CheetahhhhhhhBlog Mark III

There is tax avoidance, and then there is tax evasion. The 1st is legal and the only intelligent thing to do. The 2nd is illegal. The difference is the width of the prison bars. The 1st is legally minimizing your taxes as much as possible. The second is not reporting to the IRS properly, or some variety of fraud.

Per my discussion in the previous post, I would say tax evasion is foolish, given there is apparently no statute of limitations on tax matters, and given the resources available to the IRS.

What I’ve been studying for a while now is tax avoidance. Now, per my post below, the easiest solution is to stay abroad, where, if you don’t return to the States for more than 30 days per year, you are not taxed on the first $87,000 of your income. This figure includes perks like company-provided housing, air tickets, etc, such as are typical of expat employment. To be even more specific, the easiest solution for tax avoidance is to stay abroad in a tax-free country, such as Monaco or Panama or Uraguay or Liechtenstein. Or the Emirates.

The problem with the States is they tax worldwide income, which is ridiculous and pisses me off. Almost every other country in the world only taxes locally-generated income.

The other problem with the States is, if you get on the IRS’s bad side, they have the power to freeze your accounts. Which is why I would say it’s safer to keep your money offshore.

Incidentally the things I’m saying here are not news to the American rich. These are the things rich AMericans have been doing for a long time. Indeed, the American tax code implicitly states that while a person cannot take large amounts of money offshore, a corporation can. This encourages the formation of family trusts, etc, to move money offshore.

In America we inherited two systems of law from the English. We call it civil law and criminal law. Originally under the English, this was a system of law where nobles and commoners were bound by different laws. America is a plutocracy and so in America, this system has mutated into two separate law systems, one for the rich, and one for the poor. For example, it is well known that in America, a rich person doesn’t go to prison. He gets off (eg OJ Simpson) or he goes to a white collar jail with tennis courts.

Now in regard to taxes, it is implicit in the American tax code that the poor will be sucked dry, while the rich will move their assets offshore. Rockefeller, or somebody, I forget the exact quote, said “Only the poor pay taxes.” This is the paradox of the American plutocracy.

Now I’m not rich, but I can recognize when the game is rigged. To quote The Wire, “The game is rigged. But you can’t lose if you don’t play.”

So in sum the easiest method of tax avoidance is to live in a tax haven such as Monaco. In essence, this means you’re not playing the American plutocratic game. And you can’t lose if you don’t play.

The fact that the USA has declared war on tax havens is disturbing to me, because I have lived in a tax haven or in a tax-haven-legal-status (Korea) for the last 7 years. Now it so happens that I’m starting to approach Uncle Sam’s tax cap for expats, ie, I’m starting to approach the point where I have to pay Uncle Sam some cash on April 4. I’ve spent most of the summer studying ways to get around this while not running afoul of the IRS. My reason for such a major expenditure of time is saving 30% of my income, which is a lot of scratch. And actually I plan to return to the States some time soon, so this matter becomes more urgent.

First of all, mom, no talk about paying taxes to help build schools, or whatever, it’s all nonsense and I don’t buy it. I will not get into a philisophical debate about taxes except to say that any intelligent person will minimize them to the greatest extent possible.

I have thusfar arrived at a few scenarios:

1. Continue living abroad,

2. Live in London where there is a flat tax for expats, though this is only useful if you’re really rich, it will be of no benefit to me,

3. Live in Monaco or a similar place with no tax,

4. Form a Delaware corporation which is taxed at 15%, maintain this tax bracket by deducting salary and medical expenses & etc from the corporate overhead,

5. Form an offshore corporation (Nevis and Panama stand out in this regard) for the same purposes as #4 except here there is better asset protection; ie, form an offshore corporation but report its income to the IRS.

Now with #5, you may say, doesn’t reporting income to the IRS defeat the entire purpose of having an offshore corporation? Well no, the purpose of the offshore corporation is to prevent the IRS from getting their grubby mits on your money if, for some reason, they decide they want to. Which occasionally they do. I would report your income because it would be wise to presume that if the IRS should take an interest in you (God forbid) they could find out whatever they need to know. Perhaps you can be clever enough to avoid leaving a trail, but for me, I don’t have a PhD in accounting and frankly have better things to spend my time worrying about, so I say it’s safer to presume the IRS can track you. For example, the IRS tracks the use of foreign credit cards and ATM cards. Believe it or not. Indeed it is things precisely like this, the fact that I have foreign credit cards and bank accounts, which is precisely why it’s wise for me to presume they IRS may take an interest in me. Anyway there is, last of all, another option:

6. Say “Frack you” to the IRS and just never return to US soil.

This option is not an option for me. I really like a few places in the States, such as Napa and Carmel for example. It is, however, the best ultimate solution if you really don’t want to pay taxes.

I would settle for #4 or #5. Uncle Sam will get 15% but it’s less than he’d get otherwise.

My studies into this matter are ongoing, I might have more to say later.

The massive surge on the stock market yesterday is an example of how all intelligent and diligent technical analysis has been thrown out with the baby and the bathwater. It is actually almost impossible to make diligent investing decisions any more.

In the period of 10 days, the RUssel has surged from 470 to 546. Now of course, if I would have known this would happen, I would have simply bought some futures. As it is, I was patiently nibbling away at the stock market with options spreads, such as is my general want for reasons of safety. The problem is when the market surges so quickly (a statistical improbability, mind you), it makes pure havoc for options spreads. It’s pissing me off. Seriously. Yesterday I was so disgusted with the situation, I could barely force myself to care. I just wanted to sell so I wouldn’t have to look at the frakkin screen any more. I hope the rest of you are more content with the situation.

I would say the market looks set to do a correction. I wouldn’t buy now, I’d wait for the first bounce. That’s when you mortgage the farm.

So Van will check into Welcare hospital in Dubai, and birth will be induced on the 29th, if she doesn’t give birth before then. She had labor induced last time with Little Chris. We are excited and relieved. Van has spent the morning playing with the baby clothes.

Gloria tells us that Cale is popular in Capoocan because he went to the beach in front of Uncle Ibong’s house and said hi to everybody, and he played with some kids, and he bought something at Uncle Ibong’s store. So the town has fond memories of Cale even until now. I said yeah, the thing with Cale is he’s friendly to everybody.

Some people ask, why the Cheetahhhhhhhh? Well like the cheetah, I am the fastest land animal on earth, I have no need to drink water, and I can change direction in mid-stride because of a flexible spine. I also enjoy lurking in the bush, pouncing on gazelles, and killing them with a sharp bite to the neck. Additionally, while I am not as big as a lion or a tiger, I’m a lot faster than them and have much more endurance, so they can’t get me no matter how they try.
The 7 h’s are because cheetah, cheetahh, cheetahhh, cheetahhhh, cheetahhhhh, and cheetahhhhhh were all taken on Yahoo.

My opinion has changed, I’m now conservatively bullish. This is because of the massive upsurge last week. In particular, the NDX has eclipsed its previous highs, and the NDX is typically a leader.

You will recall I was predicting a decline to the SPX 810. This was because of the head-and-shoulders chart pattern. Now, because of the big surge last week, we actually have a reverse head-and-shoulders chart pattern.

The big move last week caught me off guard and cost me $400, which pissed me off. Actually it would have cost me a lot less if I had had internet access, but we were in Dubai getting my mother-in-law. I knew the market was moving because I was watching it on my iPhone, and I was running around with my laptop trying to find a wifi hotspot. By the time I actually found one, I was out 400 bucks and seriously pissed off. $400 is a big loss for  me. I don’t typically lose money because of the heavily hedged nature of my trading. I’ll lose $20 here or $20 there, mostly in the cost of trade commissions. So yeah losing $400 is big mojo for the Cheetahhhhhhhh and I’m still pissed off if I think about it.

So anyway because of a variety of factors, my position has changed. One of the factors is the good earning reports that are coming in.

I would predict a small rally through, say, Sept. Then I would anticipate the seasonal pattern of a drop. The stock market typically bottoms right around Haloween. Smart traders just stay out during October and then buy early in Nov to catch the Christmas rally.

I’m not terribly confident in this current rally. The problem is that because of massive government intervention, technical analysis has basically been thrown out the window, and making investing decisions with due diligence and intelligent technical reasoning has been impossible for over a year now.

One thing I will say is this. The current rally, which started in March, has surpassed anybody’s expectations and has shown gumption that nobody could ever have expected. So in a way I’m not surprised by last week’s surge and perhaps the market has more gumption for us.

As always I could be completely wrong about everything I say here.

We have a full house. Vanessa’s mom, Gloria, is here, and Aunty Nene stayed with us for four days. We have a big apartment so we could actually have more fairly comfortably, actually. Especially if they’re Filipino since Filipinos don’t mind crowded conditions. For an American, ie used to lots of personal space, I’d say we’re close to max capacity.

Anyway Nene is all baby crazy because of her new boyfriend, and so she spent 4 days playing with Bug. Van and I were quite thankful for this. Right now he is looking for somebody to play with and I have to tell him no, poor boy, otherwise no blogging will get done (like my mom who hasn’t blogged since May 21st).

Gloria thinks the Emirates are pretty, which is a surprising reaction to me, but I suppose it does have its own beauty if you look at it a certain way. I am fairly conditioned to view old European style as beautiful. For example, Tuscany. That’s pretty emblematic of “beautiful” for the Cheetahhhhhhh. But anyway Gloria seems to like it here.

We went to the Mall of the Emirates today, mainly because they have the biggest toy store we know of, and Bug has been hassling us endlessly about getting Peter Sam, the green narrow-gauge train from the Thomas the Train series. He’s got about 30 trains already incidentally. Well we lucked out and found Peter Sam.

Last week I decided I was looking a but ratty. I used to be a fashion horse, so I’m not sure what happened. I suppose I became a family man and found other things to worry about. Anyway I decided my wardrobe needs updating. This is especially the case in Dubai, where people are a but flashy. So I have been looking for fashion inspiration. I don’t read GQ any more or pay attention to what famous people are doing any more, so I’m not sure what’s cool, and I’m not really sure I’m willing to invest the effort into finding out. Nevertheless I did find some fashion inspiration at Ralph Lauren, and at Tommy Bahama. Ermeniglio Zegna, my old standby, and Burberry, my other standby, failed to impress. I spent about AED1200 on updating my wardrobe a bit. That’s about $300, made possible because everything is on sale in Dubai at the moment. I’ll need to put a bit more cash into it. But anyway I’m wearing my new clothes and feel a bit more fancy.

There’s an interesting article about the financial crisis in Dubai, in this week’s Economist.

First of all, it is apparently illegal to talk about the financial crisis in Dubai. I’m in RAK, which is actually a different country when you get down to it, so I’m sure the law doesn’t apply here. Indeed actual evidence of the federal government is very scant.

Anyway I have said many times that I don’t see evidence of this economic meltdown in Dubai. I will say a few things. There is some grandiose construction project on the Emirates Road through Ajman, which is just a skeleton of girders and work appears to have basically halted. There is also my job, at George Mason University. In January the sheikh said that the financial hemmorhage GMU was causing him had to stop. I have also read of many people getting laid off in Dubai (RAK seems fairly insulated from the economic crisis overall). The Economist talks about how British contractors in Dubai aren’t getting paid.

OK on the other side of the coin, the government of Abu Dhabi has bailed out Dubai, and will do so for the other 5 emirates if need be, apparently. Abu Dhabi has all the oil. And the Economist talks about building grinding to a halt, but this really isn’t the case in Dubai. The endless roadwork in Diera goes on. The light rail system is making really fast progress. The Dubai Mall, the most grandiose mall ever perhaps, is done, and it’s fabulous. I’ve read talk about how there is no traffic on Dubai’s streets and how expats are sleeping in their Land Rovers, etc… well OK, maybe there was indeed some expat sleeping in he Land Rover,  but traffic is no lighter than before.

Everything is on sale in Dubai shops, but that may just be because it’s summer and many of the expats are gone on vacation. I bet you the sales will end around Aug 15, when the expats styart returning.

Anyway in sum, I still see very little, if any, evidence of an economic crisis. Maybe some construction companies are in trouble, but Bug and I got lost in a construction zone two days ago, and I can tell you, there are thousands of construction workers building hundreds of buildings. So construction may be suffering, but it’s not suffering too badly.

I am fairly unbiased, also. I don’t really give a damn if there is a financial crisis in Dubai.

I had to delete my Monday Market Comment because it was causing some nerd-code-problems which I am not enough of a nerd to sit around for hours and hours figuring out. If I can’t resolve a computer program in a minute or two, I’m not interested.

Anyway the gist of my MMC is that my position is unchanged.

So I’m interested in this Google OS that’s in the news, apparently it’s a form of Linux. I’ve been using Linux Ubuntu for about 2 months now, and can’t see any reason to use Windows whatsoever, except I am forced to in the case of iTunes and MS Money and one or two other programs. Whenever I use Windows I get so annoyed. For example for several days, my Firefox didn’t work. I don’t think Microsoft is the Evil Empire. (I don’t think Starbuck’s is either.) I just think Microsoft makes crappy products. The fact that a bunch of nerds working for free in their spare time could come up with a system that works much better, ie Linux Ubuntu, when old Bill Gates is paying a fortune to programmers who can’t seem to make a product that works, ie Windows, is rather remarkable when you think about it.

Van says it’s almost time. I want to take her to the hospital now, but she says not yet, her water hasn’t broken.

We go to get Van’s mom in the Dubai airport tomorrow night. Aunty Nene is coming with us and hanging out with us all for the weekend. It’s going to be a full house. Especially when little Tristan arrives.

Bug knows that little Tristan is bringing him some presents, specifically the figurines of Jack and Alfie from Thomas the Train. He’s very excited about this. He refers to Tristan as “baby sister” however. I think this is because there was an episode of Dora the Explorer where Dora gets a baby sister.