Corporate Tax Loopholes

This past Sunday, 60 Minutes ran a fantastic and mostly factual story on how companies are hoarding money oversees to avoid paying taxes in the U.S.  Every American should watch this video, it is that important!



Emotions run very high on both sides of this issue.  Groups like USUncut recently protested against these companies and feel strongly that the government should close these tax loopholes.  Others feel that corporations are already paying too much in taxes and the rate needs to come down.  Let us provide some perspective on this situation.

Capital flows like water.   What that means is that water will flow downhill and look for the path of least resistance.  There is nothing anyone can do to change this basic phenomenon in nature.  Water will never flow uphill on its own.  Capital will always flow to wherever it can earn the highest perceived return on investment, period.  The key word is "perceived", because the end result is not always the choice that results in the absolute highest return.  However the capital will flow wherever the decision makers "think" it will earn the highest return.   This is how capital SHOULD flow, as it results in the most productivity and value for each dollar invested.  The end result is the world we live in today, where society moves forward with new discoveries, increased productivity, and a higher overall standard of living.  It is hard for anyone to argue against this, unless they feel we would all be better off riding horses, using the Pony Express to communicate, building fires to stay warm, or going without basic pain medicine or anesthetics.  Amazingly, there are some folks that feel this way, but for the rest of us, we like the way things have progressed over the last 200 years.

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Obama Cartoons

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We can't help but laugh at these Obama cartoons! Cartoons have a way of capturing feelings and frustrations in a way that words alone cannot.   Much of the frustration in these cartoons seems to focus on his lack of any real leadership skills when it comes time to make tough decisions.  That certainly is not a label that any president should be happy with, especially one that will face re-election next year.

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U.S. Involvement in Libya - Illegal, Immoral, Unaffordable

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We do our best to focus our commentary on economics and those issues that directly affect the economy and investing.  However, there are times when the seriousness of the issue warrants getting off subject and commenting on the events at hand.  The U.S. involvement in the Libyan crisis is one of those subjects that must be addressed.



First let us stick to the economic side of the story and discuss why, economically speaking, we should not be getting involved in Libya.  We are broke!  We should not be going out and trying to save others when we need to be focusing on saving ourselves.  Thanks to the earthquake in Japan, the Fed will now be purchasing the majority of new U.S. debt that is brought to market!  We are buying the majority of our own debt, which for decades has been the ultimate measure of a failing system.  We are on our last legs, and need to be slashing our federal spending across the board if we are going to avoid a fiscal disaster.  If we faced a real threat to our national security that required a full scale war to defend, we would not be able to afford to fight!  Literally, we could not fund a real war as it stands right now.

Second, we have absolutely no moral authority to get involved in Libya.  Show me what document gives us the power to intervene throughout the world as the single voice for keeping the peace.  Please don't tell me about the United Nations, NATO, or the coalition, because everyone knows the U.S. calls all the shots.  The world knows this and will hold us accountable for whatever comes as a result of our involvement in Libya, we all know that to be certain.  We are brainwashed into the thought process that if people are dying in Libya, and we have the means and power to stop it, then we must act.  We are told that standing by on the sidelines and watching would be wrong and immoral.   Folks, this is hypocrisy!  People are dying all of the world under tyranny and oppression, and we rarely get involved.  Just look at what is happening deep in the heart of Africa for example.  We allow it to happen when we do not have a vested interest in the situation.  However when we do have a stake in the game, we play the "moral obligation" card.

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Inside Japan's Nuclear Reactors

POST UPDATE - March 20, 2011

We want to share two additional infographics that deal with how radiation affects the human body, and more details on what is going on inside Japan's Fukushima Power Plant.

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ORIGINAL POST - March 17, 2011

Well-timed infographic from LiveScience that helps us all understand what is going on inside the nuclear reactor in Fukushima, Japan.   These reactors are such complex and dangerous structures, and it really boggles the mind to consider the magnitude of their power.  Japan's nuclear reactors were built in the 1960's and as we know now, are located almost directly on a fault line.

Tags: Fukushima Reactor, Fukushima Infographic, Nuclear Reactor infographic,

Japan nuclear reactors, nuclear meltdown, japan crisis.

Who Will Buy U.S. Debt?

Simon Black at "Sovereign Man" put an article out yesterday that gives a quick overview of the U.S. debt situations and asks the question, "who will buy U.S. debt when Japan and the Fed stop buying"?  It's hard to say exactly what Japan will do, but that really is not the point.  The U.S. is quickly approaching a time when there will be a lack of buyers for our debt.   No worries, right?  The Fed has already primed the pump and taken steps to make it appear that there is nothing wrong with buying our own debt!  Of course, that was a very smart strategy from a PR standpoint.  Oh, and there are no signs of inflation anywhere, according to Mr. Bernanke, so no need to buy gold, silver, oil, agriculture, or any other commodities.  Just ignore the 10 year bull market in gold, it means nothing???

POSSIBLY THE LAST TIME TO GET OUT OF THE DOLLAR

by SIMON BLACK

March 15, 2011

Dallas, Texas, USA

It’s no secret that the United States government owes a pretty penny to foreigners. Certainly, what America owes to foreigners pales in comparison to what it owes to Ben Bernanke… but still, $4.45 trillion is no small number, even in these crazy times when terms like “kajillion bajillion” are more appropriate to quantify debt and entitlements. 

China is the largest foreign buyer of US Treasuries with around $1.15 trillion in holdings… Japan is the second largest at around $886 billion. Curiously, the trend for China has been down– the Middle Kingdom has been steadily reducing its position since peaking in October 2010. 

Japan, on the other hand, has been steadily increasing its Treasury holdings over the same period. Its government does have a long pattern of currency intervention, and there has been much grumbling in Tokyo about the effects of the strong yen on their exports.

Fast forward to this past weekend. Earthquake. Tsunami. Volcano. Nuclear radiation. Japan clearly has other things on its mind right now than to continue financing the ongoing largess in Washington DC. 

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Earthquake Infographic

Sharing this very nice and appropriate infographic that illustrates many of the most notable earthquake hot spots around the globe.  There is no doubt that human beings are risk-takers by nature.  We have an incredible ability to put danger and risk in the back of our minds and focus on the hear and now.  That is probably why we have come so far over such a short period of time, because failure to ignore risk would result in fear and paralysis.  Nevertheless, those living on fault lines are putting themselves in considerable risk, there is no denying that fact.   It is one thing to live near a fault line, quite another to build nuclear power plants on one as well.  One thing is for certain, don't expect a mass exodus for the San Francisco area in the near future.

Tags:  Earthquake Infographic, Japan Infographic, Japan Earthquake

Fault lines, Earthquake Zones, Earthquake predictions, Danger Zones

Japan Earthquake Newspaper Coverage

Please help the victims and donate today at the American Red Cross!

The situation in Japan is deteriorating this morning and another earthquake has hit the country.  We want to take a look at how newspapers are covering this extremely scary and heartbreaking story this morning.  The earthquake today measured 6.0 and was felt as far away as Tokyo.   Although most people now get their news online and via other media, print newspapers still have nostalgic and historical significance and can provide a barometer for sentiment across the world.

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The 1970's - Starring Barack Obama as Jimmy Carter

Very informative interview with Niall Ferguson on CNBC.  Ferguson discusses western civilization and the historical precidence for how dominant civilizations come to an end.   His premise is that history shows us that large civilizations very often come to an abrupt end rather than enduring a long, slow decline.  He does not make any specific predictions about the decline of the United States, however he does reference the 1970's and goes into some detail about his predictions for democracy in the Middle East.

There is no reason to think at this point that the United States is going anywhere.  However, the problems we face are very real and we appear to be on a path toward more pain and suffering.  We agree with Ferguson's predictions on the future of the Middle East, which are also very bullish for oil and gasoline.  Everyone needs to protect themselves from significantly higher gas prices by purchasing an ETF that tracks either gasoline or oil prices.  Please contact your investment advisor and discuss these options with him.  If gasoline goes to $10 per gallon or higher, the affects will be felt in higher prices for all good and services.  You must be hedged against these risks.




Tags:  Oil prices, gas prices, inflation, Obama, Niall Ferguson,
CNBC, 1970, how to protect against rising oil prices

Michael Moore Calls for "War"

The events surrounding Wisconsin over the last number of weeks have been fascinating to watch.  We have posted many entries on these events and provided our commentary on the situation.  What is important to understand is how all of these events are tied to much larger developments across the world. The fallout from the Great Recession is only beginning to be understood by most Americans.   The truth is that the fallout has only begun.   The events in the Middle East, and now the events in Wisconsin are all a  direct result of political, monetary, and economic policy that came about after the downturn.

The only aspect of what is happening in Wisconsin that has caught us off guard is the speed at which events are unfolding.  We did not expect to see such large protests and words like "war" being used at this stage of the game.  Our best guess was that these events would occur over the next few years.  However, we are moving much more quickly toward our own unrest here in America.

Michael Moore is capitalizing on these events and inciting the people to take action in his interviews and speeches.  He is using very strong words and promoting anger and fear to get this message across.  The people that he is speaking to are very impressionable and most likely do not fully understand the dynamics and fundamentals  that are driving these decisions by those in power.  Whether or not you agree with way leaders in Wisconsin and elsewhere are handling these decisions, you should not be taking advice or forming your opinions on the situation from Michael Moore.  His speeches are filled with grandiose statements, dramatic content and fear.  They are empty of any real evidence and hard facts to support his claims and accusations.   He has an agenda and profits from this anti-business, anti-free market message.  He is trying to start a class war, which will rip this country apart from within.  We are all Americans and are entitled to our opinions, but we are not entitled to try and incite the masses to take action and promote violence against anyone.  That is what Michael Moore is now doing in his interviews.  Take a listen for yourself......

Michael Moore's Speech in Wisconsin

Michael Moore gave a speech in front of a large group of protesters in Madison, Wisconsin on March 5th.  Below is our response to his message.

Speech delivered at Wisconsin Capitol in Madison, March 5, 2011

America is not broke.

LET’S START RIGHT HERE AT THE TITLE.  WHY SHOULD WE BELIEVE THIS?  WHAT EVIDENCE, NUMBERS, FORMULAS AND FINANCIAL MODELS DOES HE SHARE TO PROVE HIS POINT.  SHOW THE PEOPLE WHY YOU FEEL AMERICA IS NOT BROKE.  MICHAEL, IF YOUR ASSETS EQUAL YOUR DEBTS, YOU ARE BROKE.  IF YOUR ASSETS ARE HIDDEN UNDER A MOUNTAIN OF DEBT, YOU ARE VERY BROKE.  IF YOU HAVE TO BORROW MONEY TO MAKE YOUR DEBT PAYMENTS, AND BORROW MORE MONEY TO MAKE THOSE NEW DEBT PAYMENTS, YOU ARE BROKE.  THAT IS WHERE AMERICA FINDS ITSELF.  MICHAEL, YOU ARE NOT BROKE, BUT AMERICAN IS DEAD-ASS BROKE MY FRIEND.

Contrary to what those in power would like you to believe so that you'll give up your pension, cut your wages, and settle for the life your great-grandparents had, America is not broke. Not by a long shot. The country is awash in wealth and cash. It's just that it's not in your hands. It has been transferred, in the greatest heist in history, from the workers and consumers to the banks and the portfolios of the uber-rich.

Today just 400 Americans have more wealth than half of all Americans combined.

Let me say that again. 400 obscenely rich people, most of whom benefited in some way from the multi-trillion dollar taxpayer "bailout" of 2008, now have more loot, stock and property than the assets of 155 million Americans combined. If you can't bring yourself to call that a financial coup d'état, then you are simply not being honest about what you know in your heart to be true.

And I can see why. For us to admit that we have let a small group of men abscond with and hoard the bulk of the wealth that runs our economy, would mean that we'd have to accept the humiliating acknowledgment that we have indeed surrendered our precious Democracy to the moneyed elite. Wall Street, the banks and the Fortune 500 now run this Republic -- and, until this past month, the rest of us have felt completely helpless, unable to find a way to do anything about it. 

I have nothing more than a high school degree. But back when I was in school, every student had to take one semester of economics in order to graduate. And here's what I learned: Money doesn't grow on trees. It grows when we make things.  

MONEY DOES NOT GROW, IT IS EARNED.  IT IS NOT EARNED BY HARD WORK ALONE, IT IS EARNED BY HARD WORK THAT PRODUCES RESULTS AND CREATES VALUE.  HARD WORK THAT IS WASTEFUL DOES NOT CREATE VALUE AND THEREFORE SHOULD NOT BE REWARDED.

It grows when we have good jobs with good wages that we use to buy the things we need and thus create more jobs.

BUYING THINGS DOES NOT CREATE MONEY OR JOBS.  SAVINGS AND INVESTMENT CREATES JOBS.   VALUE, AND HENCE MONEY, IS NOT CREATED AT ALL.  MONEY IS TRANSFERRED IN EXCHANGE FOR VALUE.  THE MORE VALUE YOU CAN CREATE, THE MORE MONEY  YOU WILL EARN.  SIMPLY HAVING A PULSE AND WORKING HARD DOES NOT ENTITLE YOU TO EARN A SUBSTANTIAL AMOUNT OF MONEY.  IF YOU WANT MONEY, YOU MUST CREATE VALUE FOR OTHERS.  OUR COUNTRY IS GREAT BECAUSE OF THIS BASIC IDEA WHICH DRIVES EVERYTHING WE DO AND RESULTS IN AN EVER-IMPROVING SOCIETY.

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The Drug War

Another great graphic from Daily Infographics. This "war on drugs" we are fighting here at home is really disheartening. We've all heard both sides of the argument for and against legalization, and both sides make a number of good points. There just does not seem to be a good answer, and the current situation is just a complete and utter disaster. Think of all the hard working men and women in law enforcement that are risking, and in some cases giving up, their lives for this drug war. The sad thing is that when your economy is on thin ice and unemployment is near 10%, very few politicians want to discusses this issue.  Whatever the solution, this drug war must be considered a failure at this point.

Full size graphic >> Click Here

Gas Price Cartoons

Maybe the only great thing about rising oil and gasoline prices (unless you own OLO and are protecting your family - read "Playing the Game Correctly?") is that we get a tsunami of gas price cartoons!  Enjoy!

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A Comparative Look at State Taxes

Very interesting infographic from Turbo Tax comparing all the various state taxes and how they differ from state-to-state.  Be sure to click on the last tab "Overall Tax Burden" for a look at the big picture.


                >> Click for interactive graphic

Libya - An Overview

Sharing this great overview of Libya and its economy.  If you have never seen images of Libya, it truly is a beautiful country.  The historical architecture is fascinating and the coastline is breathtaking.  It is very sad that such a beautiful country has been basically off -limits as a vacation destination for Americas for over 30 years!  Perhaps these protest will unleash a renaissances in not only this country, but across the region!

Visit our entire page dedicated to the Crisis in Libya

                                                

Libya infographic, libya economy, libya overview, libya history, libya protests, libya chart

http://precisiontradingsolutions.blogspot.com/p/libya-crisis.html

The Great Fortune Teller

Anytime our buddy Mr. Bernanke speaks on Capital Hill, we feel it is important to remind everyone to not believe one thing that comes out of his mouth when he talks about the future or our economy.  Why not?  Because before the greatest crash since the Great Depression, he thought everything was just fine.  He thought the economy would continue to grow, housing prices would continue to rise, and unemployment would stabilize.  Now, when he tells us that there is no concern about inflation and that oil prices will not hurt the economy, we should remember his track record when it comes to fortune telling!

This "dog and pony" show that takes place when he appears before Congress is outrageous.  A number of congressmen challenge him, as they should.  Most, however, have no idea of his track record.  We should not be surprised that most of our elected officials have no real economic knowledge whatsoever.  They were elected based on their promises to "fix things" and are now responsible for making decision that will impact the future of our society.  They ask him questions as if what he says is Gosphal, which of course is far from the truth.  His record speaks for itself.

What someone should ask Mr. Bernanke is the following...

"In your testimony, you told us that inflation is not a concern, our economy is strong, and oil prices do not pose any threat to the economy right now.  Why should we have any faith whatsoever in those statements?  Here is what you told us back in 2007 before the biggest economic collapse since the Great Depression.....  How do you explain those statements and why did you not  know or tell us about the coming crash before it happened, when so many others saw it as clear as daylight?"