Making Money Alert
Pay Up, Sucker!
04/15/2009
Today is tax day, a dreary day for most Americans -- especially if you have the skills, ability and fortitude to earn a substantial amount of money each year. Yes, this is the day the government says, in essence, pay up, sucker!
Now you've probably heard about the many tax "tea parties" being held today throughout our nation. I've read that there were going to be well over 1,500 tax protests held around the country, with at least one taking place in all 50 states.
Where I live in Orange County, Calif., I've heard there will be over 50 separate local tax protests. Honestly, I can't say that I blame anyone for feeling the need to protest the high tax burden imposed by not just the federal government, but also by state and local governments.
The fact is that the total tax burden Americans face each year is just way too overbearing and, with the new presidential administration's philosophy clearly on the side of more federal spending, that tax burden isn't likely to go down for at least another four years.
Depending on where you are on the economic scale, the combination of state, local and federal taxes can add up to well over 50% or more of your annual income. This means that you effectively work only six months of the year for yourself, and the other six months you basically are relegated to the servitude of the collective.
I know that may sound extreme, but I really don't think a rational person can look at it any other way.
Fortunately, there are steps you can take to help reduce your overall tax burden. First off, you have to make sure you are spending the time, energy and money that it takes to keep your overall tax liability to a minimum.
One way to do this is to meet with your CPA or tax professional on a regular basis. I make it a point to meet with my CPA four times a year. By doing this, I can plan for my tax liability well in advance of April 15, and I also can make sure I have the investment vehicles and proper deductions in place that help ameliorate my overall tax liability.
Yes, this process involves some of your time and some of your money. But believe me, it is well worth it. You see, as long as our tax code remains ever bloated and ultra complicated, having a tax professional on your financial team is just an absolute must.
Even if you feel no pangs when it comes to paying taxes, think of the situation this way. You owe it to yourself and your loved ones to protect yourselves from fiscal mismanagement. You wouldn't just throw your money away in any other walk of life, so why do it when it comes to paying Uncle Sam.
The fact is that the more successful you are in life, the more pounds of flesh the government extracts from you.
I wish I had better news for you on this April 15, but the reality is that the more you make, the more you pay. This reality dictates that you do everything you can to reduce your tax burden, and therein is the value of a good tax professional.
Oh, and for those of you taking part in a local tax tea party, well, know that you have a sympathetic ear right here with me.
The Necessary and Sufficient Conditions for a Bull Market Call
I'm hearing a whole lot of chatter amongst the financial pundit class about this current rally being the start of a booming new bull market. And while I agree that the nearly 25% climb by the S&P 500 off its March low has been extremely impressive, to proclaim that we now are in a bull market is just way too optimistic -- and way too premature.
Could this be the start of a new bull market? It could, but frankly, I don't think it is.
Take a look at the chart below of the S&P 500 and you'll see that we still are well below the long-term, 200-day moving average (red line).
I think that before we start ushering in the bulls, we ought to keep in mind that we are still nearly 100 points below where we were at the start of 2009.
In my humble opinion, I still think the recent move higher in stocks is a bear market rally. It's a strong bear market rally, I grant you, but a bear market rally nonetheless.
So, before we go calling this bear a bull, we at least have to see the S&P 500 break above its 200-day moving average. If this happens, it will be a necessary, but not yet sufficient condition for making a new bull market call.
In order for us to make a true bull market call, we must first break back above the 200-day average (the necessary condition) and then we must see a sustainable rally from there for more than just a few days or even a few weeks (the sufficient condition).
If and when we satisfy both the necessary and sufficient conditions for making a true bull market call, I shall be the first one to ring the bell and sing the praises of the new bovine market.
There's Gold in Them There Hills
I just issued a new buy in a fund tied to the price of gold in my ETF Trader advisory service.
Gold traditionally has been a safe-haven investment in times of economic turmoil, but I see gold as a great, short-term trading vehicle. The price of the yellow metal just recently bounced off its 200-day moving average. I think that means gold is poised for a sharp rally here, but that doesn't mean you should go out right away and buy gold without preconditions.
Before you stick your toes into the golden pool, you have to know when to buy, and more importantly, when to sell.
If you want to get specific buy and sells points on gold and several other short-term trading opportunities, then I invite you to check out my ETF Trader advisory service by clicking here.
Finally, I know there are a lot of advertisements claiming that gold is always the best investment vehicle over the long term. There are even those who say you should take your money out of your 401(k) plan and invest it in gold. Usually, these are the same folks who predict that gold is going to $2,000 an ounce very soon.
Certainly, there are a lot of potential drivers out there (a devaluing of the U.S. dollar, and hyper-inflation) that could propel the price of gold higher. But remember that the strongest voices shouting for $2,000-an-ounce gold are the same voices that have a vested interest in selling you gold.
I think that investing more than 15% of your money in gold, gold stocks or other precious metals is way too risky. If you want to add a little luster to your portfolio, then gold could be a good way to do so, but you have to be very smart about it. With gold, you have to know when to buy -- and more importantly when to sell.
ETF Talk: Are Solar ETFs Heating Up?
The sun brings forth incredible heat that warms, illuminates and energizes our planet. With the Obama administration becoming a powerful advocate for a strategy of increased use of alternative energy sources, it seems like solar power is destined to be a key component in that strategy. The question now for investors is how and when to profit from the political clout of a new president who has promised to make alternative energy one of his top priorities.
With both President Obama and his fellow Democrats who control Congress looking to fund clean energy initiatives, solar energy exchange-traded funds (ETFs) could start to shine. Right now, solar ETFs are trading at a fraction of their 52-week highs, yet in the last week of March, the performance of solar ETFs brightened.
Certain solar ETFs soared 20% to 50% over a very short period. The sector's surge followed an announcement that the Chinese government intends to support the development of solar energy. China's plan would offer $2.94 per watt for solar photovoltaic installations of more than 50 kilowatts. That amount may not sound like much money, but it certainly adds up fast in a huge and still vastly underdeveloped country like China.
The spurt in solar ETF prices is reflected in the chart below that compares the Market Vectors Solar Energy (KWT) and the Claymore/MAC Global Solar Energy (TAN) to the S&P 500. Both of these ETFs were beaten down in February, but they have soared nearly 50% since the market rally started on March 9. Part of the reason both of these ETFs shot up so quickly is that they are heavily weighted in China, with more than 20% of their holdings in Chinese companies.
While solar stocks have been volatile this year, they still could offer good opportunities for long-term investors if governments around the world fund development. But here's a word of caution. Despite President Obama's call for alternative energy initiatives and the Chinese government's announcement of its support for solar energy, analysts are divided about whether investors have enough reason to bet on the trend. For example, critics of China's announcement cited its lack of detail or a definitive timeline.
With the market as volatile as ever, it is uncertain which direction solar ETFs will go next. If the United States and China choose to fund alternative energy projects, then solar ETFs have a good chance of shining. But if the funding fails to heat up, the sector could be in for some cloudy days ahead.
As always, I am happy to answer your questions about ETFs. To send me your questions, click here. I will try to follow up in a future ETF Talk.
Come Meet with Me in Phoenix 2
Would you like to do any of the following?
- Protect yourself against further down side risk and be well prepared to capitalize on future bear rallies and upside opportunities.
- Get a second opinion on your portfolio, and make sure you are properly positioned to reach your goals.
- Double check your investment philosophy and find out if your portfolio is prepared for the coming impact of the federal government's economic changes.
Would you like a short list of the most promising investments we are considering for our client portfolios?
If you answered "yes" to any of the above, it may be time that we sit down to discuss how you can improve your investing plan during these difficult times. No matter what your current situation might be, there's a very good chance I can help you see what to do more clearly.
On Thursday, April 23, and Friday, April 24, I personally will be meeting one-on-one with investors to discuss their current investment situation. I will be hosting these meetings at the beautiful JW Marriott Desert Ridge Resort in Phoenix, Ariz.
I will offer my recommendations on changes that can be made to fortify investor portfolios for the current difficult times -- and well beyond.
Meeting times are limited! 2
I have made arrangements to open another two appointments. That means that if you want to get a second opinion on your portfolio, you must call me right away.
Due to the big response we've had in Phoenix, these two new appointments will be booked very quickly.
If you have a portfolio in excess of $250,000 and want to meet with me, simply click here to contact our offices, or better yet, call me toll free at 800.391.1118. Call me right away. My two remaining openings for appointments will be scooped up soon, so act now!
P.S. -- If you're serious about creating a better positioned portfolio, then call me today so I can get started on your situation. This way, I'll be better prepared to discuss your concerns in detail when we get together in the desert.
Tax Day Wisdom
"Often the masses are plundered and do not know it."
-- Frederic Bastiat
The great economist and classical liberal theorist reminds us all that sometimes the citizenry is fleeced without even realizing it. Let's hope that today, tax day, brings us the realization that plunder by any other name -- be it taxes, federal stimulus spending, bank bailouts, etc. -- is still just plain old plunder.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars or anything else. Click here to Ask Doug.