The scandalous “Panama Papers”, a collection of 2.6 terabytes of secret data from Panamanian law firm Mossack Fonseca, reveal shockingly widespread corruption and tax evasion among the global elite. The Panama Papers have implicated many politically powerful people in shadowy financial dealings, including the Prime Minister of Iceland, Russian President Vladimir Putin’s inner circle and numerous upper echelon Chinese Communist Party family members, among others. Complicated trusts, shady offshore companies and hidden foreign real estate and share holdings are apparently as common among the global elite as grains of sand on the beach.
In light of the Panama Papers, you could be forgiven for thinking that the entire international establishment is corrupt. You wouldn’t be wrong, either. The political system really is biased toward the super-rich and politically powerful while the working man gets no relief from unyielding regulations and onerous taxes. And yet discreetly building wealth is a goal that many of us common folk still secretly hope to pursue.
Most of us, understandably, have no chance of replicating the complex trust funds and offshore holdings detailed in the Panamanian Papers. It is simply a non-starter, at least if your net worth is below about 10 million dollars. However, there are certain overlooked assets available to ordinary people who value anonymity and discretion: cash, crypto-currencies, bullion and fine art and antiques.
Cold, hard cash is the first option. While hoarding a stack of hundred dollar bills is not viable over the course of decades due to the corrosive effects of inflation, it is certainly feasible for a few years or potentially longer. Cash is anonymous, discreet and, best of all, accepted absolutely everywhere!
Cash’s biggest problem is that once you withdraw it from the bank, you bear the risk of it being stolen or accidentally destroyed. Also, the U.S. federal government likes to track large (typically $10,000 or greater) cash transactions. Even so, a few hundred or even a few thousand dollars quietly secreted in a safe or other well-chosen hiding spot in your house could potentially be very useful.
A second possibility is the rapidly emerging field of crypto-currencies. A crypto-currency is virtual money that is “mined” via computers that perform extremely intensive calculations. Bitcoin is the most widely known example of a crypto-currency. The major advantage of storing a small portion of your wealth in crypto-currencies is that they are totally anonymous – even more so than cash.
And this desirable anonymity extends to any online transactions involving crypto-currencies as well. It is possible to purchase almost anything your heart desires online with the right crypto-currency – computers (Dell), tools (Sears), jewelry (Reeds Jewelers), a hotel room (Expedia) or even drugs (the dark net). Even Amazon.com accepts Bitcoin as payment!
As interesting as crypto-currencies are, they do have significant drawbacks. Most notably, they lack any intrinsic value. The calculations performed during the “mining” process, while consuming real resources in the form of electricity, don’t have any useful societal value, other than to confirm a crypto-currency’s block chain.
A block chain is a shared public ledger than keeps track of all transactions – and, by extension, all current balances – of a virtual currency. However, block chain calculations are entirely self-referential, with no value outside that particular crypto-currency’s ecosystem.
Another issue with crypto-currencies is deciding which one to choose. It can feel a lot like gambling on a horse race; you never know if you’ve picked the next Triple Crown winner or just another of the many, many losers.
The obvious leader in crypto-currencies today is Bitcoin. It is the first and most well known virtual money. Litecoin is also a rather well-established crypto-currency. Etherium is another up and coming option that is rapidly gaining exposure. Primecoin is notable because the intensive computer calculations used to “mine” the currency also serve to uncover new prime numbers – a feature that potentially makes the currency’s block chain “mining” calculations valuable to higher mathematics and, indirectly, humanity as a whole.
No discussion of off-the-radar ways to store wealth would be complete without mentioning precious metals. Gold and silver bullion have been perennial favorites for decades among prudent wealth builders. Compact, intrinsically valuable and widely recognized and accepted, bullion is one of the most perfect ways to quietly and discreetly stockpile wealth.
For as many benefits as precious metals have, however, there are still some drawbacks. Much like cash, they must be safely stored, either in a safe or other good hiding spot. Space constraints can also become an issue under some circumstances. While gold, platinum and palladium have excellent value density, large dollar amounts of silver can be somewhat bulky. In addition, transporting significant quantities of bullion can present certain distinct challenges, especially across international borders.
Bullion, however, is more of a wealth preserver than a true wealth builder. Over long periods of time (several decades or longer) gold and silver tend to keep pace with the rate of inflation. This is fine if your goal is to stockpile existing capital. But if you’re looking to actively build wealth, bullion should be a modest part of your overall portfolio rather than the majority.
This leads us to our final, and possibly best, discreet asset: fine art and antiques. Unlike bullion, high quality art and antiques have the potential to generate future returns well in excess of the rate of inflation. They are not merely stores of wealth. Instead, these luxury assets are really a claim on future GDP, independent of how that GDP is eventually produced.
This is one reason they are so powerful as investments. You don’t have to speculate in today’s stock market casino, trying to guess which company or sector is going to create the next iPhone or Facebook. Instead, you can just dedicate a reasonable portion of your net worth to investment grade art and antiques and then relax, confident in the knowledge that you have chosen wisely.
Art and antiques also compare favorably with cash, crypto-currencies and bullion in the important dimension of anonymity. A fine collection of antique, solid gold pocket watches or ancient Greek electrum staters, for example, can easily fit into a small box, yet may be worth many thousands, if not tens of thousands of dollars. Your nosy neighbors or coworkers won’t ever find out that your collection is worth a small fortune – or even that you have a collection – unless you tell them.
Unlike cash, there are few to no laws that require the tracking and recording of transactions involving fine art and antiques. And if need be, some antiques – like jewelry – can be easily slipped around a neck or onto a finger and casually carried across international borders – a feat that is difficult with bullion or cash.
The Panama Papers have laid bare the deplorable corruption rampant among the global elite. But as a wise man once said, “Why get angry when you can get even?” A little bit of cash, crypto-currency, bullion or fine art and antiques could help you build wealth while giving you peace of mind in these turbulent times. Although these four assets have their individual strengths and weaknesses, they are all intriguing alternatives that the average person could potentially use to escape the tyranny of the modern financial markets.
