AAA

Rich On Money

A Blog Just About Money and Investing

Rich '-' A Blog About Money and Investing

Welcome to my website

My Promise to YOU

If you don’t mind me being politically incorrect, I am going to give you the straight truth about what I have learned about MONEY over the course of my lifetime. You will also understand what is happening in the world of money today. This is my gift to those who choose to read about what I am thinking. I work with a group of people, all of whom report to me.

On the other hand, I report to no one. I have earned that right. I have paid for my mistakes with losses, and sometimes heeding the advice of empty suits. I don’t take too many losses anymore, and you won’t either, if you heed the wisdom that I will impart to you, and it won’t cost you a penny. Just come with an open mind, and leave the rest to me.

September 13th, 2010

American Strategy in Afghanistan needs Re Tooling

: Taliban fighters get paid $300 per month

Who’s jerking who off to be polite about it? I am talking about Afghanistan because it is draining $100 billion plus per year out of the American taxpayer and the economy with a less than desirable result. Apparently, the United States is failing miserably in its efforts to recruit more soldiers into the Afghan army. A few stats are in order.

It costs the American citizen one million per one American solider to send him to Afghanistan or Iraq for one year. One thousand Americans cost one billion per year, and one hundred thousand Americans which is what we have in that country costs one hundred billion per year. An American private gets $17,000 per year in salary so where is the rest going. It beats me.

Now the Taliban pay their soldiers $300 per month. We could pay an Afghan army $1,000 per month, an unheard of sum in that country, and pull in 100,000 soldiers. The cost would be $100 million dollars per month or $1.2 billion per year, compared to $100 billion for Americans doing the job. In other words it costs over 80 times to have an American do the job as opposed to an Afghan recruit. So I have one question for both you and me. Why are we doing this, this way?

Am I stupid, are you? What’s going on? Who’s making the dough? We have to start treating the dollar with respect if we are to leave a strong, vibrant, healthy country to our children. This is clearly no the way to do things. It was announced today that the Kabul government is having problems recruiting soldiers out of the Pashtuns in the South. One idea was to give each soldier a two month bonus of $300 to sign up. The US would pay for it of course.

The Afghan Defense Minister Addul Rahm Wardak has so far rejected the bonus idea. So now we have an Afghan saying no, I don’t want to use American money to bonus our Afghan troops. What’s going on, am I asleep at the switch We have to deal with these issues if the American economy is to get on track, and only then will the stock market which is my principal occupation have a multi-thousand point run.

No Comments »

September 13th, 2010

Taxes up or down are Coloring all Investments

: The Recession takes its toll on Larry Summers

Politicians are fickled creatures – they simply can’t make up their minds on the Bush tax cuts, and their indecision is wearing thin on investors. The stock market detests uncertainty. It can deal with just about anything, as it did with the 9/11 crisis nine years ago, which happened just a few blocks from Wall Street.

Today capital gains and dividends are taxed at a 15% tax rate. So is it going to go to 20% which is President Obama’s preference, or is it going to be taxed at normal rates 39.6% which is the preference of many Democratic members of Congress, who obviously have never worked a day in their lives in a normal occupation. One study by a major bank although they usually are as stupid as they come came up with the conclusion that a move to the old taxation rates would trim 9% off the S&P 500 index. Three economists at the Federal Reserve Board said it would have no effect at all. Now you have to remember that an economist is a man that knows a 1000 ways to make love, but has never been with a woman.

So let’s say they raise the rates all the way back to 39 plus percent. For 2013, it would raise about $40 billion, and the deficit is $1.4 trillion. The Democrats in Washington better come up with a better act than this. No one ever seems to ATTACK spending. No one ever seems to question the efficiency of a single program that is in place.

Timothy Geithner the Treasury Secretary supports the tax increases which goes along with his position as Obama’s financial right hand. Two leading economists working for Obama have now bailed out of the Administration. The Chief of Staff Ron Emanuel has made it clear he wants out also, and it is rumored that Larry Summers, former Secretary of the Treasury and now Obama economics advisor wants out but no one wants to hire him.

No Comments »

September 13th, 2010

Saudi Arabia Buys $60 billion in Arms

: Nixon figured a way to get the Arab dollars back

Today the Obama Administration will be notifying the Congress that Saudi Arabia would like to by $60 billion in advanced military airplanes from United States manufacturers. The next step will be upgrades to their naval and ballistic missile defenses. So if you are an American investor, you might say to me, why is RichOnMoney.com, telling me about this.

It’s because it is a fabulous example of how the world works, and you need to know how the world works. Forty years ago when OPEC was formed, there was a great fear on the part of the United States that we would now transfer hundreds of billions of dollars of American currency and the Arabs would own our existence. President Nixon was about as bright a President as we have seen in the 20^th century developed a novel idea.

We need to get that money back one way or another. He found two ways and did two things. The first thing he did was close the Gold window . Prior to Nixon, you could freely turn in your dollars and obtain Gold for them at $33 per ounce, a policy instituted and reaffirmed by FDR in his Administration. Nixon shut it down. He knew that the Arabs would start converting into Gold, and leave Fort Know empty. Nixon both took us off the Gold standard and refused the dollar Gold transfer policy. Now he had the Arabs up against the wall. He next forced the Arabs to denominate all oil sales in DOLLARS. This was absolutely brilliant. This meant if you were France or Germany or anyone else, and you wanted to buy oil on the world markets, you had to do it in dollars.

Nixon still had to get all that money back from the Arab states. The next steps were again brilliant. He sent every major engineering firm in America to the Middle East to sell the Arabs on building tremendous modern cities in the middle of the desert. Hundreds of billions of dollars would be spent with those engineering firms and others over the next several decades, plus you had the annual upkeep and maintenance, costing tens of billions.

Finally there was the security issue. Let’s sell them armaments, but before we do, we have to inform Israel and give them a veto power over anything we sold the Arabs. We wouldn’t want Arab states using American weapons to wage war against the Israelis. It worked, and the $60 billion dollar Arms announcement today is just the latest incantation of the Nixon policy of 40 years ago. Sometimes Presidents do get it right but there’s just one more thing. Since oil is denominated in dollars, the Arabs had to take the dollars that were left and put it into US Treasury bills and bonds to help us finance the deficit. Another brilliant move, and that’s what Obama is doing right now. He should thank the former President.

2 Comments »

September 6th, 2010

Iraq Why we were there First the region’s history???

: The Shah Of Iran – Our Guy

: Ayatollah Khomeini Replaced The Shah And Wasn’t Our Guy

Why would www.RichOnMoney.com write about Iraq and why we were there? It’s because we spent a trillion dollars on Iraq and that has direct influence on government policy and spending habits, and therefore every investment you will make from this day forward.

Most of what you will read in newspapers, and watch on television is non-sense. It is pabulum for the masses that has been further watered down to the lowest common denominator to make it acceptable to the larger audience. You need to know the truth as an investor so that you can make intelligent decisions. Deal with and embrace falsehoods, and you have a real good shot at losing most of your money.

Let’s get right to the truth, and forget about the phony reasons furnished by high political office holders.

1) The Mideast has oil, lots of it, and we don’t. In the 1960’s, it’s tough to believe that the United States was a net oil exporter, not importer. The situation has reversed today. We are importing most of oil from bad neighborhoods meaning countries we would rather not deal with because of political instability. There is not one democracy in the Mideast among the Arab nations. No democracy means no rule of, or by the people, and therein lays the instability.

2) When England walked out of the Mideast in the 1960’s and told America you take over, we no longer have the money to keep the military going, there was a power vacuum that formed. The United States filled it.

3) President Nixon may have been paranoid, but he was also brilliant. In the showdown against monolithic communism, he sought to have others act as proxies for American power. He did so by forming strong, interdependent alliances with both Saudi Arabia under the House of Saud, and Iran under the Shah of Iran. Saudi Arabia was the money, and Iran was the muscle.

4) Again brilliant in his thinking, Nixon knew that the Arab countries would swallow hundreds of billions of dollars right out of the pockets of Americans and into their own. His thinking was extraordinary, so this is what he did. He denominated oil be paid for in dollars, and at the same time took America off the gold standard. This meant that you could only buy and sell oil in dollars. What were you going to do with the dollars if you were the Arabs?

5) There was no choice; you buy Treasury bills, and notes. America even created a separate process whereby the Arabs could buy Treasury investments more easily. Nixon then sold MASSIVE armaments to the Arabs to such the billions of dollars we gave them for oil right back from them. The Shah of Iran bought so many armaments it’s a wonder Iran didn’t sink right into the desert from the weight.

6) So Saudi Arabia and Iran became our proxies for Mideast power. The Saudi’s with the money and the Shah with the army. We dominated the Mideast for years. The Soviets were unable during this period to make any real inroads into our power base.

Iran upset this arrangement when Islamic fundamentalists led by the Ayatollah Khomeini overthrew the Shah and his government in 1979. We lost the Shah , who was our guy. It was and remains a devastating blow. We tried to get Saddam Hussein to fill the power vacuum left by the Shah’s disposal, but he never really played ball with our side. Even during the Iran Iraq war in the 1980’s we supplied Saddam with armaments and satellite imagery to help Iraq’s troops on the battlefield. The best Saddam could muster was a draw, and the war ended in the late 1980’s.

Next time we will talk about the first Iraq war, and then bring it up to the present.

2 Comments »

September 6th, 2010

Iraq 1990 onward Why US invaded again?

: George H Bush

: Saddam Hussein Should Have Listened

This is part II of my write-up as to what the real deal is about Iraq. The first President George Bush went into Iraq after Saddam Hussein invaded neighboring Kuwait. Prior to the surprise invasion, Saddam Hussein summons American Ambassador April Glaspie to his office and inquires about how America meaning Bush feels about Iraq- Kuwait problems. He is told that America does not have an opinion, this is a regional issue. The exact reply is reported as having been, “We have no opinion on your Arab-Arab conflicts, such as your dispute with Kuwait.”

This is the green light for Hussein to invade Kuwait. Somebody in Washington wasn’t thinking this through. Some are now disputing that Ambassador Glaspie actually said this, but I think it is very close to the truth. Saddam would not have invaded Kuwait if he believed that the United States would threaten his physical security as a result (Bush’s so called wimp factor was in play). Saddam could hardly believe his ears. The invasion proceeded.

Somebody did an analysis afterwards and realized that between Iraq’s oil production and Kuwait’s, Saddam would have potential pricing over the world price of oil. There’s one more point that has not been talked about. If Saddam had 100,000 troops in Kuwait, this means they would also be on the border of Saudi Arabia, the largest oil producer in the world. Hussein would effectively neutralize the Saudi voice regarding oil prices by their fear of invasion just like Kuwait was invaded. The rest you know, the senior Bush invades, and Kuwait and Saudi Arabia cover the entire cost of the invasion by paying for it.

Bush leaves Saddam in power and takes the heat for this, although we don’t know the real story. By that I mean what was the arrangement with both Kuwait and Saudi Arabia regarding Iraqi sovereignty. Why ten years later does the President’s son, George W. Bush invade Iraq? Bush publicly stated weapons of mass destruction, but there were none. There wasn’t even a hint of one. Saddam did want EVERYONE to believe he had them however, and played a very dangerous game in portraying his country as having them.

Our invasion of Iraq was based on controlling oil once again. With Saddam gone, we might be able to install a more friendly government to the United States that would act as the hammer the way Iran acted as the hammer under the Shah’s rule. We were hoping and expecting that Saddam would take the Shah’s place as the third leg of the triangle in controlling the Mideast (US, Saudi Arabia, and Iraq). Saddam did not accommodate us, and had to go.

Was it worth 4000 American dead, 40,000 American wounded, and the $1 trillion dollars of American treasure expended. I am sure the American defense establishment including General Dynamics, Lockheed and hundreds of other companies who have retired generals and admirals working for them would say yes absolutely, and emphatically. The rest of us, I am not so sure.

Richard Stoyeck

No Comments »

August 21st, 2010

Taxes and Foundations and YOU A dream come true

: Jerry Farwell Knew How To Fly

The guy who drives a truck for Fed Ex, he buys a corn beef sandwich with mustard and sauerkraut for $8 and must pay for it out of after tax dollars. Meanwhile, an executive takes a business acquaintance out to lunch at the 21 Club in New York, spends $250 with drinks, and gets a tax deduction under the IRS code for travel and entertainment. Now it use to be that you could deduct the whole meal, now you are limited to a 50% deduction. This is the link to the IRS section on foundations.

A couple of years ago, I heard a lecture given by Bill Gates , America’s wealthiest individual, and he was asked what was the most important skill set you learned in your life. His answer was a “working knowledge of the Internal Revenue Service Code”. How absolutely brilliant is that? He’s right, if you have a good feel for the code, you will come up with completely legitimate ideas of how to make as much of your world as legally deductible as possible.

With my clients I am always talking taxes. I give them ideas that their tax advisors either CPA’s or lawyers never even consider. So here’s one for the history books. You will never forget the rest of this blog posting as long as you live.

Years ago I did the audit of the American Cancer Society. I am in the Chairman’s office, and he has a desk that cost $40,000. This is back in the 1970’s, that’s like $300,000 today. This is the link to the annual report for the American Cancer Society. In the 1980’s, I am at a White House function with a handful of people, and Jerry Falwell the minister and creator of Jerry Falwell University is in the room. I asked one of other attendees how he got to the White House today, “Oh we flew up with Jerry in his jet.” Don’t you just love the US tax code.

Here’s the best gimmick ever

You need to start a foundation. It’s that simple. Now you must comply legally with every aspect of every IRS regulation . Over the last century, most of your big wealthy individuals in this country have set up foundations. Think about Carnegie, Ford, Rockefeller, Gates, and ten thousand more.

Here’s the beauty of a foundation. They are only required to spend 5% of their endowment per year. Twenty percent of the 5% can go to operating expenses. I can virtually guarantee you that 98% of all foundations earn more than 5% on their endowment and therefore the principle never decreases and the foundation lives on into perpetuity.

Foundations are a rip off. They are flying around in Gulfstream Jets giving back to society as little as they are forced to, and the gents running the foundations live like Kings, and the IRS pays for it because of the tax code.

You need to explore the world of private foundations with your tax advisors. If you keep within the constraints of the law and to the letter of the law, it is better than a Golden parachute. No one will ever talk about this with you. You have to initiate it.

RichOnMoney

No Comments »

August 17th, 2010

US Squawks at China Military Buildup

: Robert Gates Secretary Of Defense

The Wall Street Journal stated the following in today’s edition, “The Pentagon voiced alarm over China’s military buildup……that could one day pose a challenge to US dominance in the western Pacific.” Okay, here are the defense budgets of the top ten countries in the world.

Rank	Country	Military expenditure, 2009^[2]	% of GDP, 2008
1	United States	663,255,000,000	4.3%
2	China	98,800,000,000	2.0%
3	United Kingdom	69,271,000,000	2.5%
4	France	67,316,000,000	2.3%
5	Russian Federation	61,000,000,000	3.5%
6	Germany	48,022,000,000	1.3%
7	Japan	46,859,000,000	0.9%
8	Saudi Arabia	39,257,000,000	8.2%
9	Italy	37,427,000,000	1.7%
10	India	36,600,000,000	2.6%

We spend $663 billion per year on defense, and the Chinese spend under $100 billion. Among the top ten there is an additional $300 billion spent per year. That is close to one trillion dollars, and does not include way over $100 billion per year spent on Afghanistan and Iraq, that is a separate expenditure.

Now who’s kidding whom? With our additional war expenditures, we are way over $800 billion per year and the Pentagon is crying we are in trouble. It’s very simple; as investors we have to be aware that every dollar the government spends is one less dollar that can be used to create jobs in this country. As the government attempts to borrow hundreds of billions to spend and simultaneously expand the deficit, the government automatically CROWDS out private borrowing.
Investors have to jump on this topic and learn to become citizen activists. My advice is that liberals as well as conservatives should be forming smaller separate activist splinter groups and attempt to exert influence over what can only be called stupid spending. My problem with liberals is that they never, ever talk about the cost of programs as to efficiency. They just want more, more, and more. My problem with conservatives is they don’t seem to empathize with people.

As investors we need to make sure that the economic environment is conducive to an expansionary economy. Defense spending has more than doubled since George W. Bush became President. He needed to spend another $300 plus billion per year to go after guys living in caves. Traditionally, our policy has been to fight our enemies, kill them and then rebuild their economic bases vies a vies Germany, and Japan. We don’t believe in ten year wars. Listen up America, it’s your economy, it’s your portfolio, it’s your future.

No Comments »

August 16th, 2010

Hewlett Packard and Mark Hurd Taken for a Sucker’s play

: Hewlett Packard

: mark hurd Hewlett Packard

I was looking at Hewlett Packard and the Mark Hurd situation. As you know the Hewlett Packard CEO Hurd was fired recently because he was involved in a sexual harassment suit with a female vendor who arranged for business meetings with Hewlett Packard personnel and outside vendors. They were like mini conventions for HP. Hurd on occasion attended the meetings.

First of all as someone who has been and continues to involved with business meetings at a high corporate level, let me give you some words of advice as to proper conduct if you represent a company in a very high position. If you represent yourself, these words are appropriate also.

People get set up all the time

You simply cannot in society trust people anymore to do the right thing. Mark Hurd and Hewlett Packard are learning that lesson right now. Hurd was taking down $10 million plus per year in pay and stock options, and he was worth every penny. The 54 year old CEO is the first man to run the company efficiently since Bill Hewlett and David Packard founded the company back in 1939 in Palo Alto, California. If you want to be protected as a CEO or wealthy private citizen, you have to take precautions. This is what I advise clients:

As a CEO you never eat dinner alone with an attractive woman other than your wife. There must always be a third person present to shill for you. It’s a term in common usage meaning to protect your interests.
You meet a woman in a bar, and you strike up a relationship. If you are smart, you do not take her to your hotel room. If you do, you should inform the bartender right there and then as to what is happening. If the lady finds it offensive, than let her go. Your money and your freedom is too important to blow it for an evening’s entertainment. This technique would have saved Mike Tyson from going to jail in Indiana for rape.
If you are paying for the evening, take the cash you need, and put the rest and your jewelry in the hotel safe, and do it in front of the lady. You don’t need to be fed a drugged drink and wake up with no assets in the hotel room. By the way, always break out your money and credit cards into at least two, and probably three different locations when you travel.
Carry copies of your credit cards, and passport with you when going overseas. This will make it much easier if things are lost to get back to America via the American embassy in the country you are stuck in.
Along the same lines, I would maintain a copy of the entire contents of your wallet in your office or home. This includes copies of your passport and travel documents. If everything is lost or stolen, make sure this information packet back in the states is accessible to your wife or someone else that can then fax the necessary copies to your location or embassy.

Follow the guidelines and you will live to play another day. If however you think you are God walking around in a man’s body, than I will virtually guarantee you that you will find yourself in over your head. You will drown, and have no one else to blame but yourself. Good luck

No Comments »

July 30th, 2010

Where does Senator Kerry dock his boat?

: Senator Kerry Pay The Boat Tax or not

I love politicians because they are so predictable. They talk a great game meanwhile you know exactly what the real deal is. I remember not so many years ago when Senator John Kerry was broke. When he would return to Boston from Washington DC he would literally sleep on the floor of someone’s apartment because he could not afford a separate home from his Washington DC living quarters. To me this was admirable, and then he marries Teresa Heinz who inherits control of a $900 million fortune when her husband, Senator John Heinz dies in a terrible airplane accident.

A few years later, Senator Kerry marries Mrs. Heinz and its goodbye to sleeping on floors. He literally marries the $900 million dollar woman. It gets better. A couple of years goes by and former Governor Weld who inherited a fortune from his parents runs against Kerry during one of Kerry’s reelection attempts. In the debate it was said by one observer, “Both these men made their money the old fashion way, one married it, and the other inherited it.” How appropriate the remark was.

Well RichOnMoney.com noticed that Senator Kerry is back in the news today. The former floor sleeper has bought a $7 million dollar yacht and the question is where you dock it. If he docks it in Massachusetts, there is a one-time sales tax in the Senator’s home state amounting to $437,500 which isn’t chump change. There are also recurring annual excise taxes of about $70,000. If he keeps the boat in neighboring Rhode Island he avoids both taxes, because Rhode Island repealed both taxes in 1993. It looks like Rhode Island has become a tax haven for yacht owners.

Kerry would be within his rights to say Rhode Island is the natural home for the yacht because he has a summer home there on the island of Nantucket, although the 79 foot boat itself is being docked in Newport Rhode Island. If the good Senator takes the boat to Massachusetts at any time during the first six months of ownership he becomes liable for the taxes anyway.

Since this has now become public information, the man who wanted to raise everybody else’s taxes has announced that he will pay the taxes on the boat as though it were based in Massachusetts. Kerry said he was keeping the boat in Newport because of charter opportunities, and long-term service. We say SURE. Newport is a good distance from Boston where the Heinz’s, I mean the Kerry’s have a $12 million townhouse on Beacon Hill.

Remember, always teach your children to marry well. It saves a lifetime of aggravation, and when the love runs out, there’s always the money. As for the Kerry’s, we will have to discuss the airplanes and the helicopters next. So much for concern for the poor, and the underprivileged, as preached by the Democratic Senator from Massachusetts.

No Comments »

July 23rd, 2010

Obama & Geithner – Too young to get it done

: Obama Still Demonstrates Inexperience

I have always been a big fan of youth and giving young people a true chance to succeed and fail at doing things. I am also reminded of how long it took me to get good at managing money in the financial markets. How much could you learn from a book versus the real world? How much can one say for experience, and the importance of it, and then there is the issue of wisdom and what does it mean?

All of this came together as I was watching a one hour interview that Charlie Rose did with Secretary of the Treasury Timothy Geithner who is in his 40’s as is the President of the United States who is in his late 40’s. Wow the answer is as clear as a bell. Unless you have some gray hair , you really don’t know a dam thing. You haven’t lived life’s cycles. You know nothing about the mountains and the valleys that we must all go through and in fact nations must go through.

Do you really think you can know much about what it was like inside a concentration camp compared to somebody who lived the experience? We have a massive divorce rate in this country because people simply do not know what they are getting into. And as far as money management is concerned, unless you have been through bear markets, you are simply a disaster waiting to happen. You have no feel for the downside, for how low, low can be.

Watching the Secretary of the Treasury, I realized he is so far in over his head, that the problem is, he doesn’t know enough to know how much he doesn’t know. The same thing is true for Obama, a highly respected intellect with great charisma and political instincts, he does even have a n amateurs understanding of history because he hasn’t lived long enough or through the cycles, and for a nation this is dangerous. Probably 95% of the Senate was more competent than he was to lead, but leadership is no longer based on competency. Politics has turned into a Hollywood type game. The actor looks the part, feels the part, becomes the part, but he is still not the person he is portraying.

People like to throw at me Ronald Reagan, to which I say, he was Governor of California for 8 years, and that automatically made him qualified for just about anything. George W. Bush was in the same boat as Obama – incompetent. America has now had two in a row, and it shows. We are losing economic dominance of the world to Asia. We are a debtor nation as opposed to being a creditor nation. We are stuck in two wars Iraq, and Afghanistan without a creditable exit strategy. The Afghan war has been going on since 2001 at this point. It is sucking resources out of this country that should be used to ensure that America remains at the forefront of the world.

Today a poll was released showing that 18 to 29 year olds no longer favor Obama as President. I personally see such a missed opportunity for this leader. There are only a few precious things he should have done to get this country moving again. Three things really would do it, 1) education, 2) education, 3) education. You have to get this country ready for a new world. With unemployment hanging out at 10%, we should have gotten millions of these unemployed into community colleges while we paid them unemployment benefits. A country can never lose by educating its population. Instead, the wasted money on pork is just unthinkable. An $800 billion stimulus program that had very little to do with stimulus.

Am I optimistic about the future, you ask. I keep wondering why I pour more and more energy into gold stocks, all of which have worked out so far, and I think will probably go higher.

No Comments »