THE GEMSTONE FORECASTER - PART ONE

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RUBY: KING OF GEMS
History
In November of 1885, the British conquered Burma. The British were occupying the palace at Mandalay, home of the Burma king, Thibaw. The palace was rumored to be filled with Burma ruby. Burmese women servants spent the day bowing and scurrying everywhere throughout the palace. The British soldiers moved quickly, surrounding the palace, the rooms, the halls, the court, and the King's baggage. But, in a typically British fashion, it was not in their nature to search women. By dawn, the women servants had spirited away the vast majority of the King's fortune beneath their sarongs. Who knows how many millions of dollars were lost due to this act of chivalry? It is rumored that night the servants spirited away two 98 and 74 carat gems, a 400 carat rough ruby that was later recut to a 70-carat stone, and a 20 carat stone. However, it should also be noted, the British supervised and profited from the mining of Burma ruby from 1885 until World War Two.

According to gem history, diamonds were first found around 800 B.C. in India. Most likely, ruby was discovered earlier in India, and later at "Gem Island", now called Sri Lanka. Most early writers called every red stone they found ruber, from the Latin, red. Theophrastus, the Greek scholar, grouped all gems according to color in 315 B.C. The problem we now know is that he included spinel and garnets with ruby. In 79 A.D., Pliny, in the world's first encyclopedia, Natural History, wrote a great deal about gems. He pointed out how gems were heated and how, "goldsmiths would use foil beneath the gems to make them glitter like fire".

Ruby is a gem steeped in lore. It is said ruby brings its owners wisdom, happiness, health, and good luck to gamblers and lovers. In 1415, King Henry the Fifth led his small British army against the French at Agincourt. For protection, he wore the famous Black Prince Ruby in his helmet. After winning the battle, he credited the stone for taking a blow meant for his head. Although The Black Prince Ruby sits in the Imperial State Crown in London, it is actually a 170 carat spinel.

Medieval Europeans believed if a ruby turned dull or dark, it meant misfortune was coming. Legend has it that this is what happened to Catherine of Aragon, the first wife of Henry the Eighth, before he divorced her. The wife of Franz Joseph of Austria, Elizabeth, always wore her ruby as a talisman. One fateful August morning she forgot to put it on, and was assassinated that day.

Geology
Ruby belongs to the corundum family, which is a crystal form of aluminum oxide. However, it takes the perfect combination of chemicals and conditions to produce corundum crystals. A combination of heat, pressure, aluminum, and oxygen must occur in exactly the right mix, well below the earth's surface. If the corundum crystal is red, it is a ruby, if it is any other color, it is a sapphire. The other colors can be blue, pink, orange, yellow, green, gray, or multi-colored. A tiny amount of chromium causes the crystal to grow into a pink sapphire. If the chromium comprises about 1/2 to 3% of a growing crystal, the crystal grows into a red gem.

Pigeon Blood Question
The reason Burma rubies glow is the high amounts of chromium which causes the gem to fluoresce. Buyers want the reddest stones available while paying pink prices, and sellers want to call every shade of red or pink a ruby.

There are thousands of different shades of red and pink, but for the sake of argument, let's categorize the stones into three major groups. The first major group is the "hot electric pink". These are the stones that were readily available in jewelry stores during our parents' and grandparents' times. Today, most of these stones would be classified as pink sapphires. These stones are lively, bright, and light-toned. However, there is a color point where the hottest of these stones (with red undertones, although predominately pink) are bought and sold as Burma ruby. The second major color group is best described as "electric magenta". The predominant color is red, and the secondary color is pink. Again, these stones are light-toned, extremely bright, and vibrate with color. Finally, the last, and considered the best by the majority of dealers and collectors worldwide, is the pigeon blood. Perhaps a better description would be "stoplight red or cherry lifesaver red". The secondary color with this group can be orange or pink. For a more detailed explanation, read here: Gemstone Forecaster, Fall, 1999

There is the story of a gem dealer who became so obsessed with the term "pigeon blood" he decided to find out exactly what pigeon blood looked like. He went to Rangoon, hired a Buddhist priest, and bought 12 Burmese pigeons. On a certain day, at high noon, he went to the beach with the priest and the pigeons. The priest beheaded the birds one by one with a sword. After waiting three minutes, he dripped the blood of the birds into his palm, then held them up for examination. The conclusion? Everybody who used this term was wrong. Instead of being red, the blood of pigeons is shockingly pink.

Sources
As mentioned earlier the two main sources for ruby for thousands of years (most likely the stones that were described in the Bible) were from India and Sri Lanka. These rubies supplied Europe during the Roman-Greco period. However, the major source of great ruby has always been the Moguk Stone Tract of Burma. The majority of great stones ended up with the Indian maharajas 128 miles north of the gem area. We are talking about Burma ruby up to 100 carats, some as big as a golf ball that were used on turbans. These museum quality rubies eventually left India for England when the English occupied India. In the middle 1600s Tavernier returned with many great gems from India to tempt English royalty. The King of Bijapur showed Tavernier a 50.75 "clean, top-quality cabochon". After the British annexed Burma, a deep, rich red 32.3 cushion cut ruby was sold in London for $20,000, and a 38.5 pear was sold for $40,000.

Mining
Today, Burma is producing more Burma ruby than ever before. After decades of moonlight mining and pilfering, the current government has become independent partners with a few mining interests. There are now seven government operated mining operations and dozens of joint venture leases with locals. After a few years of these operations, it appears that about half of what is found passes through official channels. The balance of gems are smuggled through the leaky border into Thailand.

In 1990-91, the Thai gem dealers moved in to buy up what they thought was a new Burma ruby find. It turned out that the limited production of electric pink gems were actually from North Vietnam. Since Vietnam does not possess the pedigree of Burma, many Thai speculators went bankrupt when they discovered their "Burmas" were actually from Vietnam. Then, in 1992-93, a new flood of Burma ruby hit the international gem market. Of course, it turns out that the new source was from Mong Hsu. The Thai dealers, still reeling from being burned by the Vietnamese, were skeptical. Months later the real story came out. There really was a new find in Burma. These stones are small and bright red. Gem collectors who have become shell shocked by the high prices of Burma ruby over the years were suddenly ecstatic. People who never thought they would ever again see a bargain in Burma ruby are actually loading up on Mong Hsu, sure prices will rise as the market acclimates to them or the mine plays out. Most experts believe Mong Hsu are no real threat to the traditional Moguk material, which still sets the standard of color and quality.

The Mong Hsu phenomenon has further solidified the Thai dominance of the ruby and sapphire market. Irrespective of country of origin, all ruby ends up in Bangkok. The buying power of a few wealthy Chinese/Thais is relentless and few miners can escape their wrath. They purchase everything to heat and then mount in jewelry. Of course, the highest-quality stones are sold one at a time to overseas dealers and collectors.

The Thais have become experts at understanding crystal chemistry and the process of heating gems. They heat virtually all rubies and sapphires. The only gems that are not cooked are stones too bad or too good to improve. The goal of heating gems is to improve the gem's clarity, not to improve color. Most Burma rubies contain "silk", or microscopic rutile needles. This silk clouds the overall appearance of the stone. When heated to a temperature between the melting point of rutile and ruby, the "silk" dissolves without damaging the stone, and the stone's appearance becomes "poppy".

Conclusion
Gems used to be strictly owned and traded by kings, queens, and their courts. The fact you can invest or collect rubies today is a relatively recent phenomenon. Never forget, even if your stone is heated, it will not fade. Rubies are already tens to hundreds of million of years old. It took mountain-building and erosion over eons to lift it close enough for someone to find. Your gem is hardy enough to last for another 100 million years. With just a little care, you can safeguard your investment so that your children, and their children, and their children, can enjoy the cleverness of your choice and the wisdom of your decision. Kings and queens knew what they were doing. Gems truly do last forever.

The following is an excerpt from NGC's Special Report, PRIVACY AND GEMS: HOW TO AVOID THE PRIVACY INVADERS. Send $9.95 if you would like the 38-page booklet.

THE FUTURE: THE TOTAL SURVEILLANCE STATE
The following discussion includes technologies that are already available today. The biggest drawback to an ideal total surveillance society has always been the computer power necessary for the storage and the processing of the huge amounts of data. No more! Thinking Machines (Cambridge, MA), has recently announced a massive supercomputer, the CM-5. This machine can store an astonishing 3.2 terabytes of data. In essence, a handful of these computers could easily monitor a 1984 Orwellian-Type Police State. Speculation is that the secret $350 million National Reconnaissance Organization (NRO), now under construction in Virginia, will be the site for these supercomputers.

Smart Cars
This proposal is supposed to eliminate the traffic gridlock that clog our highways and alert the police if your car has been stolen. "Smart cars" will redirect you via a computer screen to alternative routes to avoid gridlock. Although this sounds ideal, do you want the government to know where you at all times via a satellite?

Smart Card
A "Smart Card" is literally a credit card with a miniature computer. The brain of these cards is a "Capstone" chip. Every time the card is used, the chip records the transaction. The National Security Agency (NSA) and the Defense Messaging Agency (DMA) have been making "Smart Cards". Numerous federal agencies have announced complete plans to restrict access to their services to "Smart Cards" only. The pretext for the use of these cards is endless. Donna Shalala's Health, Education, and Welfare Department (HEW) says they want the cards to track childhood immunizations. The Immigration and Nationalization Service (INS) wants to use the cards as "digital passports" or "work permits". Social Security and the Veterans Administration wants the cards for "distributing federal benefits". Of course, everyone remembers the card proposed by President Clinton, for "health care benefits". Lastly, the Post Office wants a "U.S.Card". This is actually touted by postal spokesmen as a universal identity card that would eliminate "twenty million little brothers". Further, Congresswomen Barbara Jordan has proposed a "National Employment Verification Card", which would be required for U.S. employment. Tampering or counterfeiting the card would be a federal offense. Each initiative comes with a national database. The sole exception is the "U.S. Card", which would link all the other cards.

What could be placed on these "Smart Cards"? Practically anything. It could include your fingerprints, retina scan, and your DNA. According to The Washington Post, these cards could be encoded with "bank balances, credit limits, medical records, passport, driver's license, photograph, welfare eligibility, and other data. Every single transaction could create its own record which would be used for criminal investigation." Some believe the card would include everything from behavioral characteristics to sexual orientation based upon genetic information.

Video Surveillance
Security cameras are now standard in corporate and government facilities. The reason given is not the invasion of your privacy, but that cameras keep intruders out, insurance premiums down, help cut losses due to theft, and monitor bad employees. However, what is coming soon is the "Smart Camera". They behave like the human eye, and can recognize human faces, motion, and other characteristics. They can scan for certain motions, clothing, faces, and the presence of people off-limits. The pictures that are seen by these cameras will then be uploaded to a computerized monitoring facility.

The next step will be cameras that can recognize sophisticated patterns, like a specific person's face. "Matchmaker" from Integrated Systems (Norcros, GA) already markets this software. One simple application would be for the government to track you because you were in arrears on your child's support payments. Simply by downloading your photograph into the monitoring facilities, when the match occurs, (for example, when you go to renew your driver's license), the government is immediately alerted. Scary?

Satellite Surveillance
Your image may be for sale right now. The French Company SPOT Image (Reston, Virginia) sells high resolution satellite images at ten meter resolution. World Map, another company, sells high resolution pictures at two meter resolution received from spy satellites. Thirty countries are planning to launch satellite surveillance systems soon.

This is an $8 billion market. TRW is putting massive pressure on the CIA and DOD to loosen up their control of surveillance technology. Lockheed, Orbital Sciences, and World View are launching satellites with one to three meters resolution by 1997. Teledisc is planning a $9 billion satellite system by 2001. There would be no area on the planet that could not be "seen".

Clipper Chip
Within weeks of assuming office, President Clinton, in typical Orwellian Newspeak, announced the government was ready to install a federal "Clipper Chip" to "ensure personal privacy". In reality, the government wants to invade our privacy by putting this chip in our telephones, computers, fax machines, and other electronic devices. The government wants to monopolize the entire technology of encryption. We are supposed to trust the government not to listen to our telephone conversations, read our faxes, tap into our computers, or monitor our activities on the "information highway". This is like asking a Peeping Tom to put up your window blinds.

Who is going to pay for all this software which will allow the government to pry into our lives? The taxpayers, of course. In Clinton's Digital Telephony and Communications Privacy Act of 1994 the government will subsidize the telephone companies up to a half a billion dollars to install this chip. The FBI wants to impose a four year deadline for telecommunications companies to perform this task. In essence, the FBI wants to turn the data highway into a national surveillance network.

The only current "Clipper Chip" is the AT&T 3600 which the government is ordering by the thousands. It sells for $1200. The only good news on this front is that Dr. Matthew Blaze of AT&T Bell Labs has discovered a basic flaw in the chip. Although he did not decode the chip, he found a weak link in the chip so that users could further scramble the chip. The government (with the escrow keys) could not decode these messages. The bad news is that the proposed targets of the chip, criminals and terrorists, possess the financial resources to bypass the chip, while ordinary citizens do not. Does this sound similar to gun control laws?

Robot Spies
"Robot Spies" were successfully deployed in the Gulf War. You probably saw them on CNN. You probably thought they were a great idea, but are you ready for them to be used on Americans? They are called Unmanned Aerial Vehicles (UAV's) and police want them to fight crime. They can monitor an individual or building day or night. They can possess chemical sensors to detect drugs. They can be activated from thousands of miles away, and can be used to monitor conversations, and the surveillance data can be analyzed in "real time" by satellite uplink. The SR2 Security Robot System from Cybermotion (Roanoke, Virginia) patrols 15 square miles with ultrasonic, optical and infrared sensors, and "fuzzy logic" to navigate between obstacles. NASA's High Altitude Long Endurance (HALE) can stay aloft for days. They are flown by remote control. The US Navy is seeking proposals for flying robots to use for "riot control, border surveillance, and personal detection".

TAX HAVENS
The following information was downloaded via INTERNET. It was taken from the mailing list Offshore. If you have a computer and access to Internet, you can subscribe to this mailing list for free by E-mailing arniec@dnai.com. The moderator of the list is Arnie Cornez, J.D. He can be reached by calling 1-800-541-1441, or faxed at 1-408-738-4343. His address is 333 W. Maude Ave. #112, Sunnyvale, CA, 94086. Or visit OFFSHOREon the Net. To subscribe to OFFSHORE mailing list, send message; SUB to OFFSHORE@dnai.com

Please note the following is published strictly for informational purposes. Offshore activities are extremely tricky, and political and economic events can dramatically alter the reality of the information here. This information can become obsolete in a nanosecond. Plus, it is just as private and simpler to protect your assets by holding them in high-end gemstones, rare numismatic coins, or bullion.

NGC is not responsible for any action taken on the basis of this report. We recommend you only consider using offshore entities after careful consultation with proper legal and accounting representation. Never forget, the IRS has the power to pursue you to the end of the earth. The recent DEA bust coined "Project Dinero", seized $54 million in cash, 9 tons of cocaine, and the arrest of 88 suspected drug-dealers. According to a government spokesman, "You never know if you are dealing with a legitimate banker, or the IRS, or the DEA when you are doing business offshore."

Please note all comments in [ ] were the comments of Arnie Cornez, the moderator of Offshore, not NGC.

Subject: TAX HAVENS ON THE NET.
Compiled by James R. Hart [Ed., THANKS!] Updated by Vince Cate 5/94.
Aruba (Caribbean)
languages: English, Dutch, Spanish
currency controls: none?
bank secrecy: moderate (numbered accounts not permitted)
preferred legal entities: Aruba Exempt Company, NV (Dutch legal tradition, bearer shares allowed)
taxes: no income tax on AEC or shareholders, no withholding of any kind tax
treaties: none?
Austria (Eastern Europe)
language: German, [English is a business language also, Ed.]
currency controls: ??
bank secrecy: good; numbered accounts available [???, Ed.]
preferred legal entities: limited liability company, stock corporation.
taxes: corporate tax. no bank interest tax. 20% dividend tax.
tax treaties: many, OECD model, primarily personal and corporate income.
Barbados
language: English
currency controls: some (none for offshore banks & insurance)
preferred legal entities: company, public company, offshore bank, exempt insurance company, foreign sales corporation ,international business company.
taxes: income tax offshore banks and international business companies 2.5%, exempt insurance companies and foreign sales corporations.
tax treaties: double-tax treaties with 5 major countries (incl. U.K. & U.S.)
Bermuda
language: English
currency controls: none for nonresidents
bank secrecy: moderate
preferred legal entities: local (conduct business in Bermuda, must be 60% Bermuda owned),exempt (only conducts business outside Bermuda) -- min. capitalization US$12,000--extensive background check on the principles
taxes: no income, profit, sales, value added, withholding, or capital gains taxes.
tax treaties: no double-tax treaties. U.S. can be provided with tax information concerning civil & criminal tax cases. Cayman Islands IBC's can have bearer shares.
Cook Islands
[language: English, Ed.]
taxes: none, can have bearer shares
[New tax haven, and laws untested. APT laws are very generous to the Settlor as opposed to claimant. Ed.]
Costa Rica
[The Little Switzerland of Central America. The most stable central American country. Ed.]
language: Spanish.
currency controls: only on local currency, applies only to citizens or legal entities.
bank secrecy: good.
legal entities: individual enterprise/limited liability collective company, limited partnership limited-liability company, stock corporation (aka chartered company).
taxes: 15% on dividends for some nonresident shareholders, moderate corporate income, payroll, import, real estate taxes. Exporters exempt from most taxes.
tax treaties: no double-tax treaties. Caribbean Basin Initiative exchange-of-information agreement signed but not yet ratified (as of 1/93).
Hong Kong
languages: Cantonese, English
currency controls: none.
bank secrecy: moderate?
preferred legal entity: limited-liability corporation (English common law Companies Ordinance)
taxes: 16.5% domestic source corporate income, 15% domestic employment wages, 15% on domestic property rental income
tax treaties: no double-tax agreements NOTE: Hong Kong to return to Communist China in 1997.
Ireland
language: English.
currency controls: none?
bank secrecy: moderate?
preferred legal entity: nonresident company (private corporation w/limited liability, must conduct operations outside Ireland).
taxes: only on Irish operations.
tax treaties: many double-tax treaties.
NOTE: those with Irish grandparents can obtain second citizenship.
Liechtenstein
language: German.
currency controls: none
bank secrecy: excellent
preferred legal entities: allows any type found anywhere in the world (!) establishment (limited liability, unlimited duration) company limited by shares foundations and trusts.
taxes: none for income outside Liechtenstein. Net worth tax of 0.01% on capital and reserves (min. 1,000 Swiss francs), local resident taxes.
tax treaties: not party directly or indirectly to any exchange-of-information agreements, double-tax treaty exists only with Austria. NOTE: bankers won't assist law enforcement officials with drug, fraud, theft, or tax investigations. They might assist in money laundering and insider trading investigations, informing the customer first.
Luxembourg
languages: French, German, English
bank secrecy: moderate [better than Switzerland]
preferred legal entity: holding company
taxes: holding companies pays only 10% registration fee on issued shares and 0.20% annual capital tax on issued capital bonds.
tax treaties: many double-tax treaties
Malta
languages: Maltese, English
currency controls: none
bank secrecy: good
preferred legal entities: offshore non-trading, trading, banking (overseas, subsidiary, local), insurance, trusts.
taxes: non-trading exempt, trading very low
tax treaties: many double-tax treaties
Netherlands
language: Dutch, [German, French, English, Ed.]
currency controls: ??
bank secrecy: poor/non-existent - all cash deposits above 20.000 guilders will be reported to the authorities.
preferred legal entities: private or public NV (can have bearer shares)public= NV, private= BV, you can also incorporate in Delaware [=Inc] or use another overseas "model" as long as you register with the local Chambers of Commerce. You then save 40.000 guilders in capital.
taxes: complex, high (many loopholes for large offshore companies) a 40% corporate tax in profits till 250.000 guilders, the rest is taxed at 35%. In the Netherlands it is possible to discuss a prospective transaction with the tax authorities and obtain a ruling which will determine its tax treatment.
tax treaties: many
Panama
languages: Spanish, English.
currency controls: none.
bank secrecy: good; numbered accounts permissible.
preferred legal entity: corporation.
taxes: none on income generated outside Panama.
tax treaties: only on shipping income.
Singapore
languages: Malay, Mandarin, Tamil, English
currency controls: none
bank secrecy: moderate; numbered accounts available
preferred legal entities: private limited company
taxes: none on dividends, foreign deposit interest, or income derived from outside Singapore.
tax treaties: many.
Switzerland
languages: French, German, Italian, [English]
currency controls: none
bank secrecy: moderate to good [Ed. ???]; numbered accounts available [Ed. ???]
preferred legal entity: AG (stock company under Laws of Obligation).
taxes: 3.6-9.8% worldwide income tax for operating companies, 35% withholding tax on interest and dividends.
tax treaties: many double-tax treaties.
Vanuata [South Pacific]
languages: Melanesian, French, English
currency controls: none
bank secrecy: moderate?
preferred legal entities: holding, trading, agency, mgmt.service, contracting.
taxes: no income or capital gains taxes
tax treaties: none
Western Samoa
languages: Samoan, English
currency controls: none.
bank secrecy: good.
preferred legal entities: international company, offshore bank, insurance company.
taxes: none for companies under offshore acts.
tax treaties: none.

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