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« Uneasy With Kinross Red Back Merger | Main | Are Gold Stocks worth the effort: update 30th August 2010 »
Tuesday
Aug312010

Time to Go Global

Summary of Fed rects and outlays 01 sep 2010.JPG


By Chris Wood, Editor, Casey Research

Here at Casey Research, we really don’t enjoy being a buzz-kill. It’s just that we think it’s more important for investors to be well informed about the reality in which we find ourselves today than it is to be happy-go-lucky all the time.

The good news is that when the stuff hits the fan, as it has for going on two years now, it opens up a number of unexpected opportunities for profit. Even in the hairiest situations, there are ways to protect yourself.

Having said that, let’s start with the bad news

If you live in the U.S., your taxes are about to get much, much, higher. And I’m not talking about the Bush tax cuts set to expire at the end of this year. I’m talking about a structural deficiency in the tax base that will force the spendthrift federal government to demand much more from the productive members of society, no matter who’s in charge of Congress and the White House.

Here are the facts.
 



For a bit of a refresher and to update where we are, in the table above I broke down federal government receipts and outlays (revenue and expense) by month for fiscal year 2009 and year-to-date 2010.

As you can see in the table, we’re through three-fourths of fiscal year 2010 and the deficit is already over $1 trillion. At this point last year, the deficit was also just above $1 trillion. So you can bet we’re on track for a total deficit of between $1.4 and $1.5 trillion this year.

Just like last year, the huge deficit figure will be widely reported, even in the mainstream media. But a related piece of vital information will be glossed over (if reported at all).

This piece of information is the most crucial to why your taxes are set to skyrocket – and nobody is even bothering to mention it.

You see, the “outlays” column above comprises two types of spending: discretionary and mandatory. Mandatory spending, expenditures that must go into the U.S. budget, includes things like Social Security, Medicare, Medicaid, income security programs, and some others. And according to the Congressional Budget Office, mandatory spending reached $2.1 trillion in fiscal year 2009. What’s more, it increased more than 30% from the year before.

Now look back up at the table above. Notice anything?

Total receipts for 2009 were also $2.1 trillion. In 2009, for the first time ever, mandatory spending just about equaled total tax receipts.

That means that basically every single penny the federal government received in taxes last year (including individual income taxes, corporate income taxes, social insurance and retirement receipts, excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts) was already spent on something mandatory before it came in.

It’s also worth mentioning that while mandatory spending grew by 30% last year, tax receipts fell by 16%. So under the current tax structure, a gap will begin to grow where mandatory spending pulls away from total tax receipts.

What this all means is that your tax burden is sure to rise, significantly, over the coming years. That’s the government’s only choice at this point. You think it will cut discretionary expenses by any meaningful amount? Not hardly, it’s too politically damaging. And forget about legislation to cut mandatory spending until the system goes completely bust. In the meantime, both parties will try to kick the can further down the road by extracting as much as possible from you in taxes.

Now, here’s the good news…

Unlike the government, you do have a choice. You can “go global” and protect yourself by internationalizing your wealth through all the legal means available, making yourself a target that’s not easy to hit.
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For the past several months, we’ve had some of our best people working on a special report with the purpose of providing you everything you need to know to internationalize your assets and yourself. And it’s finally finished. You can read all the details here, incl. the 5 best ways of going global… at this point, this is not “Whenever you get around to it” advice anymore – the time to act is now, before new laws and regulations kick in that prevent you from getting your money out of the country.




Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.





Silver-prices.net have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.




On Friday, 27th August 2010, we closed another successful trade banking a profit of 79.46% on Call Options on Silver Wheaton.


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