November 20, 2012
- D.C. as Santa Claus, and you as an elf: an updated take on the concerns you expressed to us one year ago
- Forget the “fiscal cliff”… People who might or might not be “wealthy” are taking proactive steps well before Dec. 31: We suggest one important step you could take today
- Occupy Wall Street becomes Occupy Wal-Mart?
- Chris Mayer with a dispatch from an exotic locale where “the government seems invisible”
- Readers write: A small-business Catch-22… deifying the dogs of government officials
The nice thing about being a CEO at the nation’s premier investment bank and writing an Op-Ed for the nation’s premier business newspaper is that the paper’s editors are unlikely to press you to define your terms.
You could be forgiven for suspecting that Blankfein’s definition of “the wealthiest” might come uncomfortably close to your own pay grade.
No skin off Blankfein’s nose: He has considerable leeway structuring when and where his income originates. You, in all likelihood, do not.
Hold that thought…
A year ago at this time, we undertook a survey of our readership. We asked you what your biggest concerns were about America and your retirement. And we asked what essential information you need to achieve your retirement dreams.
Here’s a representative sample of the replies…
- “I am afraid,” said one, “that America will turn into another Greece or Egypt or any other country that finally got sick and tired of the corrupt politicians or government in general and begin to riot and start rebelling so much that it turns into almost another revolution right here at home”
- “Can a man of 61 years,” said another, “even think about retirement by the time he is 67? Will the simple necessities of life be affordable with U.S. dollars?”
- “America’s government has taken on a life of its own,” said a third. “The government now justifies its own existence and pillages the serfs to fund its ever growing appetite. My concern is how do you avoid the poorhouse in this situation?”
As part of our analysis, we ran all the responses through a word-cloud generator. This crude but revealing tool shows the words that came up most often…
“Clearly,” Addison said at the time, “you’re worried about the government… and about your retirement. And, no doubt, how the former is mucking up the latter.”
We did not conduct a follow-up survey this year… in part because we figured the results would be much the same.
That said, there’s a variation on the theme showing up lately in The 5’s inbox…
- “Taxing the rich some more sounds good,” says one, “until you look into the numbers and see how little good that will do in itself. Enough of this class warfare”
- “I believe the ‘tax the rich’ crowd can’t think further than a dachshund dodo,” says another. “It’s really simple: A) The rich create jobs, B) The less money they have, the fewer jobs they create”
- “I can only come to the conclusion,” says a third, “that this country is now filled with adult children who were never advised by their parents that Santa is a myth. They are convinced that Santa indeed delivers every day of the year. Only his address has changed. The North Pole is now Washington, D.C., and his elves are those of us stupid enough to work and create a future for our families.”
An extreme response to the election outcome?
Not if you’ve been paying attention. Seven days after the election, Mitt Romney’s top economic adviser Glenn Hubbard agitated in the Financial Times for “closing loopholes” in the tax code for “upper-income taxpayers.”
As “fiscal cliff” negotiations proceed apace, Republicans are “no longer talking about the Dec. 31 deadline for the tax rates as a Masada, a full-bore defense of the old rates,” reports Dave Weigel at Slate. “They’re talking about what they can get if they accede to the Democrats.”
And Dec. 31 might not be the end of the story. Exxon Mobil — which gave 93% of its political donations to Republicans the last two years — “is part of a growing coalition backing a carbon tax as an alternative to costly regulation,” according to Bloomberg.
“Even if higher tax rates take a while to arrive,” says our macro strategist Dan Amoss, “people and businesses are not waiting to adjust their financial plans.”
Startlingly, even The New York Times has figured out this is a problem. The Gray Lady did a story on Sunday. The people they profiled sound a lot like our readership…
- Kristina Collins, a Virginia chiropractor, says she and her husband will try to stay under the $250,000 income threshold: “If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation”
- John Moorin, the founder of a medical equipment company in Indiana, sold $650,000 in dividend-paying stocks like McDonald’s and Coca-Cola a few days ago. “I’m so scared that now all of a sudden I’m going to get taxed at such a rate with them that they won’t be worth anything”
- Dyke Messinger, owner of a construction equipment firm in North Carolina, says he has four openings, but will fill only three of them, lest his tax bill rise $100,000. “It’s enough money that you don’t want to make a misstep.”
“The rich will start hoarding more cash, expecting to pay higher tax bills in the future,” Dan says. “They’ll invest more in liquid Treasury bonds and gold; they’ll invest less in illiquid, privately owned job-creating businesses or in the stock market.”
“At the margin,” Dan goes on, “the wealthy business owners in Middle America will have to either borrow against their businesses to raise funds for higher taxes. Or the more likely path will be to put their business in ‘runoff’ mode — boosting free cash flow by halting capital investments and hiring.
“I can’t imagine why this concept is so hard to understand, but I guess if in the experience of a politician’s whole life, he’s never observed family or a friend running a small business, this debate is just an abstraction and there are piles of idle money sitting in bank accounts waiting to be grabbed.”
Nor is the ignorance confined to Washington. The wealth of many “wealthy” people is tied up in the ownership of privately held companies — “things not so easily liquidated to pay higher taxes,” Dan points out. “This phenomenon is not familiar to many guilty rich people in New York, whose net worth is in liquid financial assets that can be sold piecemeal to pay taxes.”
Like the aforementioned Mr. Blankfein…
So… Wall Street and Washington both have it in for you. Not exactly new… but more urgent now than when we sent out our survey a year ago.
That’s why Addison has decided to reopen access to “Project X” — the top-secret project we launched after our original survey to respond to those concerns.
“Project X” is unlike anything we’ve ever pursued. It’s not a newsletter, trading service, book, documentary, conference or social club. There’s truly nothing else like it in the business. It aims high — to transform the way you look at investing, building new wealth and funding your retirement.
“It’s the time to be independent,” says Addison… “follow your passions, travel, indulge a little, take care of your health and family… and there’s no better way to get there than to make sound decisions about investment opportunities. The better you understand opportunity… the more income and independence you have at the end of your life.”
Readers who’ve been part of Project X for the last year write in with high praise…
- “[I’ve gained the] perspective on how to balance my investments,” says Jack J., “based on my financial goals and risk tolerance…”
- “These guys are smart but they also do their homework,” adds Veronica J. “I liked that some of the ideas were out of the box and not mainstream”
- “[Project X] is necessary to seriously build my portfolio and is darn interesting,” says Rob C.
For a few more hours, you have the chance to join these satisfied readers. To make it worth your while, we’ve slashed the regular cost in half.
Please note, however: Project X hasn’t accepted new members for the last year. And it might be another year before we reopen it. The doors close at midnight tonight. For a full rundown of everything you get with this one-of-a-kind resource, follow this link.
Stocks are taking a rest after yesterday’s rally, the biggest since the Fed unleashed QEternity in mid-September. All the major indexes are down less than a half percent.
Overnight, Moody’s stripped France of its AAA credit rating. Before the open, housing starts registered a “better than expected” increase, jumping to a four-year high.
Crude is taking a breather, down to $88.45. Precious metals are holding their own, gold at $1,733 and silver at $33.18. The dollar index remains a hair below 81.
The Wal-Mart strikes appear to be spreading.
Addison took notice as they were getting cranked up last month, musing about whether it was “the leading edge of a new and more potent phase of the Occupy movement.”
The strikes gathered pace again last week — in Seattle and Dallas, among other cities. “Union-backed Wal-Mart worker groups said to expect a thousand strikes or demonstrations spread over nine days,” writes a sympathetic The Nation, “culminating in an unprecedented array of ‘Black Friday’ disruptions.”
Wait a minute, you say: Wal-Mart employees aren’t union. That’s the point of the movement. “Depending on the scale of Friday’s action and on what happens afterward, the strike could provide unions and their progressive allies with the opportunity to kick-start a national debate about the sorry state of labor rights,” says John Logan, a professor of “labor and employment studies” at San Francisco State.
Then again, “Shoppers in the parking lot will say, ‘Oh, that’s terrible — OK, where do I get my discounted electronics,'” says Northwestern law professor Zev Eigen, a specialist in labor relations. “That’s one of the big challenges for the labor movement. We’ll sign online petitions, but we won’t vote with our wallets.”
We’ll know by Friday, eh?
“We had a deal with him, but he cheated us,” Taukei, a native of the Cannibal Isles told our globe-trotter Chris Mayer and his crew.
“Did you eat him?” a member of the crew inquired.
Last week, Chris Mayer joined his friends Chris Tell and Mark Wallace from Capitalist Exploits at a private conference in the Cannibal Isles, or what we now know as Fiji.
“The conference attracted a mostly apocalyptic bunch,” Chris observes, “all waiting for the U.S. and the rest of the Western world to descend into darkness. So the isolation and sustainability of Fiji have great appeal in this regard.
“It is an interesting market, for reasons I will explain.
“And yes,” appends Chris, “the Fijians were cannibals long ago. They don’t hide from this history, as far as I can tell. In fact, Taukei described a piece of property by starting with, ‘In cannibal times’…”
“No one wants to invade Fiji or kill Fijians,” Chris goes on, “The weather is great. There is plenty of water. And food is everywhere. ‘No one starves in Fiji,’ Taukei told us.
“Property is cheap here too. Chris and Mark have their eyes on all kinds of properties. Taukei’s hilltop is one of them. The views are stunning. The asking price is less than $50,000 an acre. They think they can get it for less.”
Sale property in FijiAnother plus, “The government seems invisible,” says Chris, citing his Capitalist Exploits friends:
“The basic absence of government is arguably Fiji’s greatest virtue! The government isn’t here passing laws restricting its citizens from harvesting rainwater, drinking the milk from their cows, selling their vegetables in the market or home-schooling their children. Nor is it chasing down its citizens to fleece them for more tax dollars to stay in power.”
“Of course,” Chris adds, “it is not perfect.”
Health care, political stability, habitual coups are just a few of the big question marks of investing in Fiji.
“As a market,” he writes, “Fiji is asleep, not anything like Myanmar of Mongolia, which are going through huge transformational changes.
“There is no great pull that will propel Fiji to some higher stage of wealth and development,” Chris concludes. “But those who love Fiji — and are looking for a safe haven — wouldn’t have it any other way.”
“My boyfriend is in discussions with his boss about buying his business,” writes a reader jolting us back to reality: She writes from the front lines of the war on small business.
“I commented that I wouldn’t pay any cash upfront, as they are one regulation away from the business being shut down. A week later, California changed my BF’s smog check number in advance of new laws effective Jan. 1. He can’t log onto the state computer until he receives the card that matches the new number, which the state said they are ‘in the process of sending out.’ So effectively, that line of their business is shut down for an unknown period. Fortunately, they do more than smog checks!
“Pity the poor consumer who has to get a check before their renewal date, when the places are shut down! I went through a similar nightmare about 15 years ago — the fines are hefty, even when it’s the DMV that screwed up in getting the tag to you after you paid on time.”
“Accomplished?” writes a reader incredulously.
She’s writing in reply to our item last week about the oil portraits of “accomplished” government officials. “Accomplished in siphoning off taxpayer funds, empowering themselves and redirecting the economy into an abyss?
“We are becoming more and more like Rome,” says our reader, “where government officials are esteemed, honored and even deified over the rest of the people they are supposed to serve. Pretty soon, even their pets will be honored over the rest of the population (don’t give them any ideas — oil paintings for government officials’ pooches).”
The 5: Woof.
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P.S. Reminder: Access to Project X closes tonight at midnight. And in all likelihood, it won’t reopen for another 12 months. Act here.