The Swiss Model of Excellence

This morning, I opened up FT.com and received a major shock after seeing the headline: "Obama looks to target overseas tax breaks." I immediately thought I was going to be affected, but thankfully, it's not the case. I'm under enough financial stress already and I really don't like what Obama's doing to the tax system - especially not the part about tax cuts expiring for the top income brackets. I'm far from being affected, but here's why we should all care.

Higher income should be what everyone aspires to. And if we allow the government to increase taxes and penalise people for aspiring to a better lifestyle today, what are they going to do next? Are people living in poverty because others are living in luxury? No! Moreover, if we cut the inefficiencies in the US government today, taxes wouldn't even have to be so high. Recall the article I posted here some while back citing the massive salary boosts US government employees received throughout the financial crisis. If Dubbaya did anything good for the US, it was lowering taxes. And that's possibly the only good thing he's done. Lower taxes are why I'm semi-Republican. Everyone should be Republican when it comes to taxes! In a socialist regime, the only direction taxes could head is higher.

But look at what the Swiss are doing. Apparently, the Swiss healthcare system is amongst the best in the world and their federal corporate tax rates are only 8.5%. I have to say the Swiss should be lauded as models of excellence - at least when it comes to taxes. But that's almost a given since their watches are so fantastic.

Retirement & IRAs...

Ever since I officially got Age 30 stamped on my forehead, I've been feeling a lot more pressure with regard to establishing and developing my financial security. Considering that I'd like to go for the Early Retirement option as well, I now have at least 70 years of financial responsibility on my shoulders due to the need to reverse 30 years of fiscal irresponsibility as well as 40 years of retirement income to be built up. That's a lot to achieve in a very short amount of time.

Whilst I look forward to the day that I will no longer be able to contribute to my Roth IRA as that would mean that my salary has skyrocketed, I am still taking every advantage of it whilst the option is still available to me. And why shouldn't I? It's obviously got a lot of perks.

Looking back, I've committed some IRA mistakes I wish I hadn't made, including:

1. starting too late. I was only able to contribute to tax years 2007, 2008, and 2009 so far. I should have done it sooner.
2. imperfect asset allocation. In hindsight, I should have allocated more Roth IRA funds to low beta / high dividend stocks. Additionally, I should have placed some of my bond purchases in my Roth IRA rather than my regular brokerage account. In the future, when I perfect my forex trading strategy, I might also consider allocating a good amount of capital to a Roth IRA forex account.
3. not trading enough. I am a firm believer that the buy and hold strategy should not be applicable to an IRA account. Even with a low beta / high dividend strategy, I believe there are times when it makes total sense to rebalance the portfolio by cashing in on some investments and waiting for another buy opportunity.
4. not including CDs, Municipal Bonds, and Treasuries in my asset allocation. Though the yields are usually lower on CDs, Municipal Bonds, and Treasuries, due to the tax benefits, these asset classes could make a lot of sense in a Roth IRA at certain points in time. However, current fixed income yields at this point aren't at the irresistible levels they once were earlier on in the year. We're now looking at less than 7% yields on long term bonds, which to me isn't sufficient ROI - especially on corporate bonds, considering the higher default risks.
5. placing a junk bond in a Roth IRA. When I first started out in junk bond investing, I thought I did the right thing by placing Ambac bonds in my Roth IRA. Whilst I was able to collect some tax-free interest on this bond, due to Ambac's failure to pay interest on this bond issue, the cash is now not only idle, but I wouldn't be able to write it off as a loss and take a tax deduction on it. This is because it is much more difficult to take tax deductions on IRA accounts.

It might be wishful thinking, but I wish the government would get rid of social security for Gen X & Y and just enable us to contribute unlimited amounts of money to our Roth IRAs.

More Socialist Action: Obama Proposes Higher Taxes for Rich

I've never been politically correct and I'm sorry to say, but the Obama health plan has got to be the worst move ever. I do not oppose compassion, but I do oppose unfair taxation. I definitely am not in favour of further progressive taxation. Gen X & Y will be paying for this for years to come. The new system will turn out to be the Fannie and Freddie of health care.

I am not a millionaire and it'll take me time to get there, but imagine spending all this time building up your asset base only to have it eroded by the government with some unfair tax legislation after all your hard work. Democrat or Republican, it's just plain wrong. It is legalised larceny!

Why does the government need to stick its nose in everything? Get out of Iraq and we won't need to raise taxes on anyone.

Taxation has gotten out of hand when you take into consideration taxes at the Federal, State, and City levels. What is all this money being spent on? Cumulatively, the US tax rate will probably be about 50%, which is similar to the socialist nations in Europe. Anyone with a little bit of intelligence can see that if the US government reduces income taxes, the savings from this reduction in income taxes could be used to pay for healthcare by the individual. So, why do we need to increase taxes on anyone at all?

We need to reform causes for the high premiums and not put a bandaid on a broken ankle!

Fraud is ever-present in the insurance industry...

RNC Chairman thinks Obama is a socialist too... And I'm only semi-Republican

Obama Is Seriously Such A Socialist!

Sorry to say, but as a born-again semi-Republican (that's Republican - not Reptilian), Obama's efforts to get rid of LIFO accounting is not exactly appealing.

And apparently, he's doing it to finance National Healthcare Reform. Healthcare is certainly important. At the same time, I don't necessarily agree with nationalising healthcare. I just don't believe in the government interfering so much in our daily lives. Why can't people just take care of themselves and buy their own health insurance? If they can afford two cars and two TVs, why can't they afford health insurance? It's really a matter of prioritising.

I feel the whole Anti-LIFO concept is a bit penny wise, pound foolish. Anti-LIFO is definitely anti small business. So many small businesses will be adversely affected by an Anti-LIFO policy, and many will simply not survive. A wave of small business bankruptcies and more unemployment would definitely slow down the economic recovery. We cannot afford to let this happen.

I just bought a copy of FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. I seriously need to start reading it. And so does Obama.

Job 25% Done: Post-Election Ponderings

Everyone seems so energised that Obama won the US Presidential Election and subsequently made his 'Yes, we can' victory speech. It didn't resonate so much with me, although I did cry - probably more because I've become so cynical of politicians than because I feel this one is actually going to change America.

Being a glass-half-empty kind of person, I'm thinking the job is only 25% done at best. He still needs to prove himself in the White House and shake off the impression that he's a socialist, which doesn't score very high points in my dictionary or most Americans' dictionaries. I'm still waiting for Obama to appoint Hillary as Secretary of State or to oust Treasury Secretary Paulson (regardless, Paulson's ousted himself).

Most of all, I'm hoping that the Republicans in Congress will be able to prevent Obama and the Democrats from raising taxes as he's planned.

This campaign has made me realise how ridiculous the US progressive tax system is. There are people who fit into lower income tax brackets that can actually have a higher net income after taxes than a person in a higher tax bracket. Meanwhile, people with lower incomes are 'entitled' to a whole array of government benefits. The 10% tax credit for homeowners that Obama has proposed is just boiling my blood. It has increasingly become clear to me that today's financial crisis in large part is a repercussion of lenient government policies established during the Great Depression.

The US government does not tax all of its citizens equally. Someone who is supposedly making a lot of money according to the US government ends up paying almost double the amount in taxes than a person who makes a very small amount of money. We are penalised for wanting to make more money and the US tax policy as it stands actually equalises net income. If you don't believe this, check out the following analysis I did, which shows the net income after federal tax deductions for some income levels in the higher income brackets to be less than net income after federal tax deductions for some income levels in the lower income brackets.

If John McCain said one thing right - it's that these are tough times, let's not raise taxes on anybody.

And if Obama's going to cut taxes, everyone should get a tax break. He's clearly favouring people in lower income tax brackets at the expense of the people in the higher income tax brackets. And this is really, really unfair.The Republicans have recently become like the short-sellers. Everyone wants to pick on them. However, as unpopular as the Republicans are, they are necessary in our political arena because they provide an order of checks and balances.

The Fair Weather Friends on Capitol Hill

The Fair Weather Friends On Capitol Hill

Public sentiment has clearly turned against Wall Street during the painful escalation of the global financial crisis. As government officials across the world pointed fingers at the “Wall Street Fat Cat Predatory Lenders” who were purportedly the cause of this unprecedented financial system meltdown that is threatening to give the Great Depression a run for its money (no pun intended), the golden-parachuting CEOs on Wall Street that collect million dollar paintings and own more houses than John McCain have been under increasing scrutiny.

However, why have we failed to scrutinise the Fair Weather Friends on Capitol Hill and across the globe when they were the first ones to encourage subprime lending and the first ones to run the other direction as things showed imminent signs of collapse? Why have we failed to place at least some of the blame on the ones who actually took out those subprime mortgages and are now opting for bankruptcies that further undermine our entire economy?

When Lehman Brothers and WaMu were on the brink of bankruptcy, why did the US government single these two institutions out to fail when every other failing and flailing company was ‘rescued’? The US government needed a scapegoat and unfortunately, Lehman and WaMu became those scapegoats. There is no doubt in my mind that the bankruptcies of these two companies could have been avoided. However, the Federal Reserve and the US Treasury were amongst the first to panic by failing to provide additional liquidity to the markets. If the Federal Reserve had increased Lehman and WaMu’s liquidity levels, then Lehman and WaMu would not have opted for bankruptcy. People across the world wouldn’t be blaming the US for dragging them through mud.

But most importantly, if the ones who had actually taken out subprime mortgages had made on-time payments in the first place, then we wouldn’t even be in the middle of this crisis now. This article from the International Herald Tribune gives a good overview of the root cause of the subprime housing crisis. The government officials and lobbyists that were fuelling the subprime housing bubble benefitted financially from the whole ordeal as well. They should step up to the plate and own their responsibility in the catastrophe.

For the past few years, we have been building our economy on a shaky foundation. We have been fighting a multi-trillion dollar war that we should not have gotten into in the first place. We have neglected to invest in our infrastructure and are falling behind in the global economy. The US government is becoming increasingly corrupt and increasingly socialist. Almost every law that is passed entails pork barrel politics. The most appalling example: the $700 billion TARP bailout plan that couldn’t be enacted without serving up an array of bacon and ham on the side.

We are labelling people on Wall Street ‘Fat Cat Predatory Lenders’ and lauding the equally irresponsible people who took out subprime mortgages – the ones who are now opting for bankruptcy just because their property isn’t worth as much as it used to be – as ‘victims of greed.’ Meanwhile, the government that ignited this fire is ‘rescuing’ Wall Street. Where is the justice in this?

It’s time for our government to step up to responsibility or forever be known as the Fair Weather Friends On Capitol Hill.

And some of the ways they can do this:

1. Invest in our country’s future. We have become so caught up with policing the world that we are neglecting our own country. We need to pump money into improving our infrastructure, and this includes education, roadwork, and alternative energy. And with particular regard to education, we should definitely include compulsory financial management courses as part of the core curriculum in our schools. Investing in the education of our children is the only way to bridge the growing income gap in America.
2. Politicians have been arguing about healthcare for such a long time. The focus of the debate has been on insurance companies and the increasing premiums that people need to pay. I think the real problem is the cost of healthcare itself and not necessarily the insurance companies. If we nationalise the burden of healthcare, I am positive that the US government will go into further deficit. Therefore, the solution must come from the private sector.
3. Pay off the national debt. Unfortunately, debt has become a way of life for many Americans, myself included. However, it is time we clean up the slate the old-fashioned way – with dignity, with hard work, and with time.
4. Get rid of social security. Every individual should be taking their own financial responsibility. We have opted to live in a society where individual liberty is the most important value and the foundation stone of our community. Why do we even foster a socialist notion like social security? The American people have entrusted their future to the US government, but based on the way that things are moving, I am quite certain that the US government may have to do away with social security in the near future and I am in favour of getting rid of social security sooner rather than later. Just imagine. We are paying so much in social security taxes today. If the US government comes back to us thirty years from now just as we are reaching retirement age and says that they will no longer be able to pay us social security, we would have been ripped off big time. I would rather they refund our social security taxes and allow us to save for retirement on our own. Social security isn’t even inflation adjusted.
5. Deregulation has been labelled as one of the key reasons for the global credit crunch. However, if we are to leave regulation to the Fair Weather Friends on Capitol Hill, just how will things be different? Do we really think that our government is equipped to handle the challenges of the 21st century when they have already failed us so much by leaving us a multi-trillion dollar deficit? They will just create even more catastrophe if we give them the power to regulate the markets some more. Moreover, deregulation was not the cause of the problem. Government meddling was. All of today’s problems could be traced back to the Great Depression, when the US government first started meddling with the free market. Fannie Mae, Freddie Mac, and the social security system are all vestiges of the Great Depression. They are all elements that are weighing our economy down today.


Let’s establish a new long term vision for the US – one that will not leave the next generation bankrupt; one that will create new opportunities for people who never had any – not by handing out money, but by encouraging them to take responsibility and action for their own future.