Legality of Offshore Investments
Having an offshore banking account, corporation or trust are common themes in legal thrillers, spy novels and eastern European politics. There is a reason to be concerned about the legality of such accounts, for although many people would like to include them in their estate planning, a legal misstep regarding the use of any of these asset management tools could result in thousands of dollars lost in back tax payments and legal problems with none other than the IRS in addition to the possibility of spending time in prison. With that in mind, it is not surprising that many Americans shy away from offshore banking altogether.
As any good tax attorney will be able to explain to you there is a difference between tax avoidance and tax evasion. Tax avoidance is the use of legally employable strategies to reduce the amount of tax one has to pay. Tax evasion, on the other hand, is the use of illegal means to do the same thing. So the goal of any transaction that you would like to undertake offshore is to make certain that you are a tax avoider and not a tax evader. A lawyer will never be a willing party to tax evasion, if that lawyer is behaving within the cannon of professional ethics as well as the accepted norms of safeguarding their client's best interest.
To begin with it is illegal to have a secret bank account in another country that you don't tell the IRS about. It is also illegal to move unreported cash even if it is your money. The penalty for either of these offenses makes bank robbery look like a more attractive option.
However, with our own country continuing to advance the goal of globalization, of course it is legal to invest in, and to interact with, foreign markets and there are some tremendous incentives to do so. The key to taking advantage of these opportunities is to start modestly and remember that if it sounds too good to be true then it probably is too good to be true. Secondly, it is your duty as an American citizen to report your financial activities to the IRS. So divest yourself of notions of secrecy in the absolute and think in terms of tax savings rather than not paying taxes. If someone tells you that they can help you avoid paying any tax whatsoever, they are offering to help you engage in a criminal enterprise. And if you already are a criminal of some sort then perhaps you should look into the matter, but for the vast majority of those reading this article, don't endanger a life spent being a law abiding citizen by buying into an outrageous scheme.
As I said before, U.S. citizens and permanent residents are required to disclose their banking accounts abroad, where they are located and what the account numbers are, on a form called a TDF 90-22.1. However, there are exceptions to having to file this report and taxpayers are confused about the definition of these exceptions as well as the meaning of key terms within the document. One excellent way to begin to understand what must be reported, and when, is to look to the Jacobs Report. The Jacobs report which can be found at http://finance.groups.yahoo.com/group/jacobsreport/ and it is an extensive document filled with the applicable law and IRS instructions as well as the accumulated wisdom of many web sites and foreign bank reports.
Remember, the cardinal rule when beginning your inquiry into offshore banking is to find out about these matters in detail. You need to check into things yourself and keep in mind that if a deal sounds too good to be true then it is. In addition, keep in mind the fact that you want to be a tax avoider not a tax evader. Consult your estate planner and a tax specialist because the laws in many of the nations that provide tax havens have changed somewhat since the beginning of the War with Afghanistan and Iraq, because the U.S. is looking for hidden terrorist cash reserves and that has changed the way discretion is handled in many tax haven nations that are friendly with our government.
Ronald Hudkins is a consumer advocate and champions awareness to issues needing personal attention. For free Ebook downloads he has written about important issues that save money, protected identities, help in estate planning, wish fulfillment foundations for adults and more visit http://stores.lulu.com/rhudkins
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8:57 AM | 0 Comments
The Financial Woes of the Banks Will Continue
By: Hans E. Wagner
Are the financial woes of the banks over? To beat the market by investing in the stock market, you should have a good understanding of the factors that are driving the trends in the financial sector. For example, are we close to the end of the loan write-offs? If you are learning to invest, it is important to have well ground perspective on state of the financial sector before making any long-term commitments. Expect the financial woes of the banks to continue and be careful when the market make volatile moves in either direction.
Bank Failures
On Friday July 11, 2008, after the market closed, the Federal Deposit Insurance Corporation (FDIC) took over IndyMac Bancorp (IMB) in California. This was the second largest bank failure ever in the US. About a year ago, the share price was $29. It closed on Friday at $0.28. According to the FDIC, there have been 12 bank failures so far in 2008. The concern among investors is that there will be many more failures in the months to come as loan write-offs over whelm banks without sufficient capital.
Earlier on the same day, there was much consternation about the fate of the quasi-government mortgage banks Freddie Mac and Fannie Mae. An article in the Wall Street Journal and comments from a former Fed Governor indicated that these organizations were insolvent. Management at both companies claimed that this was not true and that they were fully capitalized and accepting mortgages.
Quoting "Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair-value accounting rules. The fair value of Fannie Mae [down 78%] assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, former St. Louis Federal Reserve President William Poole said." (Bloomberg). Also, Senators Schumer and McCain both said Freddie and Fannie would not be allowed to fail, in the same story.
Freddie and Fannie are essential to the U.S. mortgage market. According to various reports, they are currently buying up to 80% of the mortgages now created in the US. Without them, the mortgage market would dry up and the price of homes would fall much further as very few could afford to buy a house. If this were to happen, the US would face a housing meltdown of unprecedented form.
So where do Freddie and Fannie get additional capital? As mentioned above, the price of their stock has fallen significantly. Not many investors want to place new capital in an organization that still does not know how bad it can get. Free marketers believe they need to fail to help restructure the system and make the market work properly. Others believe the government must step in at taxpayer’s expense. Most likely, we will see the government step contributing a large amount of money receiving preferred shares in return. If this happens, expect the common stock holders to be wiped out. The hope is eventually the Treasury will be able to sell the preferred shares to recoup their investment once the market stabilizes in several years. This makes one think how bad can it get.
Testifying before Congress Ben Bernanke said that Freddie and Fannie were adequately capitalized and that the problem was one of confidence. The Securities and Exchange Commission said it would curb short selling in the 19 primary dealers including Fannie Mae and Freddie Mac.
Potential Loan Losses
About a year ago, the “analysts” estimated that the total write down of bad loans would be about $400 billion. Then by December 2007, the estimate doubled to about $800 billion. Then along comes a report from Bridgewater Associates that expects the number to double again to $1.6 trillion. Bridgewater is a very large hedge fund who is also one of the top analytical firms. Up to now, the banks have been using a ‘mark-to’model’ method of valuing the structured debt. According to Bridgewater, the modes used have grossly underestimated the actual losses. They doubt the financial institutions will be able to generate enough capital to cover the losses.
According to the report, “Lenders would have to curtail loans by roughly 10-to-one to preserve their capital ratios. This would imply a further contraction of credit by up to $12,000bn [$12 trillion] worldwide unless banks could raise fresh capital."
Not all of these losses are in the sub prime market. According to the report, more than 90% of the losses from sub prime loans have already been written off. Unfortunately, the losses form the prime and Alt-A loans could be much larger than we have already seen. The size of these loan portfolios are much larger than the sub prime portfolios. Further, Bridgewater expects about $500 billion in corporate losses that must be written off. This leads to the current estimate of more than $1 trillion in losses yet to be written off. That is a scary thought.
On Sunday evening July 13, 2008, the government stepped in to start the bail out process of Freddie and Fannie. The following is from MarketWatch:
WASHINGTON (MarketWatch) -- The White House and the Federal Reserve moved Sunday to prevent Fannie Mae and Freddie Mac from failing. In a statement, Treasury Secretary Henry Paulson said the global reach of Fannie and Freddie necessitated unprecedented action. The Treasury has asked Congress to increase the existing line of credit to Fannie and Freddie. In addition, Treasury asked Congress for the power to buy the two companies stock. In a separate vote, the Fed board of governors voted to open its discount window lending facility to Fannie and Freddie. In return, Paulson asked Congress to give the Fed a formal role to work with the new GSE regulator on capital standards for Fannie and Freddie.
So the bail out has begun. So far, Freddie and Fannie have not taken advantage of the Fed’s discount window. It looks like just making it available helped to increase the confidence in the financials. Then on Wednesday, July 16, 2008 Wells Fargo increased its dividend by 10 percent, which was a surprise. This news has helped to push up the financial sector more than 10% on the day.
The Bottom Line
So what is an investor to do? The financials benefited from these moves as short covering on Wednesday helped push up the prices of the banks across the board. The transportation and consumer discretionary sectors also did well. One characteristic of bear markets is sudden moves up that can last for several weeks. However, then reality sets in and the market turns back down. We could be on the cusp of this type of move if it can sustain itself through the heart of earnings season. For investors willing to make trades that might last only two to four weeks, there is a good chance we are near an interim bottom. Before committing capital, we need to see if the rally on Wednesday can continue. Stay tuned.
If you wish to learn more on evaluating the market cycles, I suggest you read:
Ahead of the Curve: A Commonsense Guide to Forecasting Business and Market Cycles by Joe Ellis is an excellent book on how to predict macro moves of the market.
Unexpected Returns: Understanding Secular Stock Market Cycles by Ed Easterling. One of the best, easy-to-read, study of stock market cycles of which I know.
The Disciplined Trader: Developing Winning Attitudes by Mark Douglas. Controlling ones attitudes and emotions are crucial if you are to be a successful trader.
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5:18 PM | 0 Comments
The components of trading
By: Shaun Rosenberg
I would say that there are two different components of trading. These are the trader and the system. Each one has something that they can bring to the table to give you a successful trading system.
The system component is easy to understand. If you follow your own strict rules of what to look for before you invest your money you will come up with some sort of consistency. If you always trade by do the same thing then you will be able to get the same results, over and over again.
This makes having a trading system very important aspect when it comes to making money in the market. Develop a well tested system can be the best way to make good money. However there is one other major component when it comes to trading, and that is the trader themselves.
Some traders believe that a trading strategy should be all system and the trader should try to keep their own thoughts out of it. This can be true to an extent. The major flaw we as humans have when it comes to trading is our emotions.
Our emotions might make us sell too soon or buy too early. That can cause us to lose money. But there is a good reason that traders should not rely 100% on a system and keep some human touch in trading.
This ability that humans can bring is the ability to change and adjust to new markets. You may have a system that is working well buying calls but if you start to see that the market is crashing it can tell you that you might not want to be buying calls right now.
You might adjust that strategy by taking the same rules you learned from buying calls and reversing it to give you good put buying strategies. Or you might try something different. But our ability to adjust is what gives us an edge over a pure systematic way of trading.
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Read More......4:37 PM | 0 Comments
What is an ETF Investment?
By Jeff Jarred
If you are looking for flexible investment vehicles that you manipulate within your portfolio such as stocks, bonds, futures you should pay close attention to ETF's. By definition ETF stands for exchange traded fund, an ETF holds assets such as bonds and stocks and its net worth is equivalent to that of the negotiable instrument it holds; an ETF can also be thought of as an investment portfolio that holds stocks and bonds or other negotiable instruments that are traded on a stock exchange which is very similar to the way that stocks are traded.
The main difference between stocks and ETF's (besides that an ETF is a portfolio of bonds or stocks) is that an exchange traded fund tracks and index hence the reason why they're called index funds. There are many indexes that can be tracked through ETF's, an investor may choose to track and index for it to Dow Jones, NASDAQ, a specific industry such as the manufacturing industry where they may choose to track and index of an emerging market, these markets can be in different countries so much like stocks and investor can also buy an ETF which tracks a particular index of an industry which thrives in different countries across the world.
The whole ETF concept has been around for about 15 years and the first to hit the market did it in 1993 and was better known as "spiders" -- ETF symbol was SPDRs, this ETF in particular tracked the Standard and Poor's 500 index of large-company stocks. During the early 1990s when there is investment vehicle was introduced to the market the most popular type of ETF's were those which track the index of the technology sector because of obvious reasons, today there is a huge variety of ETF's that operate in different countries and it can be said that the amount of ETF's its equivalent to the number of industries that are being traded in the stock exchange.
Benefits of ETFs
One of the most obvious benefits when it comes to ETF's is their low operating costs; let's illustrate this point, the Vanguard total Stock market VIPER which is an ETF that tracks the index for the entire US stock market carries an annual operating cost of 0.07% of the total assets, that is equivalent of saying that a $10,000 investment would have an annual operating fee of seven dollars.
Another great benefit of dealing with an ETF is that such trading vehicle is structured for tax efficiency this is because an ETF itself doesn't have to buy or sell securities so this means that there are not any taxable gains to be passed on. And ETF can generate taxable gains but, an exchange traded fund is often sold as a stock will be sold in the stock market, they are not redeemed by the holders so in order for an investor to realize capital gains he would have to sell the shares or trade the ETF in order to reflect changes in the underlying index.
Last (but not least) ETFs are very flexible when they are compared against other investment instrument such as mutual funds, in other words a mutual fund is often priced once and this usually happens at the end of the trading day, ETFs on the other hand can be bought or sold exactly as you would with stocks and similarly to stocks you could also buy on margin (using other people's money) and you can also sell short when the market conditions are appropriate.
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4:40 PM | 0 Comments
Are Your Images Of Your Trading Day Motivating or Frustrating?
ฺัBy:Terry T Leslie
The images of today's society are thrown at us to encourage us to want bigger and better, more, and faster. We are literally bombarded with high priced images and images that draw on our human desire to succeed in our lives. Status symbols are all over the place and often we know from the beginning which ones will excite us. Whether we want large yachts, expensive cars, million dollar homes, or a life of financial freedom, we all want something and we focus on the images that spark desire in our lives.
The day trading lifestyle often conjures up images of successful people playing hard with their expensive toys. Day trading attracts the people who want some of the biggest and most expensive toys because it is a known profession built off of success and money. However, since there isn't a quick short cut into the mainstream of monetary award, many people who came into day trading with hopes of a financially rewarding experience are now finding those same image that once motivated them a source of discontentment, overwrought with feelings of failure and impatience, and frustration. A successful image no longer feels good.
Those who hold onto their frustration or even the images that once spurred them into trading often do not do as well as those who realize that trading is nothing more than a process that deals with skill, knowledge, and a basic understanding that their chosen path is not an easy one. Setbacks do not mean failure when you are more focused on the education and experience than the big reward at the end of a really good year. You can get there, but you will get there faster if you hold the process above these images of fast cars, hot women and men, and large scale life. You didn't walk onto a movie set but you are dealing in real life. And real life isn't so simple. The market isn't simple. It moves around on you like a squirming fish out of water.
How do you use the images in your head while you are trading? Are you thinking about the financial gain and the next big toy or are you feeling the thrill of the trades that brought the house down, the good calls you've made, or the adrenaline rush as the ticker tape climbs right before the closing bell? The images that you flip through your mind during the trading day will either serve you well or they will work against you in the long run. Images of physical possessions generally do not motivate a trader on a bad trading day in the same positive way that images of the most exciting trade of the week do. It is all about focus.
When you focus on the reward, you become terribly frustrated when the reward seems to be slipping farther and farther away. This has the potential to rock your confidence and bring negative emotions into your trading day. This of course, can lead to some pretty costly mistakes if you allow it to. When you keep your focus on the process you can often take a loss without harm and walk away to the next trade with a little more knowledge under your belt and a little time to refocus your energy on the next event. Focus can either create energy of take it away, depending entirely on what you choose to focus on during your day.
As you go through your trading day, you are bound to find different motivating images that flash across your mind. When you find the ones that really seem to get your juices flowing in a positive direction (regardless of whether you are coming off of a winning trade or a losing trade) then you will know where to redirect your mind when it starts to lose its focus.
The use of motivating images has been used for decades in order to inspire athletes, artists, trading experts, and all kinds of people who deal in a rather aggressive and unforgiving environment. When you learn to harness your images and help them to help you, your trading day will be inspired, not frustrating, no matter what happens.
In the mean time, Good Luck on your journey to success
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6:38 AM | 0 Comments
Investments in Private Equity: a boon for investors
By:Karen Stephens
In real estate, private equity remains impartial. When the deal goes in hands of privatization it becomes more specific in spite when it was under the government. It is not necessary that every time this thing happens but with observational studies it has been retrieved that privatization has provided the equity to the real estate investments. Nowadays, people like to make their investments in real estate instead of any banks or other investment companies. This is because it is a long term investment source and when it comes to private equity it becomes more reliable.
Such investments are particularly made via private equity real estate fund which acquire funds from investors. It is not a new act to do the investments through private equity. It is having a long history in real estate investment through both direct dealing and through pooled investment capital. Previously the real estate investment were used to come under crux of real estate but now due to private equity of real estate it has become more opportunistic. Private equity real estate now comes into sight as an independent character class. It all happened because of large growth in private equity real estate in last few years. The private justice in real estate gives following investment features:
- Private Investment Management: - It relates to money advisory services leveraging all the benefits of the firm to both individual and business.
- Skill Management: - It offers diverse distribution channels to individual and association.
Thus private equity negotiates the private transactions to individual and company investors.
The real estate private equity group is full service banking business which operates two occasional equity funds. One is equity capital and the other is mezzanine investment. They provide online real time services constantly by keeping in mind about client's attention. Many such online services are available today which really got popular because of its well known service about private equity real estate. Private equity real estate is worldwide advantage class and in 2007, 46% of capital elevated in US, 26% in Europe and 27% was the targeting ratio in Asia including the rest of the world. Such service providers also take suggestion from their clients about purchasing the real estate properties. This makes client feel more comfortable with service providers. Some times when the client requests to pay the fees on real estate attainment, these service providers act as a broker at that time. They also provide a free service to their IRA clients who are a regular user of their services in locating the correct supervision to tune their account.
The service provider for the private equity real estate work on the following three basic strategies:
- Core Plus: It means to invest the fund in core properties.
- Value Added: It involves buying of property; make an improvement in it and sell it for the maximum gain on opportune time.
- Opportunistic: It requires a high degree of enhancement including development, raw land, etc.
Hence winding the discussion I will make a point focused that investment in right direction with appropriate source and equity is always helpful.
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9:14 AM | 0 Comments
