I just won a substantial bet and this is what went down. I was listening to an acquaintance agonize about finding a good financial advisor. He was concerned about optimizing his IQD cash in, minimizing his tax liability and safeguarding what was left after he his bills were paid.
After asking him a few basic questions I commented that no matter who he went to or what he asked - the value of the advice would be severely limited. This led to a discussion about what he believed, thought he knew and the questions I posed that he had not considered. We ended up betting the price of the consultation fee for the advisor he was considering. The bet was simple. I bet he would choose a different advisor, have different questions and have different priorities, if he educated himself enough to answer a series of questions I laid out for him.
It took him several weeks of reading and fact checking to distinguish between what he had believed without questioning, what the important questions were for him, how to get meaningful answers and reassess his viewpoints.
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In the excitement and hyperbole regarding recent developments in Iraq, several things are apparent:
How is that possible? Well it primarily depends on your desire to sort fact from fiction, what you believe in and your risk tolerance. The hardest part for most people is sitting down and having a heart to heart talk with themselves (trusted friends and family) about the last 2 portions. (This is based on researching my book and the feedback from readers)
It is relatively easy to look at your currency investment and figure out how much money you would gross if the dinar attains a status of anything from .50 to 3.50 USD per Dinar. With a small dinar investment you can quickly look at a current tax table and have a worst case scenario of your tax liability without any deductions. Once you get into the top tax brackets and are paying almost 50% in taxes you might want advice on legal ways to minimize the bite the government is taking- and you might be quite happy paying the full freight. What is your attitude on this? Are your beliefs a simple reflection of what you grew up with or inherited? Did you thoughtfully examine and research your current monetary attitudes and beliefs?
To establish a working premise, we will assume you are interested in legal ways to reduce your tax load, safe guard your money and make it grow if possible. For those of you who are not concerned with these goals or only have invested enough to hopefully pay your outstanding bills – no need to read further. If you don’t want to possibly educate yourself or simply want a magic silver bullet in the form of someone giving you the answers or telling you what to do – stop now!
For those still reading, let’s start by asking yourself some basic simple questions about trust and safety.
Based on what you have read and learned do you believe that your government is practicing good economic policy, protects the small investors and is keeping the value of the USD safe and strong? Do you trust your politicians to make the choices that represent your best interests?
Do you have any experience of inflation over the last 5 years (gas, food, clothing staples)? Do you believe the government statistics that claim little to no inflation in the cost of living? Do you believe the economy is on firm ground and recovering?
Have you read the numerous articles about the Bond and stock market bubbles that may soon explode as a result of the trillions in new debt and printing of money? Have you read the predictions pointing to far more unpleasant consequences than the fallout from the 2008 real estate bubble explosion?
Do you trust that the USD will remain the only reserve currency? Do you know what it means to the cost of imported goods in the USA if and when there are other reserve currencies? Do you believe that the US government will balance its budget and be able to pay its debts with or without higher interest rates or tax increases?? Do you trust your banks and the government to the point that you would feel safe and secure with all you funds tied up in banks?
Now come the really interesting questions that you need to ask yourself (and later any advisors). Do you feel, knowing what you know about currencies, banking, our economy etc. that you are completely safe with all your eggs in one basket? Put another way do you believe that the advice given by good financial advisors “diversify your assets” applies to you?
Would you want to have all your savings (assets and money) in just one currency? The IQD, the Dong, the Euro, the USD? If you have everything in just one country (with the exception of precious metals) how safe are you if there is inflation, the currency loses value internationally, the economy is not strong. Do you believe banks could close, capital controls could be imposed, pensions or retirements funds could be reduced or vanish? You do realize that all these items have already occurred in the USA including the Federal government confiscating personal gold under Roosevelt. You have considered all this, Right?
How strongly do you trust the media to report accurately and independently investigate issues of importance on both the domestic and international levels? How many different news sources(outside the USA) do you check and compare coverage’s?
As a perfect example of the above questions, how much accurate information have you learned from USA sources (banks, investment advisors, politicians, TV, newspapers, radio etc.) about the IQD speculation and developments? Note: I used the word speculation not investment. In the world of cautious “minimize risk” advisors that I follow - the operative word is speculation not investment. Gold, real estate, currency, stocks, bonds, treasuries – the risk factor on these various economic instruments is so uncertain (other than the possible immediate term) that to call them investments is to give a false sense of security to anyone wanting a “safe” investment.
In their views (and mine) when someone starts talking about something being a safe investment in the current economic conditions – you should run for the door. Consider a nice “safe” FDIC insured savings account yielding about 1-2%. How is it safe when you are losing money daily against the actual rate of inflation? After questioning a FDIC representative about the terms of their insurance I was told that the government always paid claims promptly provided you were simply a depositor at a bank not a shareholder. When pressed as to how long the government had to make payment I was reluctantly informed there was no timeline but timeliness was a priority.
What do you know about how easy and legal it is to have investments, bank accounts, assets in another country? What are the tax advantages? How does having money held abroad in another currency act as an insurance policy?
Do you believe in insurance, is it important to you and why? If you believe in home, health, vehicle and life insurances because they protect you from the financial disaster of a highly unlikely probability . . . if all your financial eggs are in one basket called “Only USA”, then based on government debt, the economy and the other things you are researching - do you need insurance? You know the slogan “Plan A is only as good as Plan B.” Do you have and need a Plan B?
OK, this is by no means a complete list of questions to ask yourself about how to get good financial advice. It simply points in the direction of things to consider. Obviously you can’t get top advice if you don’t know what questions to ask a potential advisor. For people who want safety and minimal risk you may want something other than a “Only USA” approach. Your knowledge, comfort zones and philosophies will determine the questions you ask advisors and whether you seek guidance from people who hold a limited or worldview.
If you feel diversity and having a plan B is important – then get advice that reflects your expanded view. While we hear about the global marketplace and how interconnected world economies are, it is unlikely that the average investment advisor knows much about foreign currencies, real estate, stocks, and other investments. You may get advice about US hedge funds that invest in foreign companies. If you get an advisor recommending various investments in non US instruments do you think that is unpatriotic? You need to determine the critical questions and come to grips as to whether your beliefs/facts/philosophy are up to date and serving you.
The real point is, taking a moment to question the status quo, determine what is real and what is myth and then chart a course that you feel is representative of your best research and the current situation. Forget conventional thinking and doing things the traditional way - figure out for yourself what current conditions are calling for in terms of new approaches.