Rare Strategic Metals

In turbulent economic times, smart investors understand that opportunities for growth are difficult to find.  Bonds, the traditional safe haven for many investors are providing returns well below the rate of inflation. The Fed policy of quantitative easing is pouring money into the stock market and artificially inflating prices while increasing both volatility and risk.

Many investors have adapted the strategy of wealth preservation by investing in the precious metals sector. Metals are a traditional safe haven investment during times of economic volatility. Gold, silver, platinum and palladium are predominantly investment grade metals that while they store value, can experience extreme market volatility. Of the metals group, both silver and platinum have a secondary market as industrial metals and are subject to some stability due to industrial supply and demand, but they are still predominantly investor driven.

One alternative area of the metals market, often overlooked, are the rare earth metals. As a group, they are the last pure commodity investment in the metals market and can offer some added stability due to their exclusive used in industry.

What are Rare Earth Metals

Rare Earths are a set of seventeen elements in the periodic table. Despite their name, rare earth elements are actually fairly common, but because of their geochemical properties, they are typically dispersed and as a result, are not easily mined.  China is the world’s predominant producer of rare earths, with 90% of global supply, but deposits are found and produced in other parts of the world. In recent years, China has been slowing production and enacting strict export controls limiting supply. This has caused a rise in prices as supplies tightened.

The rare earth metals are vital to the production of many technology products and as such demand is steady and growing. The rare earths can be found in everything from aerospace components, nuclear batteries, electric vehicle batteries, computers, tablets, and cell phones to household items like energy saving light bulbs and self-cleaning ovens.

As a result, industrial and military manufacturing, technology growth and alternative energy technology uses all play into the demand factor and the result is stability and predictability in the sector, with a strong floor supporting current prices. This built in demand and tight supply make the rare earth metals a strong store of wealth with somewhat greater price stability than the investment metals. As a result, they are not as vulnerable to the unpredictable and speculative forces of the financial markets. As supplies tighten and demand grows, there should be upward pressure on prices in the coming years.

How To Invest in Rare Earth Metals

Investing in rare earth mining company stocks carries the same volatility as the market as a whole, but demand is strong and many of the stocks have experienced gains. Until recently, investing in the physical metals was not possible. Today London is the center of rare earth investment.

With research it is possible to design “baskets” of the metal based on industrial sector usage. For example, the alternative energy sector heavily relies on indium, gallium and hafnium for the production of solar panels and large capacity batteries. By investing in these metals as a group, you’re also investing and can benefit from growth in the alternative energy sector.  Other groupings can focus on sectors such as defense, construction, or general key industry uses.

Rare earth metals are a new asset class that is a safe, true and lasting form of asset protection. Today, it’s possible to physically own these metals which are extremely valuable to industry now and will continue to be in the future.

Could America be facing hyperinflation?

Hyperinflation refers to a period of time when prices of commodities skyrocket. In most cases it is seen in a country where the federal government prints money for fiscal spending. Asset protection strategies can help you to prepare for inflation or the extreme case of it, which is hyperinflation.

The key attribution to giving money value is when money is scarce. When things that are used as money becomes too plentiful in the market it losses the value – causing hyperinflation. In the past your founding Fathers did not want to have a central bank. They believed when the central bank is given power it would create flat money.

There are several financial habits that help you to prepare for inflation. Have all your assets diversified in good manner. Balance them among the U.S. (or even better, international) stock market and other hard assets. Acquire a home. Owning a home protects you from rising values in rent during those times. Go for a fixed-rate mortgage and your repayment will remain the same no matter the increased value of your property.

You can invest your money in the stock market as a way of protecting it. The stocks pay in dividends which allow you to receive a regular amount even as hyperinflation happens. Another asset protection strategy is security bonds which are indexed to inflation. Their principal value rises with inflation.

America as a state is not yet facing the threat of hyperinflation. In theory, it’s the job of the Federal Reserve to control inflation.  Its main job is to tighten or relax supply of money allowed into the market. When the supply of money is tightened it reduces chance of a country to suffer inflation. On the other hand when the supply of money is relaxed it increases the chances of a country to suffer inflation.  Currently, the Federal Reserve is printing money like never before.

Hyperinflation in America only occurred once during the civil war. This happened when Confederate Government printed more money to pay for the war. Today deflation is the greatest threat America is facing. Some believe the fears of hyperinflation in America are almost unfounded, although it may be facing serious economic problems.  Others realize no asset is immune to inflation and it is important to come up with asset protection strategies to avoid massive loss of savings.

Extending the tax cuts could help but the Federal Reserve diluted this by putting a lot of money into our economy making the situation negative. Many feel the “Fed” should limit the supply of money at this time to halt the cycle of costs. If it were to occur the Federal Reserve would tighten the money supply and lower prices or they can raise the money in the bank reserves and reduce its supply.

At this point there are no economic or political factors strong enough to set off hyperinflation. While we may suffer mass inflation, the federal government has a lot of funds in reserve that would be injected in an extreme case of inflation that would threat to set off hyperinflation.

Either way, with the right asset protection strategies, you will be protected.

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• Is Hyperinflation Coming? What Can You Do about It?

It is never too early to start thinking about life after retirement. You want to make sure that after your days in the office are long gone you still have enough to sustain yourself and live a relatively comfortable life without any problem.

Many people believe that because they are involved in a retirement benefits scheme they are okay and they do not need to give any more though to what will happen after they retire. The unfortunate truth however is that they could not be more wrong. There is one thing they keep forgetting-the effects of inflation.

Inflation affects in a devastating way the purchasing power of an individual. It makes the money you had saved up all your life and all the wealth you had accumulated over time to lose value drastically. When this happens many retirees find themselves between a rock and a hard place. They may have thought all along that they were secure only to have their wealth diminish before their very eyes. The funny thing is that while most investors put measures in place to brace themselves against a stock market crash, many people do not prepare themselves against inflation, yet this is by far the more common occurrence!

Another negative thing that is associated with keeping all your wealth in an onshore account is complete loss of privacy. Whether the government would publicly admit it or not, it is common knowledge that we are past the era where third party access to your private financial information was restricted to those few instances where there were grounds to suspect wrong doing. Nowadays in most developed countries financial information that was once regarded as private can be accessed and are indeed frequently accessed in some instances by tax authorities and some government officials.

It is not all bad news however! You do not have to be defenseless against these vices. There is a proven way of protecting your financial information as well as avoiding the devastating effects of inflation; offshore investments. The benefits in terms of privacy are obvious as it is extremely rare to have unauthorized third parties accessing a person’s financial information in offshore accounts.

As regards inflation on the other hand, offshore investments have proven to be a sturdy defense. Investment especially in rare and precious metals is a wise way to ensure that no matter what happens your financial status is still protected. Over the past 30 years for instance, through various periods of inflation and recession, gold has risen at a constant 4.4% per year. This makes it a commodity in which you can invest confidently without fear of losing your money. Silver is another common preferred choice of metal to invest in although you could also go for other rare metals that are used for technical and industrial purposes.

The question that many people ask however is, in light of all these benefits of offshore investments, is it legal with an IRA? The simple answer to that question is yes, it is. As long as taxation and federal rules are observed, it is considered legal to move IRA accounts offshore. Of course there are measures put in place by the government to ensure that the provisions of these tax agreements are not abused by citizens but the bottom line remains there is nothing preventing a US citizen from taking advantage of the benefits of offshore investments.

The US is under attack by at least 7 different powerful forces that could wipe out your retirement savings.  Click here to discover how to protect yourself and liberate your assets from the US.

While it is true that you can’t take it with you, there is no reason that you should leave it to the government when you go.  After all, you’ve worked hard your entire life, and you believe that the fruits of that labor should fall to your heirs, rather than to the tax man.  As such, when it comes to your individual retirement account, now might be the time to consider converting your traditional IRA into a Roth IRA.

Although there are many advantages to enrolling in a Roth IRA, the majority of people focus on the income tax aspects of the conversion.  For those who are affluent, well off, and already nearing retirement however, a Roth IRA conversion presents an excellent estate planning tool for assuring that you are passing on as much of your estate as you are legally allowed to do.

Unlike a traditional IRA, the Roth IRA allows you the ability to, in effect, pre-pay your income taxes for your heirs during the conversion process of your individual retirement account.  Upon inheritance of a traditional IRA, the beneficiary must take annual distributions that are subsequently taxed at their normal tax rate.  This of course is in addition to any federal estate taxes, or obligations levied by the state government for their share of state income taxes, inheritance, of estate taxes.

After this bevy of tax levies, the beneficiary of a traditional IRA will be able to spend considerably less than 100% of the traditional IRA value.  Depending on the rate that those disbursements are being taxed at, your heirs could easily see a third of the value of your hard earned estate disappear into the coffers of state and federal treasuries.

Although the federal estate tax will still apply to your Roth IRA assets in the same way that it would apply to your traditional IRA account, there is an estate tax advantage to be found in the Roth IRA type of account.  Specifically speaking, your Roth IRA contains after tax dollars.  This mean that the amount of your estate has already been reduced by the amount you have already paid out in taxes.  As a result, you have a smaller taxable estate to pass on to your heirs because you have already paid out a portion of it for taxes.  It is in this way that you hear about tax savings from the Roth account because you have already met the obligation rather than any special tax savings rules that specifically apply to the Roth.

Conversion to a Roth IRA requires that the individual retirement account holder pay a tax on the converted amount.  This tax payment has the effect of lower your estate value by the amount of the taxes paid, and in effect pre-pays the tax obligation for your heirs.  The beneficiary will be forced to take annual disbursements, but would not be forced to pay out-of-pocket taxes because you would have already paid that obligation during the conversion process.

When you are at that stage of life where your finances are in excellent shape, it’s time to turn your attention to the next generation, and assure that they will be the biggest beneficiary of your hard work.  Converting your individual retirement account from a traditional IRA to a Roth IRA may be just the investment strategy designed to keep your funds in the family.

Rare Strategic Metals

Rare-earth elements, or REEs, are a group of metallic elements used in today’s technologies such as computer hard drives, cell phones, and digital cameras. These metals are also used in “green” technologies including renewable sources like wind and solar, energy-efficient light bulbs, and hybrid car batteries.

Some examples of REEs include wild names like europium and yttrium, ianthanum and neodynium. These REEs are used in light bulbs, hybrid car batteries, even in military applications.

Despite their unusual names, most of these REEs are not hard to find. And mining material containing rare earth minerals isn’t difficult. But the process of separating and extracting REEs is not only very complicated and time consuming, but also quite expensive.

Much of the industry of extraction and separation has moved to China to reduce the cost, which can be a deterrent.

There are several methods of extraction of base and precious metal deposits, with most metals extracted being highly concentrated into what is called a “single mineral phase”. For example zinc, which can then easily be refined, comes from the mineral sphalerite. Thus, the industry for zinc smelting has become highly refined and specialized.

There are several processes used to extract and separate REEs from mined rocks and earth.

·      Milling is one common process. The milling method crushes and then grinds mined ore into tiny particles which are then sifted by electromagnetic separation or flotation methods. These methods extract the usable materials and dispose of the waste products.

·      The process of electromagnetic separation uses a magnetic separator device with two rollers, one which is made with strong magnets, moving pulverized ore on a belt. Highly commercial magnetic sources or REEs such as monazite and bastnaesite drop away from nonmagnetic impurities in the ore.

·      The flotation process is one other beneficiation process used to separate magnetic properties such as bastnaesite from other nonmagnetic impurities and minerals. The pulverized ore is added to a liquid solution in tanks. Added chemicals in the liquid begin to weigh the impurities down while air is pumped into the tanks. The air creates air bubbles, which the very fine bastnaesite particles then stick to. The bastnaesite froth that eventually accumulates at the top is then skimmed.

·          A fourth, less expensive method is called gravity concentration. This method is often used to extract gold with devices called Falcon Concentrators. These Falcon Concentrators are also used in rare earth extractions during the milling stage and contain high-speed rotating bowls that generates a gravitational force which acts to separate REEs. Gravity concentration has a reduced environmental impact than electromagnetic or flotation process because is does not use chemicals.

These particular milling processes produce a high quantity of rare earth minerals, but the process is far from over. Then the process of separation of the minerals into concentrated REEs needs to happen. It’s called hydrometallurgy, and it uses liquid processes such as precipitation, extraction or leaching to separate mineral concentrates into usable oxides and metals. These rare earth elements are then dissolved and purified into very refined solutions.

One method of hydrometallurgy uses the process of solvent extraction with particular chemical agents to break down the components within a substance. Particular materials react to a specified chemical acid base and thus are separated.

Of course, the real value lies not in the process, but with particular agencies that have the infrastructure, proven methods and expertise to take a pile of rocks and extract the fine REEs that can bring in the real money.

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 as part of legislation referred to as the Hiring Incentives to Restore Employment Act (HIRE). FATCA has significant new IRS reporting requirements for taxpayers as well as for foreign financial institutions (FFI). The compliance requirements will be phased in over time.

The legislation is complex and has far reaching implications for financial institutions as well as for taxpayers. In January 2013, regulations encompassing 554 pages were published.

The thrust of FATCA is twofold.

1) It requires FFIs to provide the IRS information about U.S. citizens who hold an account or an ownership interest in an account in the FFI.

2) It requires “U.S. persons” to report their foreign assets to the IRS.

Specific IRS Affect on U.S. taxpayers.

A new IRS form must be filled out by taxpayers and attached to their tax return. The taxpayer must report foreign financial assets that, in the aggregate, amount to more than $50,000. The failure to do so will result in a $10,000 fine. If the taxpayer understates the value of foreign assets, there will be a 40 percent penalty.

IRS Requirements for FFIs.

By June 2013, FFIs are required to enter into an agreement with the U.S. in which they will agree to certain IRS reporting requirements including:

• Identify U.S. citizens who are account holders to the IRS.

• Provide annual reports to the IRS for U.S. citizens who have accounts as well as for foreign accounts when a U.S. citizen holds a substantial interest.

Penalties for FFIs who do not sign a participation agreement.

FFIs that refuse to sign a participation agreement with the U.S. will be penalized. The U.S. will withhold 30 percent of various types of payments that it would normally make to the FFI.

Potential negative impact on FFIs.

• The legislation is viewed by many countries as the U.S. trying to exhibit power in controlling how countries conduct their financial business with individuals.

• The cost of implementing the due diligence required to identify U.S. citizen accounts and other FATCA requirements is expected to increase FFIs operating budgets from 25 to 50 percent. This alone may inspire them not to enter into the required agreement.

• FFIs that refuse to sign the participation agreement will end up terminating all their relationships with the U.S.

Potential negative impact on investors.

• Individual investors will need to determine if their offshore investment is one that complies with the requirements of FATCA.

• U.S. investors have already been asked by some FFIs in some countries, Panama for example, to close their accounts. The FFIs find the IRS reporting requirements to conflict with their privacy policies and refuse to participate.

• Investors will need to discuss any of their investment concerns with attorneys with whom they share an attorney-client privilege. Bankers and accountants to not have legal confidentiality with investors and  will be required by FATCA to disclose financial information to the IRS.

• It is not always clear who is a U.S. person for tax purposes. Someone living in the U.S. for a certain number of days may turn out to be subject to the FATCA provisions without even realizing it.