Posted By Norb Vonnegut on March 5, 2010

Market Defies Fear of Real Estate Bubble in China

A real estate bubble, fueled by bad loans and too much leverage, explains much of our stock market’s turmoil since 2008. So today’s article from The New York Times on the Chinese edition, caught my attention. Here are a few of the  sound bites:

Last year, a record $560 billion of residential property was sold in China, an increase of 80 percent from the year before, according to government statistics that are widely considered reliable.

Signs of exuberance are everywhere. An investor in Shanghai recently bought 54 apartments in a single day; a villa sold for $30 million last year; and in December a consortium of developers paid more than $3.5 billion for a huge tract of land in Guangzhou, one of the highest prices paid for any property, anywhere.

Prices here have risen more than 150 percent since 2003, pushing the price of a typical 1,100-square-foot apartment up to $200,000, according to real estate experts. (Shanghai residents typically earn less than $5,000 a year.)

Okay, enough already. The point is clear. Trouble is brewing. And here’s why China’s real estate bubble is a problem for everyone. Of the five largest banks in the world, measured by market capitalization, three are located in China.

With banks trading credit risk, through those insufferable Weapons of Money Destruction otherwise known as credit default swaps, I wonder what the world’s financial exposure is to Chinese real estate. Who owns the credit risk to their developments? Have they ever been to China? Or can the creditors even spell Peking? I mean Beijing.

Norb Vonnegut

Category: Wild Wild World of Wealth | No Comments »
Tags: Beijing, bubble, China, money management, real estate, Wealth Management

Posted By Norb Vonnegut on March 5, 2010

For Psychic, Suit Came as Surprise

You know there’s a problem when your money manager:

• Claims to be today’s Nostradamus;
• Names his company, Magic Eight Ball Distributing;
• Runs a website with wellness products like “Holy Tea.”

According to the SEC and The New York Times, “America’s Prophet” may be “America’s Fraud.” You can find a copy of the lawsuit against Sean Morton by clicking his name. He’s the Svengali in question. What I don’t get is how a money manager can raise $6 million from 100 investors with nothing but a smile and a cloudy crystal ball.

Norb Vonnegut

Category: Financial Scandal | No Comments »
Tags: Money Managers, Sean Morton, Wealth Management

Posted By Ike Devji on March 4, 2010

You Bet!

As an Asset Protection lawyer that works with high net worth clients nationwide I have a large variety of the most sophisticated legal and financial tools at my disposal to help protect my clients. When Norb Vonnegut asked me for an Asset Protection primer and wealth tools that apply to everyone for Acrimoney, I went back to basics.

1. Do Something TODAY. Every day that passes makes transfer, tools and actions you take to protect yourself stronger and harder to argue with. Trying to protect yourself after you have a liability event is rarely effective and usually illegal;
2. Liability Insurance is your first line of defense, buy every dollar you can afford,  including umbrella policies, assume it won’t work and have a back up plan;
3. Use corporate entities like LLCs as liability firewalls. Always divide and segregate your personal & business assets (and liabilities) as much as possible. “Sole Proprietor” is almost always the worst choice;
4. Don’t assume that a corporate entity on its own is complete protection. Remember that single member or “closely held” entities are subject to “piercing of the corporate veil”. If you own it, run it, control it, it can be argued that it is still YOU;
5. Get professional legal & accounting help to organize your assets and make sure you maintain the legal formalities of these entities like tax returns, meeting minutes and separate bank accounts or they won’t help at all;
6. Get your vehicles out of the name of your business. Many people do this for the deduction. If you or your spouse injures someone with your car you have created a “bridge” to your business and all it owns. Take a vehicle allowance instead;
7. If you have employees get professional employment manuals, policies and dispute resolution agreements in place. A small investment will cover your business and family for years. You are five times likely to be sued by an employee than anyone else;
8. Be nice to everyone as a rule. During difficult economic times people are much more likely to take legal action, whether justified or not. Your bedside manner will play a role in their emotional decision to sue you;
9. Don’t keep too many eggs in one basket. Don’t use a single LLC, for instance, to own separate assets like 3 different rental income properties with high equity. An injury or exposure at one property or business places the owner, the LLC and all that it owns, at risk;
10. Own Nothing, Control Everything. You don’t need to keep assets in your own name to use, control and enjoy them. Make use of trusts, corporate shells and the LAW to transfer title to assets away from you.

Category: Wealth Management | 3 Comments »
Tags: asset protection, insurance, money management, Wealth Management