I found this video on the internet and thought it was pretty humorous.  Let me know what you think. 

This week I am attending an investment conference in Zurich called Fonds 2010.  I spent the day walking through the exhibitor area speaking to Swiss private banks, investment firm managers, hedge fund managers, and most any other type of investment professional you can think of.

I approached one unnamed banker and asked if his company accepted US clients.  There were four of them standing in the area when I asked the question, and after asking, three of them scattered as if I dropped a grenade in the middle of them.  The remaining guy apparently was the low guy on the totem pole so he stayed to chat a bit. 

He told me that if I walked into his bank with a briefcase full of 100 dollar bills, he would have to ask me to leave.  He said it was just too burdensome to accept a US client.  They just weren’t interested.  He said the amount of money I would need to deposit and the fees they would have to charge, would be so high, it would offset any possible benefit.  The Swiss don’t want  your money.  And this is new under the Obama administration.

This was a common theme today.  I found investment advisors and bankers throughout the day that turned quite cold when they realized I was American.  I spoke to one very nice woman who worked for another unnamed Swiss bank who asked me to talk softer once she found out I was American.  She told me it her bank wasn’t interested in US clients no matter what the deposit amount would be.

I did however, find 2 banks willing to accept US clients.  I spoke with one of them at length today and have another meeting again tomorrow with them to discuss more details.  I have a meeting with the other arranged for later in this week.  Hopefully I can find a solution for clients interested in legal banking relationships in Switzerland.  I will update you again later this week.

For those of you serious about asset protection, you should seriously be considering a banking relationship outside of the US.  Maybe Switzerland is right for you, maybe not.  There are other countries where this is still possible, but I find it increasingly difficult to find banks willing to accept US clients. 

I am not suggesting tax evasion or hiding money, but keeping a portion of your wealth, legally, in a non-US bank makes it virtually impossible for  your account to be reached by creditors pursuing unscrupulous lawsuits.  And it gives you investing opportunities you may otherwise not have access to.

After reading this recent piece on Bloomberg, I was utterly disgusted.  I just don’t understand how our policy makers can continue to pursue such terrible decisions.  Certainly the country is still in financial turmoil and there is a need to raise funds to support the budgets, but this tax on equity trades may very well be the stupidest idea yet.

Regardless of your philosophical beliefs, the reality is the world revolves around money.  If you don’t believe me, next time you are at the grocery store tell them you want to pay with ‘goodwill toward man’. 

Businesses require investment to operate.  In exchange for this investment, the business pays investors with dividends or capital appreciation.  What happens when every trade is taxed on both the buyer and seller side?  Just like any other activity, when you tax it, you get less of it.  Much of the liquidity in the financial markets are created by short term trades.  Financial institutions have traders working every day getting into and out of trades on a daily basis.

There are also many who day trade.  This can significantly increase their cost of doing business.  A tax of .25% may not seem like much, but if you are a day trader using $50,000 per day will see an additional cost of $625 per week in tax or $32,500 per year in ADDITIONAL  tax he was not already paying.  Day trading is a risky endeavor and this will likely force all but the wealthiest day traders out of the market severly decreasing the daily volume.

When daily volume decreases, the spread between the bid price and ask price will be wide enough to drive a dump truck through, which will have a negative impact on your returns.  It will also significantly increase the cost of doing business for mutual fund managers.  Do you think they will just ‘eat’ the additional cost?  Of course not, it will be passed on to you dear reader.

Let us not forget about your precious 401k’s, IRA’s, ROTH’s, and educational 529’s.  These are almost exclusively mutual fund holdings which will see major declines if this tax is implemented.  We also need to consider, what will happen to all of this capital that will flee the markets.

My guess is that it will flood into the  real estate market, thereby creating our next bubble in RE prices.  Once traders and investors around the world have their cost of doing business hit this hard, the money will not vanish, but like water it will follow the path of least resistance.  Right now, that is real estate.  Do we really want to blow up that bubble again?

I am currently living outside of the US, 7 hours ahead of the east coast so I watched Obama’s State of the Union speech this morning on youtube.  I considered staying up until 4am last night just to watch it because his speeches, whether you agree with them or not, have significant impact on the entire world.

In last night’s speech, I feel like I was listening to my old high school football coach in the locker room pre-game.  It was a lot of rah-rah, but lots of fluff.  He left us with a broad agenda, much of which will never get implemented.  At least I hope most of it won’t.  I am hopeful that his optimism becomes reality, but I’m highly skeptical.

So far he has delivered nothing to improve the lives of Americans, but only burdened our children and grandchildren with huge amounts of debt to repay.  Granted this was initiated by the Bush administration, but he took the ball and ran with it.  In one year the money supply in the US has doubled, which will certainly cause massive amounts of inflation.  He has sent more troops to the middle east, bailed out huge, failed companies that continue to fund his parties campaign, and won a Nobel Prize.  Last week I was in Norway and even they think that is absurd.

One thing that really struck a chord with me in Obama’s speech was his pride in creating 2 million new jobs in 2009.  But where did these jobs come from?  As he stated, these were policemen, firemen, teachers and other public service workers.  He even suggested forgiving education debt for student who enter the public sector.  Interesting.  Maybe he should go back to Harvard for some basic economics courses.

Government is not a producer of economic growth, it is a consumer.  Where do these salaries come from for public service workers?  Taxes and debt of course.  In 2009 under the Obama administration the average private sector job paid $40k per year and the average public sector job paid $70k per year.  The average government worker makes nearly double what the private sector does.

I’m not saying that we don’t need policemen, firemen and teachers, but we do need to be able to pay for them.  And the private sector is the economic growth engine of not only the US, but the world.  The taxes must come from somewhere and without product entrepreneurs and investors to pay the bill, debt is the only option.  We must turn this around.  We are creating wrong incentives and a generation of young people thinking government jobs are where its at.

If we continue to see growth in the public sector and decline in the private sector that can only mean increased taxation for the entrepreneurs and investors.  We will see a brain drain in the US of massive proportions.  It is possible the government is going to limit your ability to work, invest or own assets outside of the US.  This is a scary concept to me.  This is the destruction of liberty.

Now is the time to act to protect your wealth.  You must create an asset protection plan to protect you and your family.  There are numerous ways, regardless of the nature of your assets, to protect them offshore or domestically.  But you need to act now while this is still an option.  Live well.

I know that headline is a bold statement, but I have been researching this for quite a while and there is a way for US citizens to defer income taxes on business income.   While this program is certainly not for everyone, for those of you that meet all the requirements, this can be huge.

Let me use a simple example to demonstrate.  Lets assume you have a business that earns $100,000 per year in profit beyond your salary and all expenses.  In the US your undistibuted profits will be taxed.  For simplicity sake, let’s say you pay 30% tax or $30,000 per year.  We will also assume your business does not grow or shrink, but only maintains. 

If you invested your after tax profits from your business earning 10% per year, you would have about $1.2m after 10 years.  If you paid no tax on those profits and invested the full $100,000 at 10% per year, you would have about $1.7m after 10 years.  Or about $50,000 per year extra which is more than you actually paid in tax!!!

There are several restrictions for this to work, but if you structure your existing, or a new business, properly, you can see truly remarkable results.  You are required to pay tax once you repatriate this income back to the US.  What  this means is once you begin taking distributions of the profit, you pay your personal income tax on it as you normally would.  

There is a bit of additional reporting for this to work as well.  Under no circumstance do you want to find out you have run afoul of the law.  The  IRS is certainly not an entity you want to battle.  But with proper reporting and proper set up, this may be a perfect solution for many of you.  I will be discussing this in further detail in my free newsletter later this week.  If you have further questions or would like a free 30 minute consultation, please don’t hesitate to contact me.

Live well.