ worth of British taxpayers’ money being handed over o Brussels every year only had a marginal benefit to the UK economy and has suggesting that the UK is better off – economically – leaving the European Union. But while there are several politicians in the Obama Administration suggesting that a Britain leaving the EU or “Brexit” as it is now popularly called will be catastrophic to the UK economy, is a Brexit not as economically catastrophic as it is portrayed to be? 

The European Union is the UK’s biggest trading partner consisting of 670 billion US dollars worth which consists 50-percent of the UK’s annual GDP. The current trade deals that the UK has with the 27 other EU member countries also applies to the other 68 nations the UK currently has trade with. Exiting the EU would make the UK reestablish a new trade deal – 35 separate new trade deals need to be ratified with other trading nations in fact - just to keep its current trading status quo earnings. But would the UK’s imports to the United States be suddenly subjected to excessive tariffs if it chooses to leave the EU? 

UK’s imports to the US will not going to be suddenly subjected to excessive tariffs because incumbent conservative politicians in Capitol Hill will keep this as low as it did when it is still in the EU. The United States is the UK’s second biggest export market which it currently has 54 billion US dollars worth of trade. Unfortunately, the talk of “Brexit” has recently affected the value of the UK£. The UK£ has lost 12-percent of its value since August 2015 due to the talk of a “Brexit”.