The Usual Tax Feeders Will Continue to Pig Out

There are more instances of the abridgement of the freedom of the people by the gradual and silent encroachment of those in power, than by violent and sudden usurpation."  

— President James Madison

As the United States travels down the long road from the first limited government republic model of our Patriot Founding Fathers to a Washington style form of fascist national socialism, both health insurance and our private retirement system will eventually be nationalized and much of our retirement wealth confiscated all in the name of protecting us. But in a democracy, unlike total fascist and communist systems, great pillage and wealth attacks by government does not happen over night like Kristallnacht in Nazi Germany against Jewish wealth and property. The same can be said for Stalin's starvation of the Ukraine and forced collectivization and confiscation of all private property and farms. By necessity in a democracy, it is a slow, incremental step-by-step process and this provides the means for American stock investors to protect and defend their retirement assets.
 
There is little chance to stop the coming health and retirement plan nationalization because both systems certainly don't work for the benefit of most Americans. The needs of the American people have been circumvented by the politicians of both parties, the legal system and the greed of Wall Street and the American insurance industry due to their special interest control of Congress. Only a fool would say either the health or retirement system works well or that they represent the best of free-market capitalism. Both industries are simply regulated monopoly interests and the GOP propaganda to the contrary is self-serving rather than a real attempt to fix the problems.
 
Because of public opinion and the risk of voter outrage like we see today with the Tea Party movement and Ron Paul's Campaign For Liberty, the ultimate wealth confiscation goal is the same in our special interest controlled debt democracy as in a totalitarian system but the confiscation time frame is far longer. The population must first be prepared and a number of real or contrived crises must follow to give the excuse for incremental government actions over a number of years.

But Will Americans Never Learn? 

Fool me once, shame on you. Fool me twice, shame on you.
 
For example, the income tax began in 1913 with taxes starting at around 1% of income on an equivalent income of around $65,000 in today's dollars. The graduated tax rate went up to 6% on annual incomes over $10 million.
 
Social Security started in 1935 with a 1% tax on the employee and employer and only half the workers were covered at inception. Roosevelt promised the funds would go into an independent trust fund rather than the General Operating Funds of the government. Oh and yes, your Social Security benefits were originally not considered taxable income to recipients.
 
The Federal Reserve was created in 1913 and promised to promote economic stability and stable prices. The Great Depression followed in 1929 as did Franklin Roosevelt's confiscation of the entire private supply of gold in the United States. The stated goal was stable prices and low inflation. But check out the graph below and see the actual results of the Federal Reserve System and don't forget we are now in the middle of the greatest financial crisis since the Great Depression.

More Incremental Theft 

The coming retirement trap I write about in "Get Ready For the Obama Retirement Trap" and the new mandatory retirement system proposed by the Obama Administration known as the "automatic IRA" is just more Washington theft. It is the same for the eventual nationalization and confiscation of the majority of retirement benefits from successful Americans as their funds are forced into breach of a flood tide of forced liquidations of treasury debt. Their retirement funds will benefit many lower middle class, unemployed and government employees at the expense of the productive Americans who saved for retirement in the first place.
 
The coming nationalization of private retirement plans and IRAs will be the greatest government theft and wealth transfer scheme in the history of the world but it will be opposed only by a small minority of productive Americans who have worked in the private sector and who have saved for their retirement years. These Americans who have saved a substantial amount for retirement will lose wealth and retirement security while the groups who have spent their entire lives feeding at the public trough will continue to come out ahead as usual in the largest theft in history.
 
Remember, everything out of Wall Street, Congress and Washington on retirement planning is all about generating money in the form of dramatic government tax revenues for Washington and not about building real retirement security for Americans.
 
For other groups listed below, the retirement trap will be a winning proposition for them as funds from successful Americans will be used to fund their retirement benefits.

The Usual Tax Feeders Will Continue to Pig Out at the Expense of Productive Working Americans 

The Winners

• State government employees
• County and municipal employees
• Federal employees may be bailed out along with state and local government employees who have dramatically under-funded retirement programs.
• The unemployed
• The underemployed
• Those who simply don't work
• Participants in most under-funded union plans

And the Losers in the Retirement Trap: All productive, working American in the private sector who have trusted the government and politicians to keep their world and saved a substantial amount of funds in qualified plans and IRA accounts.

The Timing 

The timing of the steps to retirement plan nationalization and confiscation are a very difficult proposition first because of an uncertain political situation. While I fear both political parties will move in the direction I've outlined below to retain political power, historically the Democrats have moved faster in this direction than the Republicans. But now with the revenue needs of Washington totally out of control, which side of the two-party monopoly in control of Congress and the White House may not matter in the future. Second, most of the probable causes of the next financial or foreign policy crisis depend more on what China, Japan, Iran or Israel may do than on Washington. I believe the ultimate confiscation conclusion of the Retirement Trap will take place within ten years and I have a suggested time limit for each step to help you in your retirement planning.

Buy the Precious Metal That Will Outperform Gold

Here's a fact about precious metals that no one is paying attention to: Platinum metal, its top stocks and its best ETF for 2011 will outperform gold. Yes, we all know all the attention that gold is getting due to the global currency printing presses and serious concerns of inflation. But the best you can do with gold is wear it or store it. Not with platinum. Platinum has other important "industrial" uses that add to its best stock investments appeal.

Platinum is more rare than gold, more expensive than gold, has more practical uses, is in much tighter supplies, and is only mined in a few areas around the world.

Platinum and its related metals such as palladium, iridium, rhodium, osmium and ruthenium are part of the precious metals group called platinum group metals or PGM. They have similar chemical and physical properties and are found at the same ore deposits around the globe. For simplicity, I'm focusing on platinum but the same opportunities apply to platinum's sister metal, palladium.

Why get excited about platinum? Well, the supply and demand dynamics are both attractive.

Platinum Prices Will Continue Up. With the global recession, the price of platinum tanked by 66% to $774 an ounce from early 2008 highs of $2,250/ounce. It is still 40% off its high and the fundamentals are more compelling today than a few years ago. My price target is more than $1,900/ounce in a few (2-4) years.

Let's look at why. On the demand side of the equation, there are at least three compelling reasons to be excited about platinum's outlook.

• Global Vehicle Volumes Rising. The biggest use of platinum is in motor vehicles. Actually, 50% of newly mined platinum usage is for global vehicle demand. Platinum is used in catalytic converters, which is part of a vehicle's exhaust system and is critical in reducing carbon monoxide, nitrous oxide and hydrocarbons in the atmosphere. The platinum in the catalytic converter absorbs and converts these deadly emissions into harmless ones.

Every traditional internal combustion engine has a catalytic converter and new vehicles being manufactured have even tougher emission regulations, requiring more platinum content.

Vehicle demand tanked during this recent recession and platinum prices followed suit. Now we're witnessing a turnaround in global vehicle sales.

And China, which recently beat the U.S. to be the largest car market, is growing rapidly. Tax incentives, credits and new financing methods all support fast Chinese vehicle demand. According to CMS Insight, an automotive consultancy, total global light vehicle sales will jump by 30% over the next two years and grow much more than that in China. Even better, China's commercial (e.g. truck) demand grew by 45% last year and should continue at that level.

Overall increased global concern about the environment and emissions means increased penetration of platinum as more manufacturers and refineries adopt their products and technologies. This is particularly true in emerging markets such as China where pollution and smog is a serious problem.

• Jewels and Gems. Platinum is commonly used in jewelry given its rarity, durability and polish – to name a few appealing attributes. About 20% of platinum's end use is in jewelry.

The cultural importance of jewelry cannot be underestimated with regards to China and India. As millions of Chinese and Indians move into the middle class, their desire and ability to own jewelry increases substantially.

One hundred million young Chinese and Indian women love their jewelry. My last trip to Asia included a stop in the Chinese island of Macau, the Las Vegas of the East. I couldn't believe all of the jewelry stores near the casinos. If someone hit the jackpot, they were very likely going to take some of their earnings and buy jewelry.

China and India represent about 8-9% of the global gem and jewelry sales, or roughly $5 billion – and have the fastest growth rates. The total market should grow at over 5% for the next few years and will be a $250 billion market by 2015 compared to $146 billion in 2005.

• Platinum Group Metals ETF Demand. This past January, two exchange-traded funds (ETF) were launched, one for platinum bullion and one for palladium bullion. Since these ETFs are backed by the actual bullion, as investors buy the ETFs fund managers have to make more physical purchases. It is almost like a self-fulfilling or self-promotional process. The more investors buy into the ETF, the more the ETF has to buy physical bullion, thus providing some distinct price support.

Actually, given the limited supply of platinum, the exchange-traded fund has affected supply and demand characteristics by taking increasing amounts of the metal off the market.

The Wall Street Journal states that there are only 2.2 million ounces of open contracts of platinum (compared to 47 million in gold). And already close to 15% of platinum bullion surplus has been picked up by the ETF. Even better, another precious metal ETF is expected later this year – increasing exposure to investors and putting more upward pressure on the platinum prices.

As if the demand part of the equation weren't compelling enough to make you want platinum exposure, let me talk about some of the supply issues.

• Russian Stockpile Depleted. South Africa (Bushveld Complex) and Russia represent over 90% of all production supplies as there are very few ore deposits around the world. Most are in South Africa, then in Siberia. There are also mines in Montana (Stillwater and East Boulder mines) and in Ontario, Canada.

And Russia (25% of total supplies) has the only surplus supply. As a strategic and national security move years ago, Russia accumulated excess platinum surplus.                                                                     

These Russian stockpiles had created a mild supply overhang for platinum. The Russian government had been slowly unwinding and reducing this supply surplus. The key point is that industry experts believe Russia is running out of its surplus. If ever confirmed that would be quite a bullish indicator. As opposed to gold, the total amount of platinum ever mined could fit into your living room – there is no Fort Knox.

• Production Issues. There have also been increased production disruptions, health and safety issues, strikes and other operational problems in South Africa platinum mines. These problems are worth keeping an eye on given the tight supplies available.

A few weeks ago, platinum producer Platinum Australia had to shut down all operations at its mine in Smokey Hills, South Africa. There have also been other disruptions such as worker strikes at other South African mines. This ongoing risk provides some upward price action.

Buy the ETF

What's the best way to invest in platinum? You should want direct exposure to platinum's bullion price and the favorable global trends.

You could own the U.S. and Canadian platinum companies such as Stillwater Mining (SWC:NYSE) or North American Platinum (PAL:NYSE). But you wouldn't be getting the full global benefits of global platinum demand, since a lot of production is regionally designated – i.e. to North American car manufacturers. There would be little direct benefit from the faster-growing demand from China.

Other miners are diversified and are mining for other metals besides platinum. Also, I'm leery of the liquidity and volume of the South African companies such as Anooraq Resources (ANO:AMEX), which is trading under $2/share. And I worry about the direct operational risk of South African companies.

So, the best way to invest stock in platinum, in my opinion, is to actually buy the bullion ETF. ETFS Physical Platinum Shares ETF (PPLT:NYSE), which actually started trading in January, is the best way. It's only up mildly since then. Also consider the sister commodity ETF for palladium – ETFS Physical Palladium Shares (PALL:NYSE).

With PPLT you can take advantage of the long-term global favorable outlook for the precious metal that should shine for the next several years. Not only to take advantage of very favorable global supply and demand fundamentals, but also as a solid hedge against future inflationary risks and fiscal uncertainty – just as gold does.

Five Reasons I'm Skeptical About Target-Date ETFs

Are you planning to retire someday? Unless you are already retired the answer is almost certainly "Yes." It's the American Dream!

Of course, there's nothing magical about age 65. Some people end their careers earlier and busy themselves in different ways. Others enjoy their work so much they keep on going as long as their health allows.

In either case, you probably have some idea when you'll want to retire. And you probably consider it when planning your investment strategy — or at least you should. That's because there's a big difference between age 25 and age 60 when it comes to deciding what to do with your money.

ETF sponsors know this. They also know many people are looking for an "easy answer" that will let them save for retirement without having to think very much. Their solution: Target-date ETFs.

What's Your Target Date?

For example, suppose you're 40 years old. You're in good health and live carefully. You like your work and think you can keep doing it until you are 70. That's 30 years from now — year 2040.

With that many years to go, you can afford to be a little more aggressive now. When you get to 60+, you should probably pull back on your risk a bit.

Target-date ETFs automatically do this for you ...

For instance in the above case, you might take a look at iShares S&P Target Date 2040 Index Fund (TZV). This ETF buys other iShares ETFs. The proportions are weighted to be more growth-oriented now, and will gradually change to be more conservative as the year 2040 gets closer.

Currently, TZV is allocated like this:

Source: iShares

As you can see in the above chart, the portfolio is invested almost completely in best stocks for 2011 — roughly 90 percent. This is what most advisors would probably recommend for someone with a 30-year time horizon.

The allocation won't stay this way. As time passes, you will see less of TZV devoted to best stocks and more going into bonds ...

• In ten years, it should look much like the Target 2030 ETF (TZL) does today, with around 80 percent in best stocks for 2011.
  
  
• In twenty years, it will look like the Target 2020 ETF (TZG) now, with about two-thirds in best stocks for 2011 and the rest in bonds.
  
  
• And in thirty years, it should look a lot like the 2010 fund (TZD) does now, with over half the portfolio in bonds.

iShares has a whole series of ETFs keyed to specific retirement years. Other firms offer similar products. They vary in the details of the asset allocation strategy and how it is applied, but the general idea is the same.

So What's the Problem?

Target-date ETFs offer one-stop shopping with no need to make adjustments along the way. But I'm skeptical for five reasons ...

First, their advantage is based on the assumption you will buy and hold them for many years. My experience tells me that very few people will actually do this. Investors get scared in bear markets and greedy in bull markets. They don't just sit still like the "professionals" tell them.

Circumstances can change, too. For instance, you may decide to retire earlier than anticipated, or later. Then what? You spent decades paying for someone to implement a strategy you end up not even needing.

Second, the target-date strategy isn't free. In fact you're adding an extra layer of fees when you buy one of these funds. You pay once for someone to decide what ETFs to allocate your money into, and again for the ETFs they decide to buy.

Is the fee very much? In some ways, no. TZV charges 0.25 percent on top of the component ETF fees. Part of this is being waived right now, but the numbers add up over time. It could be thousands of dollars if you stick with TZV for as many years as they want you to.

Third, each fund family treats the target date differently. This means the best stock investments for 2011 and bond allocations will often be dramatically different between two funds with the same target date.

Many of these funds that were at or near their "target date" still got clobbered in the recent bear market. The reason is that many took on more risk in an attempt to look favorable when compared to funds with similar target dates.

Fourth, you probably don't need them. The fact that you read Money and Markets tells me you want to educate yourself about investments. Chances are you can decide for yourself how to split your money between the different categories of stocks and bonds.

Fifth, investors like you are not the intended market for target-date funds. They are designed for people who don't pay attention — folks who would otherwise keep all of their money in a low-yielding bank account.

But since you do pay attention, you can do a lot better! So it might not make sense to pay extra for something you don't need.

Is Real Estate at the Watershed?

I read an article the other day on the Social Security system that was downright scary!  It said that, for the first time ever, Social Security is now paying out more than it's receiving from taxes.  

In fact, the funds once set aside by the government to pay back Social Security are now gone!  I'm talking about billions of dollars ravaged by incompetent spendthrifts in the U.S. Congress over the last couple of decades.

So Uncle Sam is now paying Social Security back with IOUs in the form of $2.5 trillion in U.S. Treasury bonds!

So this puts the entire Social Security system in jeopardy by 2037.  And when I say "jeopardy", I don't mean this kind either:
 

"I'll take 'Idiot leaders of Congress' for $80, Alex..."
 

So how old will you be in 2037? 

60?  70?  Maybe 80? 

Think about what your retirement could be like without having any monthly Social Security check on which to rely.  

Do you have a pension?  Good for you if you do, but it seems like fewer and fewer workers these days have one. 

So where does that leave you -- with a 401(k) in a best stock market in 2011 that has gyrated like crazy over the last 10 years, but is basically flat to negative in all that time?

Will this be you in 2037?

Listen, I don't have a pension either, and even though Social Security may still be around when I reach my mid 60's, I'm sure as heck not depending on it.  Yes, I've got some 401(k) money and some funds in my IRA's, but that's the kind of money that will allow me to eat out at Bob Evans, when where I really want to go is the Ruth's Chris Steakhouse.

So I'm staking the largest percentage of my future retirement on real estate. 

With all of the volatility in the real estate market lately, why would I do that?  Here is why:

Did you know that throughout time, the richest people in the world have all owned a great deal of real estate? 

And did you know that since 1963, the real estate market has only had two down periods, those being 1989-1992 and 2007-today?
 

Let's go back to 1992 for a second.

Had you invested heavily in real estate in 1992, using 15 year mortgages with 20% down, look where your investments would have been when the mortgage was paid off in 2007.  The $100,000 house, for which you put down only $20,000, would have been paid off by your tenants and worth about $240,000.

That's a 1200% gross profit in 15 years!

So ok, you got greedy and didn't sell in 2007, and now it's worth only $170,000, right?

That's still an 850% profit in 18 years, or about 47% per year!  But don't forget to count the rental income, perhaps $40,000 or more you've made in the last three years with the mortgage all paid off! 

In other words, while the value may have been dropping from the peak, your rental income was acting like a dividend to offset almost 60% of that loss.

With the rental income, the gross potential return (before taxes, insurance, repairs) climbs up to over 1000%!

You see my point?

Tycoon readers, you need to understand one important point -- perhaps the most important one that I have made on these pages in months.

There is only a narrow window of opportunity in the real estate market that will last maybe another year or two at most. 

During this time, foreclosure properties will be so cheap and interest rates so low that you will be able to buy properties on 15 year mortgages and have a positive cash flow every month while your tenants pay down the entire mortgage!

Come on Ethan, this sounds like 100% pure hyperbole.  What proof do you have?

What proof?  Well, I just did it myself.  I bought a HUD home for a little over $80,000, put down $20,000, and took out a 15 year fixed loan at 5.125%.  My total monthly mortgage payment, including taxes and insurance will be $621. 

I just secured a lease with a tenant for $975 a month!  

But already there is competition brewing all over the country, as other savvy investors are sniffing out the bargains.  Cash purchases of real estate, which normally average about 10% of all sales, were at 26% last month.  In the most hard hit areas, such as Las Vegas, NV and Phoenix, AZ, cash purchases were 50% and 40% respectively.

In San Diego, the number of flipped re-sale properties have doubled in recent months, as cash investors are scooping up terrific bargains and reselling them at great profits within a few months.  Some of these homes are being purchased in large quantities by investor hedge fund pools.

So I'm not waiting to buy, and I don't think you should either.  

To paraphrase Warren Buffett, the most famous investor of the last 40 years, I want to be the guy who bought when others were most fearful.  I want to be the guy who gets in on the good deal before others drive the prices back up again.

In fact, this is the face that I want my relatives to make when I tell them that I am once more acquiring properties.

 

When I see that face, that will confirm that I am right!

Tycoon readers, if you have ever been interested in acquiring real estate, 2010 and 2011 are going to be watershed years for doing so.  Great looking foreclosure properties are ripe for both long term rentals, using leverage with fantastic interest rates, and even once again for short term flipping.

To quote the very astute Teeka Tiwari, in an article that he wrote in early 2008:
 

" The beauty of real estate is the LEVERAGE, the bloody LEVERAGE is MAGNIFICENT!!  It allows the smart buyer to propel themselves into an economic band that they could only dream about."

 

So how old will you be in 15 years when your rental property mortgages are all paid off by your tenants, and you have your choice of selling the property at a huge profit or using it for monthly income for the rest of your life?

60?  70?  80?  How about only 45?

This week, I want you to declare your financial independence from Uncle Sam!

That means that when you hit retirement age, you can thumb your nose at Uncle Sam when he says, "Sorry, there are no more funds for Social Security", or "Sorry, you now have to be 85 years old to collect Social Security."

So what's in your retirement plans, Bob Evans or Ruth Chris?

Next Leg for the Euro: Down

There are two major issues facing global currencies in the months ahead. And both have escalated in the past week.

Issue #1: The Greek Drama

Act I:

Sovereign debt fears

In the first act of the euro-zone sovereign debt shock, shaky Greek government finances exposed the structural flaws of the euro. And as the lens of scrutiny widened, the potential domino effect of weak euro-zone countries combined to represent a viable threat to the future existence of the euro.

I called attention to this vulnerability back in early January in my piece, Will the Euro Become the Most Hated Currency for 2010? Since then, the euro plunged another 6 percent against the dollar and the outlook has grown increasingly tenuous.

Intermission:

Bail out?

But in came talks of a bail out. And that marked a timeout for the massive speculative selling pressure against the euro. Euro-zone leaders gathered and emerged with a promise of support for its flagging member country, Greece. But the implications of such a decision would bring with it an irreparable moral hazard. If Greece could be bailed out, that opens the floodgates for the other weak countries in the euro zone to come looking for support from their more fiscally responsible neighbors.

Now, with increasing signs that no concrete form of financial aid will be offered to Greece, the sovereign debt problems weighing on the euro currency are approaching Act II.

Act II:

The realization of a no-win situation for the euro ...

A bail out of a fellow Economic and Monetary Union (EMU) member country is a direct violation of rules set forth in the Stability and Growth Pact, the principles upon which the euro was built. And that's why euro-zone leadership has been slow to provide details of their proposed support.

But this past week, Greek Prime Minister Papandreou turned up the heat. He asked for a definitive decision on aid from Europe to come by next week. His bargaining chip: IFM aid. If the euro zone is not prepared to step in with financial aid, he'll turn to the IMF. And a turn to the IMF represents a further credibility hit for the European monetary union ... i.e. the structure of the euro is flawed, its rules are unenforceable and solidarity isn't possible.

And with an official deadline for speculators to lean on, this coming week could bring with it the catalyst for the next big leg down in the euro.

Take a look at this chart ...

Source: Bloomberg

The euro had a false break from the four-month bear channel, but now is on track to test the lower line of this channel, which projects a test of the 2009 lows of 1.2457 by the end of April. Coincidentally, Greece will have to come up with 14 billion dollars in fresh capital to refinance maturing government debt by that time.

And as I laid out in my February 20th Money and Stock Markets column, The Future of the Euro in Question, expect the intense scrutiny surrounding the lifespan of the euro to continue.

The EMU countries with damaged balance sheets and a bleak outlook for growth are stuck. With a one-size fits all monetary policy and currency, they lack critical tools to work their way out.

Issue #2: China's Currency

While a sovereign debt crisis will likely be potent enough to knock global recovery off track, the most severe threat to the global economy remains China's currency, as I discussed in my February 27th column, Why You Should Be Worried About China.

And the issue with China's currency heated up this week.

With the healthcare debacle in Washington death-spiraling favorability polls, it became time to pull out the China card again.

Last week Congress resurrected threats against China's currency policy. In 2005, Senators Graham and Schumer, lobbied a bill which threatened a 27.5 percent tariff on Chinese imports, unless China revalued its currency. Now the two Senators are spearheading new rules for the way the U.S. Treasury manages currency manipulators and proposes tougher consequences.

Tougher Talk ... More Resistance

In 2005, the global economy was humming along, and China had a lot to lose by not showing some concession. Today, times are different. Global demand is weak and China's major trading partners are dealing with sluggish growth. And despite the assertions of China's emerging domestic demand, China has built its economic model on exports. So, in tough times, disabling their trade advantage through a currency revaluation is not likely.

That's why I've been expecting China's currency policy to be the biggest threat to global economy recovery — fueling protectionism and damaging the global economy (see my September piece Protectionism: Enemy of Recovery for more details).

Overall, the issues with sovereign debt and global imbalances, fueled by China's weak currency, present a big challenge for the global economy. That's why I expect a sustained risk aversion to be the dominant theme of 2010.

How Taxes Kill Your Investment Returns

As the "value investor" of this motley crew of investors who write for The Tycoon Report,  I am most often asked why I invest for the long term.  Trading, they argue, is the most logical way to invest your money.

Isn't it smarter to follow trends than to wait for them?

Well, yes ... and no.  There are many reasons I don't trade.  Perhaps the biggest are a) I do not like to pay taxes, b) it fits my emotional disposition, and c) I think it's the most profitable way to invest for the long term.

Over the next few articles I write, I'm going to discuss why I am a long-term value investor and why I never pay attention to short-term trends.  This is not to argue against dear friends Chris and Teeka.  Indeed, I've seen what they can do first hand, and it is quite impressive.

But it is important for you as investors to understand some of the key issues that make us different investors.

So, with that in mind, today I'm going to focus on my desire to avoid paying short-term capital gains taxes. 

How Taxes Kill Investment Returns

Paying taxes has a devastating effect on the power of compounding returns in your portfolio.

To show you just how devastating trading top stocks for 2011 (and by default paying taxes) can be on your portfolio, I've prepared a table below to illustrate.

The Power of Compounding Returns
(or my alternative title, "How Taxes Kill Investment Returns")

Let's say that both Portfolio A and Portfolio B each begin with a $10,000 investment.  In addition, each earns 20 percent each year.  But while Portfolio A holds on to the same stock each and every single year for 10 years, Portfolio B does one trade annually (I won't even show how devastating multiple trades can be).

(Click on Table to Enlarge)

As you can see, at the end of year 10, the initial investment of $10,000 is worth $61,917, for a net gain of $51,917.

Now let's take a look at Portfolio B, where one trade is executed each year creating a single taxable event at a short-term tax rate of 40 percent.

 

(Click on Table to Enlarge)

As you can see, at the end of year 10, the initial investment of $10,000 is worth $30,912 for a net gain of $20,912.

It also demonstrates clearly that taxes have a devastating effect on the compounding effects of returns on your portfolio.  At the end of the ten-year period, Portfolio A has a total of $61,917.  This is in stark contrast to the $30,912 in Portfolio B.  The difference?  One trade each year and the taxes associated with that.

It's no secret, then, why investing greats such as John Templeton, Warren Buffett and Ed Lampert have always preached the importance of finding great companies and holding them for as long as you can.

Having been fortunate enough to have "seen the light" (and the facts) at an early age, I've been practicing the same philosophy for years.  That's why, much to the astonishment of many of my friends, I'm not glued to the screen each day waiting for news to hit the tape.  Oftentimes, they're the ones who know about the news of one of my portfolio companies earlier in the day than I do.

To sum up my philosophy in one sentence, my goal is to buy a piece of a company that has great "natural" economics and receive returns commensurate with the economics of the company over a long period of time.

If I never have to sell the company and never have to pay taxes, I will be a very happy man.

AIG Increases Compensation for Most Top Managers Who Remained

Written by Hugh Son and Robert Schmidt, Bloomberg

 

March 24 (Bloomberg) -- American International Group Inc., the bailed-out insurer, was allowed by U.S. paymaster Kenneth Feinberg to increase 2010 compensation for most top executives in a group that had their pay slashed last year.

 

Six of eight managers who had their 2009 awards set by Feinberg, the Obama administration's special master on executive pay, had their overall packages expanded this year, according to a Treasury Department report released yesterday. Chief Executive Officer Robert Benmosche has said that AIG must offer competitive pay to keep employees needed to repay its rescue.

 

Feinberg, who controls pay for AIG's 25 highest-paid employees, last year slashed overall compensation for that group by about 58 percent and instituted a $500,000 base salary cap for most workers. Most executives who were among the top 25 when AIG was bailed out in 2008 have left the company, and those new to the group had their 2010 awards lowered, on average.

 

"AIG, under the strong leadership of Mr. Benmosche, the new CEO, has worked closely with our office," Feinberg said yesterday at a press briefing. "He deserves specific mention and praise."

 

Exceptions to the $500,000 cap were made for those deemed critical to AIG's success, including Benmosche, whose compensation was unchanged from last year's $7 million salary and $3.5 million in long-term incentives. Five other AIG executives had base cash salaries of $500,000 or more in 2010, according to the Treasury document. AIG is majority-owned by the U.S. after a rescue that has swelled to $182.3 billion.

 

Stock Award

 

Among the employees who were awarded larger packages was an executive, labeled only by an identification number, who will collect $3.6 million this year, mostly in stock salary, compared with total pay of $125,000 for 2009. For a group of 12 corporate and operating-unit executives new to the top-paid list, overall compensation decreased by 25 percent from 2009.

 

Feinberg has required that companies substitute cash with stock to tie managers' performance more closely to the firms' long-term success. While cash pay for AIG's top-paid employees fell by 63 percent, total compensation including cash and stock rose by 2 percent. The shares will be paid over three years.

 

"The shift is really away from cash to stock, but we forget the lessons of companies like Lehman Brothers, whose employees had plenty of skin in the game," Frank Glassner, chief executive officer of Veritas Executive Compensation Consultants LLC, said in an interview. "They gambled with their own money and lost." Lehman Brothers Holdings Inc. filed for bankruptcy protection in 2008.

 

Bailout Recipients

 

AIG, which had proposed boosting cash salaries for the holdovers from 2009, has 30 days to ask Feinberg to reconsider his determination, according to the Treasury document.

 

Total pay in 2010 will fall by about 15 percent for 119 executives at AIG, General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial Corp., Feinberg said yesterday at the press briefing. His rulings showed 69 of them will get $1 million or more, including long-term restricted stock.

 

AIG Chairman Harvey Golub wrote last month in a letter to shareholders that some of Feinberg's rulings hurt the company. AIG's board is focused on working with the Federal Reserve Bank of New York and Treasury Department and "dealing with" pay guidelines, Golub wrote.

 

"While we can pay the vast majority of people competitively, on occasion, these restrictions and his decisions have yielded outcomes that make little business sense," Golub, 70, said of Feinberg. "In some cases we are prevented from providing market-competitive compensation to retain some of our most experienced and best executives. This hurts the business and makes it harder to repay the taxpayers."

 

Executive Departures

 

More than 60 managers have left AIG since its 2008 rescue. Under Feinberg's orders, cash salary was reduced by 91 percent last year for 12 of AIG's top executives. Benmosche, 65, said in a Nov. 11 memo to employees that he was committed to leading AIG after reports that he'd threatened to resign because pay limits hurt the insurer's ability to retain staff.

 

General counsel Anastasia Kelly stepped down in December after a dispute with Feinberg over pay. Her $900,000 base salary would have been slashed to $500,000 and she may have jeopardized a severance payment if she stayed, Kelly said in a Fortune magazine interview published in February.

 

"For someone to say, 'I think you're doing a great job, Stasia, but the American people hate you and therefore we think you should make no more than $500,000 a year' -- there's no logic to that," Kelly told the magazine. "It wasn't something I could live with."

 

Public Backlash

 

AIG said in February that it was overhauling its incentive system to improve the tie between pay and performance. A backlash against AIG's bonuses for employees in the derivatives unit blamed for the firm's near-collapse peaked in March 2009 with President Barack Obama criticizing the awards.

 

Feinberg, 64, who formerly oversaw the September 11th Victim Compensation Fund, is responsible for setting pay at firms including Chrysler Group, GMAC and AIG that were among the top recipients of bailout funds.

 

AIG released Golub's letter after reporting that its 2009 loss narrowed to $10.9 billion from $99.3 billion a year earlier.

Bombay Dreams

We have come to Bombay to get a good look at India - at least the part of it you can see from a 10th floor room at the Taj Mahal Hotel. Which isn't much. The air is too dense. Still, we can make out the figures of whole families eating and sleeping on the pavement near the dock.

We have never seen families sleeping on the pavement on Regent Street...nor on 5th Avenue. New York and London are great success stories. Turning the pages here, on the other hand, we read a failure story. It is the story of a people who haven't got much. The world turned against them, relatively, at the beginning of the Industrial Revolution. But if the world turns long enough, it comes back to where it began. To make a long story short, we're betting on rotation.

The secret of material success is simple enough. In the beginning there is nothing. In the end, there is much. In between is all the dust and noise of a real economy. Everything and everyone moves - the dirt and raw materials...the bussers and schleppers who carry them, heat them up and hammer them into finished products...the merchants who sell them...and the consumers who use them. The money moves too.

But over time...and space...it must all balance out. For every item produced there must be a consumer. For every surplus, there must be a deficit somewhere else. And for every boom there must be a bust.

Taking a train from Washington DC to New York City, you can look out your window and see the equation fastened to a rusty bridge, over a rusty river in a city of rust. It says "Trenton Makes, the World Takes." It is a sign that might have been hung on any one of hundreds of bridges in hundreds of different factory towns throughout America and Britain. As a bit of civic promotion, the sign is not completely fraudulent; it is only incomplete. It should have been turned around...probably in the 1970s. That was when Trenton became a taker.

For more than half a century, Trenton pumped out exports...then, it spent almost another half a century getting swamped by them. First, it enjoyed a best stock investments for 2011...and then a capital investment bust, followed by a consumer spending boom...and then a consumer spending bust. Now the rest of the world awaits neither its output nor its orders. It is neither maker nor taker, but a dead-end slum.

Where will Trenton's next boom come from...or when? No one knows. In the meantime, it must pay for what it already got. America's post-WWII consumer boom came to an end in 2007. For the first time since 1946, consumer credit is falling. Americans are paying down debt.

Which leaves us looking out our hotel window, wondering...

The best form of government, said Voltaire, is democracy tempered by an occasional assassination. India's government must be as hard as steel by now. In 1984, the Prime Minister, Indira Gandhi, was assassinated by her Sikh bodyguards. Then, in 1991, her son Rajiv Gandhi was also killed, this time by Tamil Tigers. If we were named Gandhi, we'd go into a less dangerous line of work, like being a test pilot. But Sonia Gandhi, widow of Rajiv and the daughter of an unreconstructed Italian fascist, must like excitement. She was elected president in 1998. Her son is also a politician.

Western investors needed courage to put their money in India. Six out of nine governments since 1980 have been coalitions, several including communists. In 1999, Pakistan invaded the country. In 2007 Maoist rebels attacked police and killed 50 of them. Last year, terrorists set fire to our hotel.

When activists, foreign and domestic, failed to destroy India, nature took a whack at it. A cyclone in 1999 killed 10,000 people. An earthquake in 2001 carried off 30,000. A Tsunami struck in 2004. The next year, monsoons flooded much of the country.

Indian stocks paid off anyway. US stock prices went nowhere over the last 10 years; Bombay stock prices more than tripled. Over the 30 years, from the opening of the hot stock market to the end of 2009, the investor had a return of 17,000%.

All over the developed world, governments are getting a death grip on their economies, taking control of vital industries and increasing the state's share of GDP. One of India's advantages is that its feds have been choking the economy for years; now it is becoming a model of negligence. As a percentage of GDP, India offered only perfunctory stimulus to fight the downturn of 2007-2009.

Now, China overheats. America cools down. And India grows at 7% per year without breaking a sweat.

Wage growth is flat or negative in Trenton; in India hourly earnings double every 10 years. India depends less on exports than any other major developing nation except Brazil. And only the Philippines and Indonesia have less credit as a percentage of GDP.

While much of the rest of the world did it...and then over-did it...India hasn't done it yet. There are more autos in the US than there are licensed drivers, and two chickens in every pot; India barely has one vehicle per 100 people and barely any pot at all. This is a country where the getting has just begun.

Mutual Fund Managers Should Listen to Their Mothers

There will be a pullback sooner or later. But at this point investors can no longer wait for what the market will do, they have to follow what the money is doing now.
– WSJ, "Money Flowing into Top Stocks For 2011 is Form of Reverse Capitulation"

When I was 13 years old, there was nothing in the world I wanted more than a skateboard. For a seventh grader in the late '80s, skateboarding was the epitome of "cool."

My folks were having none of it. They were convinced I would bash my brains out on a curb or some such thing. (It probably didn't help that I was an exceptionally clumsy 13-year-old, having grown to my full 6'1" height before my 14th birthday.)

I couldn't believe how cruel and inflexible they were being. Couldn't they see? Didn't they understand that all the "cool kids" had skateboards?

I made this argument with all the passion I could muster. In return I got the classic response:

"If all your friends were jumping off a cliff, would you do it too?"

Within a year or so, my skateboard fever passed. (A friend of mine knocking three of his front teeth out helped cool the ardor too.) But I never forgot the lesson.

How did Mark Twain put it? "When I was a boy of fourteen my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much the old man had learned in seven years."

Reverse Capitulation?

I was reminded of the above this week upon stumbling across the phrase, "Reverse Capitulation."

Normal capitulation is what happens when investors give up the ghost… cry for uncle… throw in the towel… or otherwise give up and sell the losing positions they can no longer stand to hold.

Reverse capitulation, apparently, is when sidelined investors feel they can no longer stay in cash. As the WSJ explains,

Money is moving into hot stocks for 2011 because they are going up. The new highs in all three indexes means there is no longer a recent reference point for managers of that money to base their buying decisions. Those that have been skeptical, or underweight relative to their proxy indexes, no longer have a choice but to, at the very least, get back to neutral or risk falling further and further behind.

This seems the height of lunacy. Unfortunately, it also sheds light on how Wall Street works.

Mutual Fund Managers Haven't Learned

Those that have been skeptical "no longer have a choice," the WSJ reports. They have to get into hot stocks for 2011 "because they are going up."

In other words: Because everyone else is jumping off the cliff, these managers have to as well.

The WSJ piece further notes, "Investors like to have a good reason to justify buying." To which your editor replies, "No, really? You don't say!"

Think for a moment how silly this is. We now have mutual fund managers buying top stocks for 2011 not out of conviction, not out of good reason, but because Tom, Dick and Harry are buying. And, well, if those guys are buying, it must be the thing to do…

The Market Is Not a Popularity Contest

Now your editor is going to risk sounding like someone's mother in saying the following: The market is not a popularity contest. Buying top stocks for 2011 just because "everyone else is doing it" is a STUPID thing to do.

You may have other reasons for buying top stocks for 2011, of course.

• It may be that, while the broad market is overextended and overbought, there are individual names on your radar screen which you feel to be of good value.

• Or, if you are a trader, you may be buying breakouts in a carefully selected group of stocks with good reward-to-risk ratios on the individual names.

• Or, if you have a long-term capital allocation plan, you may have a habit of putting $X dollars in every month or quarter, with short-term fluctuations meaning nothing to you.

Can you see the similarity in the three courses of actions listed above? They are all based on having a logical plan. None is based on getting jerked around by the whims of the crowd.

The Peril of Benchmarks

This is why your editor remains skeptical of the professional money management business, or at least very large swathes of it.

The practice of mutual fund managers buying just because everyone else is buying is very widespread. In fact it's baked into the cake based on how the typical manager is measured. The great fear of these men and women is not making bad investments or losing money for their clients, but failing to keep up with their "benchmark."

This means that, when the benchmark moves, the managers have to move too – convictions be damned.

Not all money is managed this way, of course. The better managers (a lot of them hedge fund managers) refuse to buy at valuations they consider unreasonable. They will go heavy cash, or even all cash or net short, when they feel it is appropriate. They are not driven by a blind, slave-like devotion to what the herd is doing.

The risk of not tightly tracking the herd, of course, is that you wind up underperforming for occasional stretches of time. When you march to the beat of a different drummer, there will be times where the market appears to be ahead of you – especially when the market is flying headlong on vapors and rumors.

The risk of underperformance is too great for the average mutual fund manager. As Keynes once put it, it is better for them to "fail conventionally than succeed unconventionally." Safety in numbers means the average manager would rather risk your money foolishly under cover of the crowd, then do something wise and take a chance at being left behind.

The Performance Conundrum

One of the great mutual fund managers of all time, Robert Rodriguez of FPA Capital, likes to further hammer home an interesting point.

To be a great investor over the long term – to "beat the market" over, say, a period of a decade or more – almost requires you to have years where you underperform.

What is this statement based on? Simple empirical observation.

Rodriguez points out that, if you look at the track records of the great investors who earned X percent in excess of the S&P over many, many years, those returns are not distributed evenly every year. On the contrary, they tend to be very, very lumpy. Years of gigantic outperformance tend to be interspersed with years of humdrum and quiet. And in nine cases out of 10, there are always at least some years where the market itself did better.

This makes sense when you think about it. To outperform the crowd, one cannot be doing the same things as the crowd. This means different risk levels and different exposures. It means zigging when others zag… being greedy when others are fearful, as Warren Buffett famously once said, and fearful when others are greedy.

It is the exact opposite mentality, in other words, of the one that drives much of Wall Street. When the average mutual fund manager is in a buying frenzy for fear of getting "left behind," that is more than likely an excellent time not to buy. Unless you have reasons your mother would approve of.

Why betting against an economic recovery is still a smart play

Markets were dallying last we checked, up a bit, but not enough to sway an opinion. The majors in the US are up on average 5% for the past month, aided, as far as we can tell, by slapdash political rhetoric, myopic investor optimism and cherry-picked data analysis. That said, a 5% gain is a good month by just about anybody's measure. So why are we so dour?

 

The short answer is, "we're not...we're just cautious."

In his terrific book, Fooled By Randomness: The Hidden Role of Chance in Life and in the Markets, Nassim Nicholas Taleb explores, among other things, something he calls the "zoology" of bullish and bearish sentiment. In one particular example, Taleb describes the scene in a New York office when he is asked to give his forecast on the trajectory of the market over the coming week.

Taleb answers that he thinks the market will rise. He gives it a 70% probability of doing so, a seemingly bullish outlook.

"But Nassim," interjected one of his colleagues, "you just boasted being short a very large quantity of S&P 500 futures, making a bet that the market would go down. What made you change your mind?"

"I did not change my mind," replied Taleb. "I have a lot of faith in my bet! As a matter of fact I now feel like selling even more!"

Taleb goes on to explain that, although he suspected that the market would move higher, it was preferable to short it because, "in the event of its going down, it could go down a lot."

In other words, the possible upside of going long - even though that outcome was, by his own analysis, more likely - was marginal compared to the dire consequences of what would happen in the less likely scenario that the market tanked.

"How frequent the profit is irrelevant," writes Taleb. "It is the magnitude of the outcome that counts."

US markets are, on average, up some 50% since their lows just over a year ago. That's an incredible bounce, to be sure, one for the history books. Nevertheless, the steps higher seem less and less resolute, more and more tentative. It's as if a mountain climber, after a momentous ascent, suddenly remembers that he has an acute case of acrophobia. Where to now?

The markets might well rise a little in the coming weeks, in other words, but they might also fall...a lot. We'd rather miss out on a minor advance in top stocks than suffer a cataclysmic retreat. There are a slew of worrying macro-catalysts that inspire more than a little trepidation in your editor's heart. Here's one:

China and Japan, the two largest foreign holders of Treasurys, are slowly, steadily, incrementally reducing their exposure to American government debt. Now, if you were sitting on $900 billion or so of US debt - as China happens to be - and you wanted out, you couldn't simply bolt for the door. That kind of movement would spook the market, signaling a run on the dollar and decimating the value of your remaining holdings. Instead, you'd have to creep out very quietly...exactly as China and Japan appear to be doing.

Bloomberg reports: "China has been a net seller of Treasuries for three straight months, the longest such stretch since the end of 2007. Chinese officials have questioned the dollar's role as a reserve currency and recently sought assurances about the safety of US government debt as the budget deficit widens to a projected record $1.6 trillion this year."

The relationship between America and her foreign creditors is one built primarily on faith. China, Japan, Russia, Taiwan and the rest of world's dollar holders rely on the "full faith and credit" of the United States government to stand behind its currency, the world's reserve. But faith is a fickle thing. It takes a lifetime of monogamy to forge a faithful marriage...but just a single night of reckless abandon to destroy one.

The "recovery" may well deliver a few more sessions of best stock market passion, in other words, but those tempted to flirt with it are advised to remember the wrath of a lover scorned.

How Millionaires Scramble to Close Stocks Market Window?

They're not going to like that I'm giving away "guest passes" into the market that's making them rich...

Why would they? They've done everything to keep this a secret from you. And up until today, they've done a pretty good job...

Only 2,408 people are currently "on the inside."

But today, I'll give you a chance to beat them at their own game. A simple and easy way to gain guest access to their private "Millionaire's Market." Then you could start profiting from their transactions.

Sound crazy? It's not. Let me explain...

First, you won't hear about the "Millionaire's Market" on the evening news. The operation is hush-hush. And obviously, the millionaires want to keep it that way.

Next, only the elite can join. They charge outrageous membership fees to join the "Millionaire's Market." At least a million bucks.

That's exactly why I call it a "Millionaire's Market" — even though most people know it by another name. Some members have even paid $5.8 million to secure their seat inside.

I don't know about you, but I'd pay a few million bucks to gain access to a secret financial market only if I was certain to become "ultra rich" in the process...

And that's exactly what they're doing. Making millions of dollars year after year. All without touching a single best stock to buy... bond... or other kind of investment most people are used to.

In short, they're growing rich trading "secret" things in their "secret" market — while you and I are left spinning the roulette wheel that the stock market has become. Does that sound fair to you? Of course not!

Today, I'll give you a secret "guest pass" into their market — so you can grab your share of the riches WITHOUT ever having to pay their million-dollar membership fee.

Don't worry. Your "guest pass" is perfectly legal. And it could be extremely profitable.

I'll show you a few examples of how much you could make in just a minute.

But first, you're probably wondering just who these secret millionaires are... why they keep their market hidden... and how I know all of this. So let's start from the beginning...

The 136-Year-Old "Millionaire's Market" Moves Stockpiles of Money Each Day. . . Right Beneath Your Nose!

But Today, My "Guest Pass" Gives You the Chance to Withdraw YOUR SHARE. . .

Before we go any further, I want to make something clear: The Millionaire's Market doesn't involve stocks or bonds... These millionaires could care less what the Dow Jones, S&P or Nasdaq do each day.

While the talking heads on television try to stimulate the economy... while the corporate stock market junkies try to convince you that "buy and hold" is the best way to make money... and while brokers charge ridiculous fees to manage retirement accounts that never seem to move...

This secret group of traders plays an ENTIRELY different game.

And they use the mainstream media's "know-it-all analysts" to convince you that the 2010 hot stocks market is the place to be... all just to divert your attention away from them while they trade like bandits inside their secret Millionaire's Market...

Today alone, they've completed more than 1,115,153 deals. Yesterday, they closed over 1,045,456 trades... and the day before, they made 1,305,567 deals...

My point is that over a million of these transactions occur each and every day. And they've run this underground Millionaire's Market since 1872.

But today is YOUR day to infiltrate the Millionaire's Market with your own guest pass.

But Why Do They Work So Hard to Keep You out of the "Millionaire's Market"?

Expensive cars, party boats, houses in the Hamptons, private helicopters... these guys have it all.

Think they want to give these things up to you? NO WAY! They want it all for themselves. And the more people who know about their market the more competition they have...

To me, that just doesn't seem fair... So today, I'll throw the doors wide open for you.

I want to give you a "guest pass" that allows access to the opportunities inside the Millionaire's Market.

You can think of the guest pass as your revenge against them for trying to shut off access to the hardworking, blue-collar Joe...

When you use your guest pass to get in on the profit potential of the Millionaire's Market, you'll have the chance to make huge sums of income — as much as $810 per week — from the world's hottest and most secretive market.

Money like that can completely change your life forever. I know — because that income changed my life.

Here's How the "Millionaire's Market" Paid Me to Retire From My 9–5 Office Job at 32 Years Old. . .

No more ironing shirts and tying ties at 6:15 in the morning... no more sitting in rush hour... and no more waiting around at 5 p.m. on Friday to pick up my weekly check...

The Millionaire's Market changed ALL of that. Now I'm my own boss.

I'm able to go hit golf balls on a sunny Friday afternoon. I'm able to spend entire weekdays with my young daughter. And I'm able to travel whenever and wherever I want. After all, isn't that what life is REALLY about?

I'm finally free from the shackles of "normal" work. You could be, too. I'll show you how in just a moment.

And if you're already retired, the "guest pass" could help you live more comfortably, too.

Since 1989, I estimate that I've made more than $100,000 year after year in this secret market... In fact, I use it whenever I need some extra cash for my wife, my young daughter or me.

Today, I'd like to show you how you could do the same thing...

How You Use YOUR Extra "Millionaire's Market" Money Is Completely up to YOU. . .

If you accept your personal "guest pass" today, you could live a happier life while making a consistent stream of money. And you can start as early as 7:10 a.m. EST tomorrow.

Take Ray Chan, for example. Ray's a 48-year-old software architect from Charlotte, N.C., who told me that he's used his guest pass into the Millionaire's Market to average an extra $1,500 per month. For the past eight months!

What has he used the extra cash on? Well, Ray said this: "Giving gifts is a lot easier when you have some extra money that you didn't work overtime for!"

Or take Stan Rohl — a 51-year-old semiretired uniform rental operator — who recently told me that he used the guest pass into the Millionaire's Market to make $1,337.80 in only ONE WEEK.

If you could do that each and every week, it would add up to almost $70,000 per year in extra income. What would YOU do with an extra $70K per year?

Just think how extra cash like that would change your life...

Because today I'm giving YOU a chance at the same type of gains.

You see, the "guest pass" is my name for a research service I've spent the last 19 years of my life perfecting. And Stan and Ray are just two of the many readers taking advantage of this service.

But before I tell you how you can join me as we raid this market, let's get something straight... The Millionaire's Market isn't for everyone. I want only aggressive people joining me as we sneak into this market through the back door. We have no room for deadbeats.

So if you're not serious about a chance to make an extra $810 per week, stop reading. This letter isn't for you. But if that extra income potential sounds appealing...

What you're about to read is highly confidential.

The truth is, I'm lucky to be telling you about it all. That's because I wasn't born into the "Millionaire's Market."

Instead, I stumbled into it by accident.

How My Life Story Has Paved the Way for YOU to "Withdraw" Money From the "Millionaire's Market" With an Undercover Guest Pass. . .

My true love in life used to be filmmaking.

When I was a kid, my parents told me that I used to act out scenes in my crib. They said I was a natural...

So when I grew older, I left my middle-class Minnesota town and went to the Big Apple to become a film major.

But after college, I couldn't find a job in film to save my life. So being young, broke and desperate, I took any type of work that I could find. And that's when I discovered the Millionaire's Market.

You see, a buddy of mine had just been accepted as an assistant to a trader inside the secret financial market I've been telling you about.

And as luck would have it, he knew another "millionaire" who needed an assistant. The next day, I got the job...

The Secret "Millionaire's Market" REVEALED!

They paid me $22,000 per year to do their grunt work.

And I quickly found out what they were trading to make them so rich...

They never touched a single stock... never laid their hands on a corporate bond... and didn't think twice about investing in CDOs, ADRs, ETFs or any other fancy acronyms.

They didn't have to worry about shady accounting practices... questionable insider transactions... or even SEC investigations...

Instead, these guys were trading things that can't be manipulated by Corporate America — the stuff we use each and every day. Things like oil... gold... silver... natural gas... soybeans... sugar... orange juice... and so on.

Forget the stock market! Here's where the rich go to get richer...

Want a chance to make a few hundred dollars extra per month? This is the place for you.

Of course, 99.9% of the investing public has no clue how to get in on this action. That's why I feel like the "Millionaire's Market" (known to most people as the commodities market) has been "hidden" and kept "secret" from you... until today!

Why I'm Now Using My "Inside" Experience to Open the Doors on Their Greedy Little Secrets. . . Giving You a Chance to Bring in Extra Monthly Income. . .

I figured out how every part of the system works during my years inside the Millionaire's Market.

I placed trades that banked over $100,000 in a matter of minutes... And I placed trades hundreds of times per day.

I discovered all of the Millionaire's Market's secrets.

But along the way, something didn't smell right to me...

First, they had no loyalty to each other. They were concerned only about fattening their own wallets at any cost. That kind of mentality was sickening in itself. Then I realized what was really bothering me.

These guys were so selfish about the millions they were raking in they took steps to keep this market completely hidden.

Instead of sharing their moneymaking secrets with the world, they screwed over everyday people by charging million-dollar entrance fees. It was all designed to keep the rich getting richer... while the everyday Joes like you and me were grinding through 50–60-hour workweeks.

Call me crazy, but that wasn't the life for me. So as soon as I sucked up all the knowledge I could, I quit with the hope of bringing their secrets back home to my family and friends...

But how does this all add up to you making $810 or more per week from their "hidden" market? Well, that's the secret...

I Realized That After I Quit the Secret Millionaire's Market, the System Didn't Shut Me out. . . Now You Have a Chance to "Hack" Into It With the "Guest Pass" I'll Give You Today!

To be honest, I didn't know if it would work. But my access to this market wasn't shut off when I left.

When I logged onto my personal trading account and tried to tag along on one of the Millionaire's Market trades, I fully expected to be shut out. Then the transaction went through, and my pulse started to beat faster and faster. It wasn't a big victory — I withdrew only $650...

A few days later, I tagged along on another trade. And it worked again. This time, I withdrew a little bit more. Around $1,850.

Jackpot! Since I'm not technically on the "inside" anymore, that's why I call my research service a "guest pass." It allows me to recommend the exact same opportunities without having to be "on the inside."

And at that moment, I realized that anyone could tag right along with the millionaires... as long as they knew where to look.

With all of the money floating around inside the Millionaire's Market, it's like secretly reaching in and "withdrawing" money from their transactions — all perfectly legal and virtually undetected.

And today, I'm inviting YOU to do just that!

Since these secret millionaires complete over 1,000,000 commodity trades in their market per day, as long as you don't get greedy, they'll never notice that you're tagging along with their trades.

How the "Guest Pass" Works

The guest pass allows you to participate in the same transactions that they complete each and every day. When we find one that's potentially profitable, you decide if you want to fork over the small amount of cash it takes to make the deal.

Then, when it comes time to "cash out," you could take back your initial cost, plus your share of the profits.

I know it may sound complicated. It's not. Here's how we're going to play it...

Your FREE Guest Pass Into the Millionaire's Market

The "guest pass" is a financial research service called Resource Trader Alert — a service that focuses on the kind of commodity trades they make inside the Millionaire's Market. My recommendations have safely and consistently been booking gains month after month.

And today, I'd like for you to join us.

Through Resource Trader Alert, I'll give you behind-the-scenes access to the Millionaire's Market with my secret guest pass. You could use it to trade alongside them and have a chance to make as much as $810 per week in profits.

I've been personally using the Millionaire's Market to make money EACH and EVERY day — for more than 19 years. I promise that I'll show you how to do the very same thing...

Take Sacramento, Calif., resident Greg Clay, for example. Greg wrote me saying that he "had absolutely no knowledge about [the Millionaire's Market.]" After I gave him the guest pass, he started with just $15,000 in his account, and he says his account is now worth $123,000!

Sally Flemming from Cedar Grove, Wis., told me that she's "grown her account by $4,000" in four months. She's used the guest pass to generate $1,000 in extra income a month!

Or look what Chuck Zhan — a 52-year-old former psychotherapist who can no longer work due to a disability — told me: "I've invested in a recommendation only one time thus far... and sold for a 96% gain, almost doubling my money." Since Chuck is on Social Security, he needs any income that his guest pass can bring him just to get by.

Now, with the guest pass in your hands, you'll have a chance to begin bringing in huge sums of weekly income from the Millionaire's Market. And you'll be able to start as early as 7:10 a.m. EST tomorrow. I'll show you how.

But before I give you access to the guest pass, let me show you just a few specific examples of how much you could make...

Millionaire's Market "Withdrawal" #1 How to Use Your Guest Pass to Make an Extra $810 in Just 7 Days. . .

Did you know that you could make great money trading cocoa in the Millionaire's Market?

You can. Today. But more than 99.9% of people never do. Because before today, the Millionaire's Market was reserved for, well, the millionaires only...

You see, cocoa trades on the Millionaire's Market each and every day. And they make a fortune doing it. But your guest pass will give you the chance to profit by tagging onto their transactions.

You simply use the guest pass to get in on the action... and then take your share of the cash if they profit.

Here's how...

A while back, I sent my Resource Trader Alert readers the following note:

"BUY the December Cocoa Calls for $480."

Then seven short days later, I rushed them these simple instructions:

"SELL the December Cocoa Calls for $750."

In at $480... out seven days later at $750. That's like withdrawing $270 from the Millionaire's Market. All with just 10 minutes of work.

Not bad, right? But some Resource Trader Alert readers could have made much more than $270...

If you'd have bought two contracts of the same trade, you could have made $540. And if you'd have loaded up on three contracts, you could have raked in an extra $810 in just SEVEN days.

You could have deposited it right into your retirement account... or used it to pay off those heating bills... or put it toward a nice little vacation for your family. It's your choice.

But it gets even more fun than that. $810 in a week is nothing compared with what some of the other lucky guest pass recipients have had the chance to "withdraw." For example...

Millionaire's Market "Withdrawal" #2: How the Guest Pass Could Have Made You $6,208 in Just Under 1 Month

Another commodity that trades in the Millionaire's Market each day is heating oil...

I knew that if my readers wanted to join the millionaires as they traded heating oil, they could get a share of the profits. And that's what the guest pass gives them a chance to do. So heating oil was one of the first plays that I recommended to my Resource Trader Alert readers.

I wasted no time and rushed out an urgent e-mail. I simply told them to...

"BUY February $150 Heating Oil Calls for $1,747."

Twenty-eight days later, I rushed them instructions again. This time, they could have exited the trade at a price of $4,851 — a "withdrawal" of $3,104 per contract.

If you had bought just two contracts, you could have turned every $3,500 into $6,208...

Four contracts would have raked in $12,416 in pure profit. All in only 28 days.

Pretty impressive, isn't it? And that's money you could make by using your guest pass to get into just one of the 1,633,894 transactions that these guys USED to make behind your back every day.

This happens time and time again. I send my readers instructions... they get a chance to make money in the Millionaire's Market.

Here's another example...

Millionaire's Market "Withdrawal" #3 $911.25 in. . . $3,375 Out. . .

Would an extra $27,095.75 per month help you sleep better at night?

If so, that's exactly the type of extra cash that my Resource Trader Alert readers could have generated. And they'd have done it by playing coffee on the Millionaire's Market.

The trick to trading coffee is to know how the seasons affect the coffee supply. Based on similar seasonal coffee price moves that I saw in my days on the inside of the market, I knew the winter months would send the price of coffee soaring.

So in November, I positioned my readers for potential profits by sending them this set of instructions:

"BUY May $1.05 Coffee Calls for $911.25."

Just 30 days later, the price of coffee had moved up quickly — sending the $911.25 coffee contract up to $3,375 — an amazing 270% gain!

Resource Trader Alert readers could have raked in a quick profit of $2,463.25.

Had you acted on my series of email instructions, you could have safely turned every $3,000 into more than $7,389. Or with a little bit more aggressive bet of 11 contracts, you could have even made $27,095.75 or more.

All within 30 days.

And all by using your guest pass to gain entry into the Millionaire's Market.

But what about today's unstable economic conditions? Do they play a part?

Not at all.

You won't be playing top stocks for 2010, remember? This gives you a chance to SAFELY make money, no matter what the stock market does...

While the U.S. Plows Through a Recession, These Secret Millionaires Trade More Than Ever. . . Giving You a Chance to Join Them in Their Elite Game

Does it look like the Millionaire's Market players are hurting over the recession? Nope!

They're making more money than ever from soaring commodity prices.

Here's proof: The sheer number of recent Millionaire's Market transactions is just amazing...

In 2004, the daily average inside the Millionaire's Market was 538,245. In 2005, it increased to 697,371... in 2006, it averaged a whopping 980,400...

Now it averages over 1,633,894 trades per day. That's an impressive 204% growth in just four years.

And this 136-year-old market has increased the number of transactions every year since it started.

This means that the volume of trading on the Millionaire's Market is so high that they'll never even notice you when you tag along to "withdraw" your share of the money!

For example, if you used your guest pass to get in on only a tenth of a percent of their daily transactions, that would still leave you 1,633 cherry-picked potential trades to participate in each day!

The bottom line is that this profit parade won't end anytime soon.

And my Resource Trader Alert system will show you how to safely "withdraw" money from only the VERY best transactions... the ones that could easily pay your monthly bills... and leave you some "extra" cash to burn.

The ones like...

The $4,000 you could have reaped in 20 days if you'd bought 8 of our recommended silver contracts

The $17,820 in pure profit you could have made in just 9 days from 5 wheat contracts

The $4,500 you could have raked in 19 days playing 9 corn contracts

The $4,704 you could have bagged from the Millionaire's Market in 6 days through 10 sugar contracts

The $9,200 you could have made in 28 days by playing 10 gold contracts.

That's exactly what my Resource Trader Alert system is designed to do — safely provide you guest access to the Millionaire's Market, where you'll have a chance to make as much as $2,000–10,000 per month, depending on your initial stake.

And as good as those gains are, they're nothing compared with...

Millionaire's Market "Withdrawal" #4 Using the Guest Pass to Make You $6,048 in 48 Hours

In early 2007, my Resource Trader Alert system locked onto a sugar play. So I rushed out a quick e-mail to my readers telling them to get in on it. If they wanted to get in on the opportunity, they had to shell out just $358.40 per contract...

And less than 48 hours later, I told them to sell those same sugar contracts for a gain of 84%.

That's like "withdrawing" $302.40 in pure profit from each contract.

With 20 contracts, you could have made $6,048 in as little as 48 hours...

All without ever having to worry about a company going bankrupt or announcing bad earnings.

Again, Resource Trader Alert readers simply wait for my instructions... decide if they want to act... and then act quickly when it's time to sell for a profit. It couldn't be easier.

Here's another deal that could have brought you some quick cash...

Millionaire's Market "Withdrawal" #5 The Guest Pass Could Have Made You an Extra $36.46 per Hour. . . Even While You Slept!

I know that sounds crazy. But hear me out...

Over the course of eight days, I gave my Resource Trader Alert readers the chance to "withdraw" $7,000 from the Millionaire's Market. That's eight days... and $7,000 in pure profit.

Said a different way — that's like generating an extra $36.46 per hour... for 24 straight hours... and for eight straight days. Even while you sleep.

And all with just the guest pass to access the best opportunities in the Millionaire's Market and 10 minutes of work.

Here's Why You'll Be Able to Generate Additional Monthly Income for Years. . . and Years. . . and Years

As long as the world spins, we'll need the simple things to live on. The things like sugar, cocoa, heating oil, cattle, oil and soybeans...

And it only makes sense that supply and demand will make the prices of these things go up and down... That means you'll always have opportunities to make money!

All you need is the guest pass to get you behind the scenes. Once the guest pass is yours, you'll have the chance to...

Turn $5,000 Into $339,200 of PURE Profit

For the past 3 1/2 years, my Resource Trader Alert system has helped me cherry-pick 106 Millionaire's Market recommendations for readers.

Eighty-eight recommendations were winners.

After forking over the cash it took to get in on the transactions, the total cumulative gains (including losers) were a whopping 6,808%.

If you'd have dumped $5,000 into each and every single one of my recommended Millionaire's Market trades, you could have made $339,200 in pure profit. That includes the rare break-even or losing transactions.

Compared with the Dow, which went up just 24.6% during the same time frame, now you can see why certain people pay ridiculous fees to join the Millionaire's Market!

By this point, though, I'm sure you have some questions about what I've told you....

So It Seems Only Appropriate to Answer Your Questions Now. . .

I'd like to take a moment to make sure you're completely comfortable with how powerful this guest pass can be.

Remember, I want only serious people using the guest pass to play this secret Millionaire's Market. NO deadbeats allowed...

So I've tried to compile some questions that I think you may have. I'll answer them now...

"If the Millionaire's Market Makes You So Much Money, Why Don't You Just Keep It to Yourself? Why Release This Information?"

Answer: I DO use my guest pass to make money each and every day. But with 1,633,894 transactions per day, there's more than enough for you, too.

I don't want to ever be accused of front-running a recommendation. So here's my promise to you in plain English — I'll never personally play the recommendations I give you.

So if you think about it, it's a win-win. I get to continue doing what I love... while still giving you the guest pass and specific instructions on how you could make money for yourself!

After all, if I kept this information for myself, wouldn't I be just as bad as the millionaires who want to keep you out?

"This Sounds Risky. . . Is It?"

Answer: I'm not going to lie. All investments involve risk. And to tag along with the Millionaire's Market transactions, you'll have to fork over the cash it takes to get in on the deal.

If you're not willing to take on a TINY amount of risk, you'd better stop right here. The Millionaire's Market isn't for you. You'd be better off sticking your money into a savings account that's guaranteed to make you 4% per year...

But if you're willing to assume a small amount of risk in return for a chance to generate profits from the Millionaire's Market, this is for you.

On top of that, remember that I've been perfecting my Resource Trader Alert system for 20 years. It allows me to identify only the safest opportunities in the Millionaire's Market.

It's the reason why guest pass reader Sam Early wrote me to say that his account is safely up 80% in seven months. He followed up by saying, "Unlike some other, overhyped services... yours is the real deal. And that [80%] is the real number."

"Do I Need to Know Anything About Commodities or Trading to Use My Guest Pass?"

Answer: Nope. Using the guest pass to play the Millionaire's Market is actually easier than buying stocks. How? Because in the past 3 1/2 years — with over 106 specific plays — I've recommended plays on only15 different Millionaire's Market commodities.

As a gift, I'll give you all 15 right now. Mark these down:

Crude Oil, Orange Juice, Heating Oil, Natural Gas, Coffee, Soybeans, Corn, Cotton, Unleaded Gas, Cattle, Sugar, Gold, Cocoa, Silver, Wheat

Compare that to the thousands and thousands of top stocks for 2010 out there...

Remember, California resident Greg wrote me saying that he "had absolutely no knowledge about [the Millionaire's Market]" before hearing about Resource Trader Alert. He's since made $123,000 in the previously hidden Millionaire's Market.

"What if I Don't Have a Ton of Cash to Get Started? Can I Still Participate in the Recommendations?"

Answer: It does take a little bit of money to get started. But not much.

Most of the recommendations that my Resource Trader Alert system helps me lock onto will cost around $750 to play. If you don't have that much, I'm sorry. There's nothing I can do. I don't make the rules. I just offer a "guest pass" to get you inside...

But if you have a few hundred bucks, the risk is so small (remember I've given my readers a chance to make money 83% of the time) that the potential returns far outweigh the transaction costs.

"How Will I Know What and When to Buy and Sell?"

Answer: This one is simple. I'll tell you exactly what to buy, when to buy it and when to sell it.

I've recommended a total of 106 plays with specific buy-and-sell recommendations. Eighty-eight went up. And the average gain over all of those plays, including losers, was an amazing 64%.

That's like "withdrawing" an average of $640 from the Millionaire's Market from every $1,000 transaction!

"What Do I Need to Get Started?"

Answer: You need two only simple things to gain behind-the-scenes access to the Millionaire's Market.

First, you need a guest pass. I've just finished a special report that gives you all of the details. It's called Your Underground Guest Pass Into the World's Most Secretive Millionaire's Market.

And it's yours FREE if you follow the instructions at the end of this letter. But the amount of special reports I can give out is extremely limited — I have only 2,500.

Next, you'll need my instructions on exactly what to buy and sell. With your permission, I'd like to immediately e-mail you my Resource Trader Alert recommendations. Each week, I send two e-mails out. One may have a recommendation... and the other is a recap of our open positions.

That's all you'll ever need to generate extra monthly income. I'm confident that if you possess both these things, you'll never want to gamble on the stock market again.

And here's what I'm willing to do for you today...

If You Act Quickly. . . There's a Guest Pass Waiting for You!

I've been telling you that there's no room for deadbeats all along.

So I just skimmed through my Resource Trader Alert list and kicked off anyone who hasn't paid subscription dues.

With the deadbeats gone, I'm finally ready to let in a few new guest pass subscribers — something I haven't done in six months.

As I'm sure you'll understand, though, I can't offer this for free.

So after thinking about it, I came to the decision that a fair price to pay for a yearlong subscription to my "guest pass" research service would be $2,990.

That's a drop in the bucket when you consider that others have had to pay $5.8 million to join the Millionaire's Market. Or when you consider that you might have an opportunity to make up your subscription price within the first month of your membership.

Like subscriber George Chan, from Singapore, who told me that he "recovered his subscription fees in the very first [Millionaire's Market recommendation]" he took. He went on to say that he "regretted not joining earlier."

Or take Colin Roberts, who lives just a stone's throw away from Central Park, NYC. He said he paid for his "first-year subscription in six days." "Wish I'd have been on sooner," he continued... "Something tells me I'm not alone."

And he's right. He's not alone. Now you can rake in income from the Millionaire's Market, too.

With your subscription to Resource Trader Alert, I'll immediately send you a FREE copy of my special report, Your Underground Guest Pass Inside the World's Most Secretive Millionaire's Market.

I'll want you to read it right away.

Because I'll also add you to my list of Resource Trader Alert guest pass subscribers. Through the list, I'll send you approximately two or three recommendations per month that you could use to "withdraw" your share of the profits from the Millionaire's Market... and I'll also send you weekly updates on your positions.

I have only a few hundred special reports to give out. Any more and we'd risk being "discovered." I'd hate for this offer to close before you've had a chance claim your personal guest pass. So how's this for fair...

Respond Today and Get 50% Off

If you act before Midnight, May 12, I'm willing to do something very special for you.

I'll give you a full 50% off the normal one-year price of Resource Trader Alert.

You'll get the guest pass subscription (with approximately 36 Resource Trader Alert cherry-picked trading recommendations) for just $1,495.

But space is extremely limited. And when midnight May 12th rolls around, I'll be forced to close this offer.

If you're still not sure if this report and Resource Trader Alert are right for you, here's what I suggest you do...

Go Ahead. . . Take the Next 90 Days to Decide if Resource Trader Alert Works for You

Sign up for a subscription to Resource Trader Alert today. Then take the next 90 days to decide if it's for you.

If the guest pass research service doesn't give you a chance to substantially better your way of living... if it doesn't help lighten the load of your monthly bills... or if you're not happy for any reason...

Simply call me up and I'll send you a full refund. The only thing I ask is that you return your special report so that someone else can use it.

But if Resource Trader Alert helps you see gains, which I'm sure it will, I'll wait until the end of your 90-day trial to begin your yearlong subscription.

That's something I've NEVER done before.

That means you'll receive a total of 15 months... THREE FREE ... and 12 more as your normal year's subscription... all for the half-price offer of just $1,495.

But you must act before Midnight, May 12th. After the click strikes 12:00 A.M., this "THREE FREE" month offer ends. Perhaps for good.

Of course, there's also one other reason why you'll want to act right now...

Your Chance to Be Inside the Millionaire's Market by 7:10 a.m. Tomorrow

The Millionaire's Market opens for trading tomorrow at 7:10 a.m. While "normal" Wall Street doesn't get started until much later in the day... these guys waste no time when they know there's serious money to be made.

So either you're in or you're out...

Continue to stick with the risky lottery system that the hot stock market has become... or gain behind-the-scenes guest access into the financial community's best-kept secret, the Millionaire's Market — where you'll have a chance to "withdraw" $810 or more per week without ever trading a single stock again.