Many Countries Offer Passports For A Price

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Once upon a time being a citizen of a country used to be a privilege and citizenships were usually not for sale. In today’s globalized world, that is not true anymore. Many countries offer passports for a price. Acquiring citizenship or residency statuses in these countries is easy as depositing a bunch of cash. Cash is king and anyone can acquire a passport as long as they have meet the minimum requirements.

The following table shows the countries that offer citizenship or residency programs for cash:

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Getting Passports and Price

Source: A Passport of Convenience by Judith Gold and Ahmed El-Ashram, Finance & Development Magazine, IMF, December 2015

For example, a farmer in Brazil or China can get a Maltese passport if he can deposit 1.15 million Euros. Among the countries offering these types of citizenships for cash programs, Maltese and Cypriot passports are the best deal since they allow the holder to the most number of countries without a visa.

Why Holding Dividend-Paying Stocks Is Important

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Holding dividend-paying stocks to hold in a well-diversified is a wise strategy. This is especially important for investors who focus on long-term goals such as retirement, paying for college, etc. I have written many times before on the advantages of dividend payers over non-payers.

Investing in non-dividend stocks purely for price appreciation is not for the faint of heart. For example, Chipotle Mexican Grill, Inc. (CMG), a non-dividend payer plunged from over $758 to as low as $399 a while ago when customers fell ill after eating in its restaurants. Though it has recovered to $511 now, stocks such as Chipotle are not high-quality stocks that long-term investors must hold. In addition to not paying a dividend, Chipotle is riding the wave of a fad for fast-casual food fad.

Dividend stocks can not only provide steady income but also offer dividend growth that can beat inflation.  A single hypothetical share of the S&P 500 Index offered $5.65 in dividends in 1979. Since then annual dividend yields on the S&P 500 has been decline. Even with the decline, the annual dividends has grown to $39.44 in 2014 according to a research report by Thornburg Investment Management. This assumes that the dividends each year were not reinvested. If those dividends had been reinvested, then the amount of income earned in 2014 would have been higher.

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Dividend Growth of SP 500 Since 1970

Dividends account for a huge portion of total returns over time as shown in the chart below:

Dividends in Total Return

From the research report:

As Figure 3 shows, the S&P 500 Index did very well from January 1970 through December 2014, even without accounting for dividends. One share of the S&P 500 Index grew to $2,059, an annualized return of 7.40%.

However, one can see that the additional return generated by reinvesting those dividends would have dwarfed the return earned by simple price appreciation. By continually accumulating additional shares through reinvesting dividend payments, the S&P 500 Index would have grown to over $8,133 by December 31, 2014, an annualized return of 11.01%.

Source: Cultivating the Growth of the Dividend, Thornburg Investment Management

Disclosure: No Positions

Household Savings Rate: Germany vs. USA

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The  household savings rate in Germany is much higher than in the US. In fact, the German rate is one of the highest among the OECD countries, according to a report by the OECD. The average household savings rate in Germany is 16.7%. In the third quarter of 2015, the savings rate was 16.9%. The German rate is also relatively stable and varies the least when compared with other OECD countries.

The Household Savings Rate in Germany:

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Germany Household Savings Rate

Source: A dash of data: Spotlight on German households, OECD

Compared to Germans, Americans save very little. In fact, the personal savings rate in the US is in the single digits.

The Personal Savings Rate in the US:

US Personal Saings Rate

Source: FRED, Federal Reserve of St.Louis

At the end of last year, the rate stood at just 5.5% according to Federal Reserve data,  Americans save about 1/3rd of the savings than Germans. In the US, the savings rate was nearly half the current rate before the global financial crisis of 2008-09.

As a socialist country Germany offers many benefits such as free healthcare for all, free college, pension, etc. to its citizens, So Germans could spend more and save less. But due to cultural reasons, Germans are traditionally risk-averse and debt is considered as a negative or a bad thing to have. Hence Germans tend to save more and pay with cash for purchases as opposed to using credit cards or take on home loans.

Americans on the other hand get limited benefits from the state and fund themselves for much of the needs such as education, healthcare, retirement, etc. So it may seem prudent for Americans to save more for the future. But due to cultural and other factors, Americans save less as evidenced by the very low savings rate and consume more goods and services, Much of the economy in the US is driven by credit and taking on debt is almost considered as a  right rather than a bad thing or a privilege Other factors such as heavy marketing at all levels by companies encourages people to spend than save.