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The Quintessential Nice Guy
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Tuesday, January 9, 2007
Vol. 9 No. 8 |
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In Today's Letter:
Comment: The Quintessential Nice Guy
Offshore: Keeping New Year's Resolution #4
Wealth: Cracks in the Pavement
Currencies: A Warning from Dr. Doom
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Remembering the
Quintessential Nice Guy
Today's comment is by Bob Bauman, The Sovereign Society's Legal Counsel and long-time editor.
Dear A-Letter Reader,
Gerald R Ford, better known to those of us who counted him as our personal friend as just plain "Jerry," has passed away at the age of 93, making him America's longest lived president. We had not heard or seen much about him in recent years, as he chose to stay out of the spotlight and enjoy golf in Rancho Mirage, California, his home for many years.
Most of the comments I have read or saw on the extensive TV coverage described Jerry Ford as decent, unassuming, principled, self-effacing, and honorable. Those are all accurate words -- words that certainly could not be used to describe some occupants of the White House in recent history. Ford's reputation for integrity and openness made him popular during his 25 years in Congress, respected by members on both sides of the aisle. He was the quintessential "nice guy."
From 1965 to 1973, Ford was House Republican Minority Leader. It was my honor to serve as a member of the U.S. House of Representatives at the very end of Ford's House service. This was just before he replaced the tarnished Spiro Agnew, my fellow Marylander, as vice president, by appointment of then President Richard M. Nixon. Within a matter of months, Nixon engulfed in the Watergate scandal, also resigned and Jerry Ford, became the President of the United States.
But my first encounter with Congressman Jerry Ford of Grand Rapids, Michigan, came many years before I was elected to the U.S. House from Maryland's Chesapeake Bay area in 1973. In 1954, I was a House page boy, half way through my senior year at the Capitol Page School located in the Library of Congress. In the 1954 elections the Republicans lost their brief, two year control of Congress, and all Republican page boys were about to be replaced by Democrat appointees. My own sponsor, Rep. Ted Miller (R-MD) was now in the minority. I was without a sponsor and faced being without a job.
As it turned out, Ted Miller and Jerry Ford were close friends, having served together for years on the House Appropriations Committee. At Ted's request, Jerry agreed to sponsor me as a Republican patronage appointee and that allowed me to graduate from Page School. I will always be grateful to Jerry for the kindness shown me. Indeed, I continued as a Republican House Floor Staff Assistant for several years, until I was elected to the Maryland State Senate in 1970. And even years later, when I became a U.S. House member, Jerry Ford always called me "Bobby," the teenage name by which he had known me when we first began our association as congressman and page back in 1955.
I did not always agree with President Ford's policies. In fact I backed Ronald Reagan in his close but unsuccessful challenge to President Ford for the 1976 Republican nomination. (Carter defeated Ford that fall.) I also voted against Ford's nomination of Nelson Rockefeller as vice president. But I always admired the basic decency of the gentleman from Michigan. He was that rarity in national politics, an honest, uncomplicated and patriotic American who tried to do what he understood to be right.
May my good friend, and America's, Jerry Ford rest in well deserved peace.
BOB BAUMAN, Editor
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Keeping New Year's Resolution #4:
Get Serious about Legally Minimizing Your Taxes
Heads up: if you're an American, you have exactly 98 days before your taxes are due (counting today). So if cutting back on your tax bills is your New Year's resolution, there's no time like the present to start.
But before I go any further, please note that Americans who "go offshore" for investment diversification or asset protection usually don't receive much in the way of tax relief. That happens frequently in spite of all the wild claims made by charlatans who promise that they can tell you how to avoid paying U.S. taxes!
Take our word for it, U.S. taxes are tied to citizenship, and nothing can override that unless you choose to expatriate - which is tantamount to giving up your U.S. citizenship, passport and residence.
But there are a few ways to legally avoid taxes offshore... here are a few (courtesy of the Offshore Advantage book).
Investing offshore can:
• Defer taxes in some cases (using annuities and life insurance)
• Exempt you from local offshore taxes - you won't pay tax in the local jurisdiction. For example, if you had a Panamanian business that didn't do business in Panama, it wouldn't be subject to Panamanian tax.
Living offshore can:
• Cut operating and living costs for U.S. citizens living outside the U.S.
• Permit U.S. citizens to earn up to $82,400 annually, free of U.S. tax obligations ($168,800 for a married couple, both living offshore). To qualify, you must spend at least 11 months a year living outside the U.S., or be "tax-resident" in a country other than the U.S.)
ERIKA NOLAN, Executive Director
P.S. For more information on cutting back your tax bills by living abroad, see Mark Nestmann's A-Letter from 6/7/06, http://www.sovereignsociety.com/offshore1693.html .
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Cracks in the Pavement: Global Stock Market Correction Ahead
After posting strong rallies the first two days of the New Year, global stocks are looking tired. I'd say the odds of a severe correction are looming as investors finally take some money off the lucrative stock market table.
With the exception of Treasury bonds, gold and silver, oil and some defensive large-cap multinationals, most stocks and other high-risk securities are going to suffer a major short-term correction -- and soon. But before explaining why I'm bearish near-term, allow me to express my optimism for 2007.
Long-term interest rates worldwide remain very low by historical standards. That trend is feeding a boom in global liquidity flows, mergers and acquisitions and generally, is good for the consumer and businesses. Another boost is the trend in U.S. employment, still holding up quite well despite the malaise in manufacturing and housing. I'd be far more concerned about a recession IF employment growth was stalling. But that's not the case. As long as Mr. and Mrs. Smith have a job, and continue to service their installment debt, then the economy won't tank. Lower rates make all our lives much easier.
Another plus is sliding inflation and the low price of oil compared to a multi-decade high of US$77 a barrel in July. Lower energy prices allow the consumer to increase discretionary spending. Although I'm not especially worried about inflation (I think it's already peaked), I am concerned that higher oil prices later in 2007 will temper consumer spending. But that's later this year. For now, oil prices are 25% lower compared to their July highs and most commodities are also in the midst of correcting, discounting a slowdown in U.S., and international growth. This is where it gets interesting...
If the bond market, which is still in "yield inversion," is forecasting a recession and commodities are declining again, then is it safe to admit we've got a stock-market that's overvalued? I think that's the case. Again, I doubt we'll suffer a global or U.S. economic recession in 2007, not with long-term rates this low. Remember, liquidity is abundant. But corporate profits are probably too rich in this environment of slowing growth and the bond market and commodities are telling investors to be careful -- there's a big correction coming.
Make sure you have cash. The best bargains since early 2003 are about to unfold. I think we'll have a brutal but short-lived correction in stocks. Treasury bonds will do well, and gold should stay above $600 an ounce. But high-risk stocks, junk bonds, and emerging markets will roil. You've been warned.
ERIC ROSEMAN, Investment Director
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A Warning from Dr. Doom
In the background we are seeing growing concerns that a major correction in global asset markets may be brewing. Long-time international market guru, and free-thinker, Mark Faber told Bloomberg today: "In the next few months, we could get a severe correction in all asset markets.'' Mr. Faber added, "In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate."
What's the key concern? It's all about liquidity. There is still plenty of liquidity, or money, floating around the global markets. But often when markets become highly leveraged, meaning many investors borrow more than they normally would to take advantage of big bull moves in the market, then it only takes a slight decline in liquidity, (or available money), to tip the balance and force traders to rush for the exits at the same time. This is why small incremental changes "at the margin" can have a surprisingly large impact. And it can lead to a sharp and deep correction that would otherwise not make sense based solely on the market fundamentals.
Over the near-term, any major correction in global markets might be good for the dollar because U.S. fund managers have a ton of money invested offshore. If a decent amount of that money rushes back onshore to hide in short-term cash deposits, it would likely boost the buck. That could surprise the markets. A global market correction could also lead to a big rally in the Japanese yen against all the major currencies if the yen carry-trade starts to unwind.
Stay tuned. If Mr. Faber is right, a correction could be very swift and deep because there is a whole lot of money out there being held by people with very itchy trigger fingers.
JACK CROOKS, Currency Director
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