James Davidson

Editor,

Abundance

Predatory Trading Formula Preys on Falling Stocks for 170 Winning Trades!

While most people are being decimated by the ongoing market collapse, a small group of smart folks are turning the market plunge into big gains of 224%… 279%… 214%… 291%… and more!

Here’s how to turn the market crisis into your personal profit machine. First come, first served… so reserve your space now…

Your Increasing Tax Burden and How to Avoid It

Point number one is that Obama has confirmed he will take rapid action to cut taxes for 95% of Americans. At first blush, cutting taxes for 95% sounds like a grand idea. However, look closer. The top 5% of income earners already pay 60% of all income tax, up from the top 36.64% in 1980. The corollary to Obama’s tax reduction, which will go mainly to people who don’t pay income taxes, is that a large increase is scheduled for the high earners.

A hint of the magnitude of the coming burden was offered by T he Washington Post on January 2, when it published its assessment of the cost of the bailout as already announced.

According to Post, if equally apportioned over the 139 million tax returns filed last year, the toll of the bailout would be $61,871 per taxpayer. But taxes are manifestly not apportioned equally. Even before Obama’s tax hikes take effect, 60% of the tax burden falls on 5% of earners –roughly speaking, those who earn $250,000 or more annually.

If you are one of them, your share of the bailout cost will be about $750,000. Pencil that into your balance sheet.

If you have substantial assets, you undoubtedly took your share of losses from the estimated $32 trillion trimmed from stock markets last year. (Stocks worldwide lost 48% of their value.) Trillions more were lost in real estate, bonds and commodities. But it is very possible, especially if your portfolio was well positioned, that you will lose more from bearing your lopsided share of the almost $9 trillion bailout burden than from your investments.

What does this mean? As I see it, you basically face a choice of three broad strategic options.

Strategic Option # 1 : You stay the course, taking your marching orders from the lyrics of the great hit song of 1932.

They used to tell me I was building a dream

I was always there, right on the job .

Like the everyman hero of Brother, Can You Spare a Dime ? , you can “follow the mob” and do whatever you are expected to do – even if that means paying for everyone else’s mistakes. But remember, the result won’t be much better than that described in other lines from this song of the Great Depression:

They used to tell me I was building a dream

Why should I be standing in line, just waiting for bread?

That may sound dire, or exaggerated. But, then again, it may not be.

Strategic Option #2 : Run for the hills. This allows you to put British economist David Ricardo’s “Equivalence Theorem” into practice. Ricardo wrote that investors could see through government fiscal policies, pick them apart if you will, and take individual steps to minimize their costs. One thing Ricardo did not emphasize, however, is that you can simply get out of a country where politicians intend to impose high, disproportionate costs on you.

Whether the government raises your taxes this year or next year, on current evidence it is clear that the view of the Democratic Party is that one person out of twenty should bear more than 60% of the costs of running the government. These costs have manifestly escalated by trillions over the past six months, and they seem likely to rise even higher as the economic downturn deepens.

You probably need to earn millions of dollars over the next decade or two to sustain your lifestyle and provide for your retirement. The question is whether you can best do this in the U.S. or elsewhere.

Even if the U.S. is still the best place to invest money to earn a high return, you may be better off making those investments from another country, one where you will be able to keep more of the money you earn.

An irony of last year’s financial debacle is that before the full measure of the wipeout was evident Congress passed a law designed to add a few feet of financial barbed wire to what The Economist describes as “America’s Berlin Wall” (June 12, 2008, p. 89). The glorious sounding Heroes Earnings Assistance and Relief Tax Act imposed new penalties on Americans seeking to escape U.S. citizenship.

As The Economist reported, “That expats want to leave at all is evidence of America’s odd tax system. Along with citizens of North Korea … Americans are taxed based on their citizenship, rather than where they live. So they usually pay twice – to their host country and the Internal Revenue Service. As this makes citizenship less palatable, Congress has erected large barriers to stop them jumping ship. In 1996, it forced people who renounced citizenship to continue paying income taxes for an extra ten years.”

The new law, which the government meant to be more draconian than previous legislation, actually allows for a cleaner break. It establishes a one-time exit tax based on capital gains realizations on worldwide assets. Under the law, any high-income American who relinquishes citizenship must act as if he had sold all his worldwide assets on departure. If the unrealized capital gains taxes on these assets exceed $600,000, you must pay your capital gains tax to make good your escape.

When the government conceived and passed the law in the first half of 2008, the Wipeout of 2008 had not made its way into the consciousness of the Congress. The Congressional Budget Office even calculated that the federal government would net an extra $285 million in exit tax payments over five years. But the collapse in value of almost every category of asset over the second half of 2008 renders the exit tax much less punishing than it was conceived to be.

Indeed, as The Economist observed, “But even as the law tries to prevent people from renouncing their citizenship, it may have the opposite effect. Under the new structure, it would make financial sense for any young American working overseas with a promising career to renounce his citizenship as early as possible, before his assets accumulate. For everyone else, plunging stock and property prices mean now may be as good a time as any to hand back the passport, says Kurt Rademacher, a partner at Withers, a global tax-planning firm.” We explore these issues more fully in Crisis Strategy Alert .

Strategic Option # 3 Whether you decide to stay or go, you have a lot of work ahead of you to recapture losses and recover from the costs of the bailout. Whatever your previous thoughts about retirement, it is fair to assume that necessity will keep you hard at work until you’re the age of Raul Castro or older. If you are a baby boomer, as I am, you face a grueling physical test of your stamina. The next two decades will not be a time when you can allow yourself to lie back and become feeble.

The challenges ahead have hardly been conveniently timed. The financial crash and deepening downturn that threaten the deepest depression since the 1930s may be a prelude to a fall in living standards dictated by demographics.

Rapidly aging populations in most of the wealthy countries, combined with burgeoning retired populations dependent on “pay-as-you-go” transfer programs, are a recipe for falling living standards. Unless productivity increases faster than workforces decline, simple economic arithmetic dictates that living standards must fall. In Western Europe and Japan, more than half of all adults will be older than the official retirement by2020. Many countries, including Italy and Spain, will have more residents in their 70s than their 20s.

In a time like that, you don’t want to be one of the frail elderly. Old-age benefit systems and government health care programs of most of the developed countries will be stretched to the ragged margins of bankruptcy. If you depend on them, you are likely to be disappointed. So what can you do? The answer is relatively simple, if unwelcome.

The Easy Way to Extend Your Vitality

If you can extend your vitality, and evidence suggests you can, now is the time to take steps to do so. Specifically, I recommend taking time to exercise, as well as using a few anti-aging supplements that have strong research support.

First, let’s look at exercise. I have been an avid exercise devotee for all my adult life. After competing on the cross-country team at Oxford, I continued a habit of outdoor running, daily body weight calisthenics and resistance training.

I also cultivated a serious study of exercise physiology. Much the way that some people collect baseball cards or football memorabilia as a hobby, I sought out information about the most effective techniques for exercise. For some years, I have read journals such as Peak Performance and Medicine & Science in Sports & Exercise to indulge my curiosity and learn. As time passed, I was surprised to find that many of the commonplace training techniques I formerly employed were probably suboptimal.

Here’s what I learned that could be of interest to you.

Beginning in the mid to late 1990s, researchers began to more fully explore High-Intensity Intermittent Exercise (HIIE) as a training alternative to prolonged medium- or low-intensity sessions of what is commonly, and misleadingly, known as “cardio” training.

In perhaps the most important finding in the modern history of exercise physiology, Izumi Tabata and colleagues at the Japan’s National Institute of Fitness and Sports showed that HIIE training may improve V̇O2max (the maximum capacity of an individual’s body to transport and utilize oxygen) by as much as, or more than, moderate intensity continuous-exercise training.

Tabata’s interval-exercise training protocols involved very short duration efforts (20 to 30 seconds) at extremely high intensities (170% to 200% of the work rate eliciting V̇O2max). In a total of four minutes a day, athletes undertaking Tabata protocol showed decisively better fitness results than those doing prolonged aerobic exercise for an hour daily at 70% of their V̇O2max.1

Other studies have shown that HIIE results in the positive changes in red cell volume typically associated with endurance training.

Meanwhile, a Canadian study 2 showed that subjects who did HIIE for four minutes a day for six weeks lost nine times more body fat than a control group that did prolonged cardio an hour a day for eight weeks.

So a fair summary of recent authoritative research is that you can achieve significant health benefits of exercise in a very short time period. Obviously, it is easier to find four minutes a day for HIIE than it is to find an hour or two for continuous-exercise training.

I have used the Tabata protocol (20 seconds of exertion, followed by ten seconds of rest, repeated eight times for a total of four minutes per set) with excellent results. I also frequently do multi-joint resistance exercises, such as heavy squats or Tee Push Ups with dumbbells in a Tabata format.

I have found that I can bring my pulse rate into the 180’s at the age of 61, which is up to 25 beats per minute higher than my predicted maximum pulse. Note that this is a measure of cardiopulmonary intensity and fitness. The predicted maximum pulse is only a forecast, not a speed limit. The higher you bring your pulse, the more intense the exercise and the greater the training benefits you gain. I target 115% of my predicted maximum pulse in my exercise sessions.

I have enjoyed the benefits of maintaining a high level of fitness throughout my life. As a result, I can exercise today at a higher level of intensity than I would have been able to manage had I begun yesterday. That said, much of the fitness advice dispensed at the level of popular culture is wrong.

For example, I lifted the following bogus advice, which is not unlike the advice you might hear from the trainer in a local gym, from a public source on exercise intensity: “You gain the most benefits and lessen the risks when you exercise in your target heart rate zone. Usually this is when your exercise heart rate (pulse) is 60% to 80% of your maximum heart rate … Do not exercise above 85% of your maximum heart rate. This increases both cardiovascular and orthopedic risk and does not add any extra benefit.”

Malarkey.

Unless you are already in ill health, this is gravely misleading advice. In fact, there is growing evidence that prolonged exercise of the type typically recommended by trainers and ill-informed doctors results in a transient or even persistent depression of cardiac function.

Not so with HIIE; if it doesn’t kill you on the spot, it will strengthen your heart and make you healthier all over.

The “Holy Grail” of Anti-Aging

One of the most promising aspects of HIIE in extending vitality that exercising at higher intensities literally keeps you younger. A study of 2,401 British twins published in the Archives of Internal Medicine shows that the DNA of individuals who exercised more intensely than their twin did appeared to be as much a decade younger. This even though they were born at the same time with identical or similar genetic make-up (some of the twins were fraternal).

The study’s authors, led by Lynn Cherkas, an epidemiologist at King’s College London, examined just the ends of DNA strands. Called telomeres, these act something like the plastic caps on shoelaces, preventing the DNA in chromosomes from unraveling.

Previous research has shown that older people have shorter ends than younger folks do. Indeed, biologists say the caps shrink every time a cell divides. But not everyone’s DNA ages at the same rate. What Cherkas found most compelling were the results of her comparison of 67 pairs of twins in which one exercised much more than the other. Among those, the exercising twin had longer telomeres than his or her more sedentary counterpart.

Evidence that intense exercise extends the length of telomeres is as close as anyone has ever come to the “Holy Grail” of anti-aging.

Since you’re facing the prospect of slaving away for decades to recover from the Wipeout of 2008 and pay-off the costs of trillions of dollars in bailouts, you might want to devote a few minutes a day to HIIE, which may help keep you younger and healthier. (Check with your doctor to determine the proper pathway for you to begin a HIIE program.)

I recommend as part of your commitment to your health that you buy a sophisticated heart monitor to keep an eye on the progress of your exercise program. I use the Suunto t6. It calculates numerous physiological functions such as excess post-exercise oxygen consumption. You normally need gas exchange monitoring in an exercise laboratory to measure this.

The Suunto t6 is probably the most sophisticated device on the market. But be warned that the instructions for programming it are appalling and customer service is a trying if you need a repair.

Try This “Red Wine” Lift

While you’re at, you may also want to supplement with nutraceuticals, which have shown promise in maintaining vitality. Among the most promising is the anti-oxidant Resveratrol, which is prevalent in red wine.

Recent studies have shown that adding Resveratrol to the diet of yeast, fruit flies, worms and a species of fish increased their life spans up to 70%, 29%, 24%, & 50% respectively.

Resveratrol also caused fat related deaths drop 31% in obese mice. And the obese mice that were fed Resveratrol performed much better in movement and agility tests than obese mice not fed Resveratrol. Studies also show that mice fed Resveratrol had 100% more endurance than mice not fed Resveratrol (i.e., they were able to run twice as far on a treadmill). This could come in handy if you will still be working when you’re in your 80s.

Also of interest is a study published in Proceedings of the National Academy of Sciences that describes the powerful synergistic abilities of alpha lipoic acid and acetyl-l-carnitine to significantly combat aging. Together, these two nutrients have been shown to help combat diabetes, maintain proper cognitive function, support heart and liver health, support energy production, protect the body from radiation and chemical toxins and maintain immunity.

In addition to normal vitamins such as B, C and D, you can also benefit by including high potency doses of Ubiquinol, the active antioxidant form of Coenzyme Q10 in your diet.

Ubiquinol has been proven to have significant health-enhancing effects. For example, patients suffering from advanced congestive heart failure showed significantly improved heart function after supplementing with Ubiquinol for just three months. And cardiologist Peter Langsjoen found that critically ill patients who supplemented with Ubiquinol experienced a 24% to 50% increase in their hearts’ ability to pump blood.

Try it. You’ll want a strong heart to perserve and achieve Abundance in the years to come.

Crisis Updates

The Death of the Dollar?… Trillion Dollar Deficits for Years… GM’s Delusions of Grandeur…

** The dollars down, but it’s certainly not out.

• From mid-July to the end of November, the U.S. Dollar Index rose a whopping 23%. This tracks the value of a dollar against six major currencies.
• Anyone who knows anything about currency trading knows it’s not normal for a currency to move 23% in such a short time. Forex traders consider a one percent daily move to be big news.
• So it would make sense that the U.S. Dollar Index would have to see a rapid price decline after rising 23% so quickly. It has to go back to the mean, after all. And that’s exactly what happened. The dollar fell 11% between mid-November and mid-December.
• But this drop doesn’t necessarily signal the beginning of a new downtrend. As of now, it only signals a correction. We can see this by looking at a chart below.

• As long as the dollar stays above its 200-day moving average, the recent uptrend will stick. But that’s not to say we won’t see dollar weakness ahead.
• It’s possible for the dollar index to trade between 78 and 88 for the next two or three years. It could even move past 88. But betting that it will move under 78 is premature. If you really want to capitalize on a drop in the dollar, wait for a confirmation of the downtrend by allowing the U.S. Dollar Index to trade under 78 before shorting.
• At that point, you could make some good money buying up the Rydex Weakening Dollar 2x Strategy H ETF (MUTF:RYWBX) . For every one percent the dollar losses, you gain two percent. And with Bernanke dropping money from helicopters, it is only a matter of time before the dollar starts seeing bigger drops.

** The Congressional Budget Office estimates that the 2009 budget deficit will reach $1.2 trillion.

• That was one day after President-elect Obama said, “Potentially we’ve got trillion-dollar deficits for years to come, even with the economic recovery that we are working on at this point.”
• The government has already backstopped the financial markets to the tune of over $8 trillion. Now our politicians are starting to spend obscene amounts of money in a failed effort to “jump start” our economy.
• If the markets continue to suffer, the government will have to cover losses for years in the future. This means they will continue to create funny money to cover those losses. And inflation should become a big concern.

** According to Bloomberg, General Motors said it has enough government loans to cover its worst-case forecast for U.S. auto sales and won’t need more if the economy holds up.

• It’s extremely difficult to believe that a one-time loan to GM would be enough to fix their problems. A former Merrill Lynch auto analyst has said that GM’s plan “all depends on a lot of difficult-to-forecast factors, like the size of the market.” And during congressional testimony, another analyst said Detroit would need up to $125 billion to become whole again. This is very different from the less than $20 billion that GM and Chrysler got from the government in December.
• The truth is that GM is taking a big fat guess on the amount of taxpayers’ money it needs to stay afloat. And to make matters worse, it seems GM’s management is far too detached from reality to make a good business decision.
• Considering GM’s current predicament, why would anyone believe GM to be right about its super-ambitious forecast? Don’t believe a word of it. GM will ask the government for more money this year… more losses will force the government to create more money… and the politicians leading us will be “forced” to spend more to try and “buffer” a recession in vain. Buy gold .

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