I often write on Quora.com, where I am the most viewed writer on financial matters, with over 594.1 million views in recent years.
In the answers below I focused on the following topics and issues:
- What are the benefits of being an expat living abroad from a taxation perspective?
- How do I keep my money safe from inflation?
- What is a money market fund?
- Will cryptocurrency destroy central banks?
- What are the reason that marketing has become so important in business?
- Which Western countries are still decent and not in decline?
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What are the benefits of being an expat living abroad from a taxation perspective?
It depends on;
- What your nationality is. Some countries like the US and Eritrea have taxation by citizenship.
- How many ties you have to your home country. The UK has a ties test. Canada and Australia are stricter. Fewer countries these days automatically allow you not to pay taxes back home just because you are spending fewer than 90 days in your home country.
- Where you go to live. Of course, places like the UAE or Cayman are more tax-efficient than most European countries.
- What are the best alternatives to buying gold?
Basically, if you are American or a US-specified person (for example green card holder), you need to get rid of your US ties.
An example of this is Eduardo Luiz Saverin:
He gave up his US citizenship and changed his residency.
Every year, a record number of Americans are doing the same, with many others considering it.
For most nationalities, you need to change your personal and tax residency, and make sure you give up many ties to your home country, and don’t spend too many days back home
You can keep some ties like keep bank accounts open, but better to cancel gym memberships, bank and invest offshore etc.
If you keep too many ties open, the tax offices can sometimes argue that you were only ever planning on temporarily going overseas.
Obviously get proper tax advice if needed, but far easier to cut as many ties as possible.
It isn’t like you have much to gain, in any case, by keeping a lot of these ties open.
How do I keep my money safe from inflation?
The main ways are:
- Get rid of high yielding debt
Not all debt is bad, but if inflation increases, interest rates tend to go up to combat that very inflation.
Therefore, you should expect interest rates on the likes of credit cards to increase.
As it isn’t easy to find investments that pay out 15%-20% per year, it is best to get rid of these debts first
2. Budget
When people actually look at what they are spending money on every month, many can find ways to cut back.
3. Invest into yourself
The best doctor in town can increase his or her prices.
So can the best language teacher or dentist.
Being very good at something is always a hedge against inflation.
4. Invest into assets
Don’t save, apart from an emergency pot of money.
When inflation increases, fixed return investments like cash and government bonds become less attractive, unless the rate of return is very good.
Remember getting 4% with inflation at 8% is worse than getting 0.1% when inflation is at 2%-3% per year.
It doesn’t make sense to focus on saving unless the rate of return on offer in the banks beat inflation.
5. Don’t get fooled by what an inflation hedge is
In truth, assets such as commodities and gold have had a very questionable relationship with inflation.
Sometimes they have done well in inflationary periods, and sometimes not.
Charts like this show some correlations, but the data behind them is questionable:
Some people even said Bitcoin would be an inflation hedge, and that turned out not to be the case.
Focus on having the right asset allocation, because inflation can come and go.
We saw that in 2007-2011.
In 2007 there was worries about inflation with oil hitting $147.
Inflation turned to deflation, or low inflation at least, in 2009.
Inflation reappears in 2010, then was low in most countries from 2011 until last year.
What is a money market fund?
It is a kind of fund that only funds short-term debt instruments that are low risk.
So, low-risk and low-return.
Traditionally money market funds haven’t received a lot of publicity.
That is because most investors focus on stocks, bonds and REITs.
Those who don’t want to invest stay in cash in a bank account.
That has changed recently with the banking crisis.
As interest rates have increased, banks have been under stress.
They have increased how much they are offering depositors, but money market funds are paying more than the banks, for comparable levels of risks.
Therefore, some people are talking about a money market fund bubble:
As you can see, they tend to become more attractive when interest rates are higher, or during crisis such as 2007–2008.
Will cryptocurrency destroy central banks?
This is likely to become one of the biggest delusions about Bitcoin – well-meaning libertarians are likely to be disappointed.
Before answering explaining why I do find it interesting that this question was asked about six years ago.
Many people forget that Bitcoin’s original purpose was to be a currency, not an investment, and some people investing in it hoped it would bring down governments or central banks.
Those with long enough memories will remember that the internet was supposed to harm governments power, when it has increased them in many ways.
If you really want privacy from government, you should live off the grid, and use cash which can’t be traced.
Why was Bin Laden not caught for about a decade?
He lived off the grid, without internet, phones or credit cards, and used other humans (such as couriers) to transit messages for him.
Other people on the run do the same. Organized criminals use $100 notes.
If they use the internet and other technologies, they will be caught more easily.
Now let’s turn to Bitcoin. What are we seeing already? Central Bank Digital Currencies (CBDC).
China is trying to use it alongside a social credit system, to allow for more control.
Even in democracies we are seeing some changes. For example, the former UK leader, Tony Blair, is again arguing for ID cards, which would work in tandem with new technologies.
This has resulted in more legitimate people, who aren’t criminals, becoming worried about state power, especially in a post-Covid and lockdown world.
Technology is a double-edged sword for governments. It is a threat but also an opportunity to control more.
So, the reality is, if you really want to limit state power, good old-fashioned cash is the way to go.
Yes, it is created by governments and can be controlled by the state up to a point, via refusing to accept old notes as legal tenor.
Yet once it is in circulation, it is harder to trace.
It reminds me about those people who have said Bitcoin would become a hedge against inflation, recession and god knows what else.
It hasn’t been. It has merely been a speculative investment which gives some investors diversification.
Whether digital currencies succeed or not is an open question, but it is very unlikely they will replace the state, regardless of whether you think that is a good or bad idea.
I personally have sympathy with anybody who wants to limit the power of the state, but doubt Bitcoin will do it.
What are the reason that marketing has become so important in business?
Most companies don’t exist in a vacuum without competition.
If they don’t, it either won’t last for long or it is a small market.
Therefore, getting well known in a particular niche is key.
Most businesses aren’t known by enough people to get big – they are neither famous nor infamous.
As soon as you get known by enough people, some will gravitate towards the business and others won’t.
That beats organic growth from client recommendations, and well-marketed companies can still get that organic growth as well.
Ultimately, you don’t have to become as famous as Coca-Cola or Amazon, but becoming known in your niece is key.
There is another thing as well – margins and how much you can charge.
Take an advertising business.
How much can you charge for making a blog post?
Not that much, even if the blog posts can gain a company revenue.
In comparison, many digital marketing companies can charge $2,000-$6,000 a month for social media ads and a whole marketing strategy.
That is because it is easier to position how an agency is unique, whereas you aren’t unique as a blog writer unless you can say something like:
- I used to write Obama or Clinton’s speeches and content
- I can prove my content generated $1m for X and Y company.
By the same token, some firms are great at marketing and even sales, but have bad cashflow, because they spend too much money.
So, when investing in companies as well as a private investor, prioritize those that have good marketing and accounting/finance.
Business is just getting money in, without spending too much money in return for that.
Which Western countries are still decent and not in decline?
Firstly, it is a half truth at best that all of the Western countries are in decline.
The US, the Republic of Ireland and many other Western countries have actually outgrown the global economy regularly in the last ten years.
Take the US. Since 2012, the US has outgrown South Africa, Russia and Brazil – three of the BRICS countries.
It has also sometimes outgrown China in common currency terms in the last decade- in other words adjusted for currency movements as the USD has been appreciating.
The converging growth between the two largest economies has also got many forecasters to predict that China will never overtake the US, will do so briefly or will do so later than expected:
You also have to be careful with statistics – as the old saying goes, lies, damn lies and statistics.
Small increases for a huge pie can mean more than huge increases on a small pie.
Let’s take an example
In 2000, the US had a 10.2 trillion economy, China 1.2 trillion. Now it is 25 trillion and 18 respectively.
GDP per capita was $35,000 and $1,000 in 2000, and now $70,000 for the US and $12,000 for China.
Now there are two ways to read those stats. One way is to say the gap has closed. The US had an economy about 8 times bigger than China, and now it is only about 30%.
Yet another way is to say that the US has added $35,000 of income in over twenty years, which is more than most countries (including all the BRIC economies) have in total.
They have also added about 15 trillion to their GDP, which is almost the same China’s entire GDP, and much bigger than India’s.
It is a mathematical reality that it is difficult to maintain high growth rates, but even low growth rates are effective on a big pie.
The same thing is happening with China now. They will likely struggle to maintain high growth rates, but even a 2%-3% average growth rate will dramatically increase the size of their economy over time, regardless of whether they overtake the US or not.
So, the issue isn’t “Western decline”, it is that many countries have struggled to maintain decent growth since the 2008 Global Financial Crisis.
The exceptions have been some frontier and emerging market countries, and a handful of developed and high-income countries.
In terms of Western countries in the “best” shape, those are probably
– Australia
– The US
– Countless smaller European countries like Norway, which maintain good standards of living.
What is true is that apart from say Monaco, there aren’t many low-tax Western countries left.
There has been a millionaire migration for this, and other, reasons recently, to places like the UAE and Singapore:
And that is one thing I have learned over the years – follow the money.
There was a huge increase in Chinese and Russian people looking for second passports and citizenships in the 2010–2014 period, despite the rest of the world thinking that all was well locally.
The fact that some Western countries are losing millionaires and others are gaining them should tell you something.
What are the best alternatives to buying gold?
It depends on what you want to achieve.
If you just want long-term investment success, then stocks, bonds and REITs have all outperformed gold long-term.
In comparison, if you are looking to diversify into uncorrelated assets, you have the following options:
- Commodity indexes.
Some of these ETFs and funds will own gold, and others won’t. They will likely be more volatile than gold because some commodities move up and down fast.
Look at the way that oil has bounced all over the place over the decades!
2. Gold mining stocks.
Gold doesn’t produce a dividend or coupon. A gold mining company can find many ways of making money from gold.
Just as some oil companies can make money when the oil price is going down as there are many ways to make money from a barrel of oil, the same is true of gold, even though it is easier to make money when the gold price is going up.
3. Hedge funds.
In the stock market, it isn’t easy for hedge funds to beat the market long-term. Warren Buffett had a famous bet with a hedge fund manager that he wouldn’t beat the S&P500 over a 10-year period. He won the bet.
Most hedge funds don’t even claim that they want to beat the market these days. They are merely there to reduce volatility and have an uncorrelated return.
When it comes to gold, in comparison, the returns only tend to match inflation long-term. Even advocates of gold admit it is just a source of value that doesn’t erode to inflation.
Gold isn’t a good vehicle to beat inflation comfortable over the long-term, even if it sometimes does. Therefore, some hedge funds focusing on gold can actually beat the gold price.
As an aside, don’t get over excited when gold approaches a record high, as it has done recently.
Many people get in at the height, which is a huge mistake.
The chart below looks at one of the major US stock indexes, the Dow Jones, and compares it to the price of gold.
As you can see, whilst gold sometimes outperforms over periods of time, it doesn’t long-term.
That isn’t to mention the price of storing, and insuring, physical gold.
If the graph was even more long-term, the results would be more striking.
¿Le duele la indecisión financiera? ¿Quiere invertir con Adam?
Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
