A Better Business Option

“I like it when a flower or a little tuft of grass grows through a crack in the concrete. It's so fuckin' heroic.”
George Carlin

Welcome to The Golden Sense!  Business makes the world go round. Business owners are the real heroes of society because they have taken personal risk, created jobs and sold products that advanced society and made themselves and others around them wealthy. Think about it, entrepreneurs are the reason you are sitting in that comfy chair right now.

Everyday businesses are started while some are shut down. It is tough running a business because there are so many variables to deal with along with competition coming from all directions. For example, it is especially difficult to do business here in my home state of California. This state has high real estate prices, expensive rent, burdensome taxes, heavy regulation, and high employments costs. All these aspects make running a business much more challenging. Despite these headwinds entrepreneurs still take the risk to make their dream come true.

Building a business is one thing, building a successful business is a much more difficult task. In order for a business to survive and thrive in a difficult environment the owner has to streamline the way his or her business operates. Success not only depends upon the product or service you provide but on how the business is organized.

It is said that to start a business all you need to do is "dream up a need and fill it". To fill that need it often helps to have three types of characters. Richard Russell of Dow Theory Letters says "you need (1) a dreamer, (2) a businessman, and (3) a S.O.B." With these in place it comes down to the actual formation of the business. The structure of the business is critically important because it provides the framework for incentive.

"The problem with many traditional business structures is that it leads to restrictions, bad feelings, and conflict of interest between employers, employees, and partners" (Brown).  Every individual within the business has their own motives, qualities, talents, ideas and attitudes about how to do things. This naturally leads to conflict amongst the owners and amongst the managers of a business.

It is important to structure the relationships within the business so that each person has his own area of responsibility in which he has complete control. This means the ideal business should have no employees and no partners with unspecified obligations within the business. Each individual should be paid for the service they provide.

Try hard to avoid paying salaries and hourly wages. Everybody conducts work at their own pace. You do not want to pay for someone to drink coffee, surf the Internet, or flirt with the secretary. Every part of the business should be independently contracted based on the service they provide. This is the most effective way to get what you want and avoid conflict. Plus if you don't like the service they provide then you can check the market place and see if you can contract with another person who will provide a higher quality service.

The idea behind setting up your business structure in this manner is that you are paying only for results. "You get three important benefits: (1) You have an accurate understanding of what each thing costs you (and you can compare with alternatives); (2) you no longer have to supervise the individuals time- all you have to do is check their results; (3) each supplier has the same incentive you do with regard to his service- he'll profit most by doing what is most valuable to you" (Brown).

The business should try to avoid any situation in which it obligates you or anyone else to perform services in which it is not in yours or his self interest.

By having a business in which all aspects are independently contracted you become cost effective and much more profitable.

There are many types of business structures you can form. Run the above business strategy under the business entity of an S corporation. S corporations are merely corporations that elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. The S corporation will also shield the shareholders from personal liability. It is very important to structure your business so that it minimizes your tax burden and personal exposure. S corporations may take a little money to form and some yearly maintenance but they are one of the better options for small business owners.

Use the S corporation as your overall entity and contract for services within that structure. By doing this your business will be leaner, more profitable, and it will incentive all involved.

As with many things in life and definitely in business:

"The first step is hardest" - Marie De Vichy-Chamrond

It's time to get started.

Sincerely,
T. Norman






























References:

Brown (1974) How I found freedom in an unfree world. Avon Books. New York, New York.

www.dowtheoryletters.com

Make the Trend your Friend

"Whenever you find yourself on the side of the majority, it is time to pause and reflect"
Mark Twain

Welcome to The Golden Sense! Some say that the road to hell is paved with good intentions. I happen to fully agree with that statement. Yet on that hot steamy road to hell I am sure there is a good opportunity to sell sunscreen and tank tops. There is no doubt a market for these products when people are headed to such a hot place. The point is that no matter where the road is headed, it is important to take advantage of the opportunities that the road offers.

There are trends and tendencies in all aspects of the world today. By identifying a public inclination toward a particular behavior or a general direction in which a financial market is developing you can take steps to make profits or position yourself for potential windfalls. There are short, medium and long term trends and these trends are a product of mass human behavior. When I use the phrase short term, I am refereeing to a time frame shorter than one year while medium term is 2-5 years and long term is 6 years and beyond. Forecasting human behavior is never easy but by understanding behavioral tendencies we can take advantage of opportunity when it appears.

In the short term there are technical price trends in the financial market. The price action of the stock market has fallen into a distinct upward trend. Simply put, stocks are bullish. As of the fall 2013 stocks are hitting their highs and the general public is investing heavily in stocks. The stock market is generally overpriced and over loved at this moment. The average guys is piling in and guaranteeing the market in the short term will move higher. Every bull market is different, and this one's uniqueness stands out as a result of unprecedented global monetary easing which has driven interest rates to all-time lows. The reason the stock market is so bullish is because it is currently the only game in town. Having money in bonds earns you almost nothing so people put their money into dividend paying stocks where they hope to get capital gains and at worse a quarterly dividend.  Some call it the speculative third phase of a bull market where valuations get thrown out the window for the obsession of making a profit. During these periods market prices typically go parabolic where prices go to dizzying heights. This is when the big Wall Street institutions gradually sell out and step to the side lines. In this situation there is still opportunity. First and foremost, you have an opportunity to take caution in regard to this trend. You wouldn't want to be fully invested but in the short run you should be somewhat invested and take advantage of the ascending price. Being invested can make you some quick profits, but just be careful because nothing goes up forever. Eventually gravity takes over and prices will come back down to reality.

In the medium to long term we have the financial price fixing imposed by Federal Reserve. The Federal Reserve currently buys $85 billion worth of mortgage backed securities and Treasuries each month. By doing this the Federal Reserve is keeping the price of bonds high and interest rates low. This trend will continue until it can't.
 
Chris Martenson of Peak Prosperity explains the Federal Reserve's actions:

"If you understand our monetary system, you know that by its very design, it must grow. If it's growing – and exponentially, at that – then it's relatively happy.  When it stops growing or even goes into reverse, then the wheels come off and it literally threatens collapse.

That happens to be the system that we've all inherited.  I'm sure it made a lot of sense when the world had a billion or fewer people on it and the horizons were seemingly limitless, but now it's just a vast liability.  And yet the central banks and politicians cannot imagine any other system. Not because the ideas themselves are terribly difficult (they are actually quite simple), but because they run so counter to their entrenched belief systems that they'd most likely reject them before they even got close enough to cause mild discomfort.

Currently, the U.S. debt-to-GDP ratio stands at around 350% in 2013.  This is a historically elevated number, so much so that we really don't have anything in our economic history books to tell us what comes next.  The Federal Reserve thinks that robust economic growth can reduce that imbalance painlessly.

But looking at the past 220 years of history, we find that the average yearly growth in U.S. GDP has been 3.8%:

Now, I have some quibbles with the idea that the U.S. will be able to sustain that long-run average of 3.8% over the next 30 years, because debt levels are already crushing growth, as are high oil prices (double whammy!).  But let's spot the Fed every advantage here. 

Between 1980 and 2013, total credit grew by an astonishing 8% per year, compounded. I say "astonishing" because anything growing by 8% per year will fully double every 9 years.

If U.S. GDP grows at 3.8% annually, but credit grows at 8%, this means the nation's debt-to-GDP ratio would balloon to 1,130% by 2043.  That's equivalent to someone with a $50,000 salary carrying $573,000 on their credit card. 

Again, this just seems to be so completely unworkable that I'm pretty certain it's not going to happen.

The alternative of growing credit at roughly the same rate as GDP, ~4% vs. 3.8%, means that not much really changes in regards to debt-to-GDP ratios, but they remain elevated at over 350%.

Of course, the difficulty in this story is that over the past thirty years, GDP has grown at only an average of 2.6%.  The most recent decade was the second worst in 220 years of U.S. economic record-keeping, clocking in at an anemic 1.7%.

If we use the past thirty years of GDP growth (2.6%) as our guide, then the numbers just get a lot worse.  Instead of 1,130% debt-to-GDP under the 8% credit growth future, we come up with a 1,600% debt-to-GDP figure.

 

My expectation is for central banks to just keep trying and then trying harder, doing the same things that is not working currently.  And they will not discuss any concerns that perhaps there's something wrong with their approaches or acknowledge any mistakes they made to help get us into this predicament.

The Fed is desperately trying to recreate the credit growth of the past 30 years, but it will not be able to do this unless the dollar loses a lot of value. 

The reason they want to do this has nothing to do with what's best for you or me or even the nation.  It has to do with the demands of a debt-based fiat money system that simply has to continue growing exponentially in order to survive."

 

This means in the medium term interest rates will stay low despite the Federal Reserve's talk of tapering its bond buying program. Interest rates have to stay low otherwise the Treasury won't be able to pay off the interest on the enormous national debt. Rising interest rates will also crush many larger financial institutions that are now locked into loans and bonds at low interest rates. Once interest rates rise by 3% or more there will be serious hell to pay in the financial markets. For this reason, the Fed won't take their foot off the money creation accelerator. Low interest rates are here to stay. This means the average guy will continue to get screwed out of his savings as inflation eats away at it.

 

There are many opportunities in this situation:

• Buy gold. Gold acts as insurance in case of a catastrophe in the financial system. It is also a hedge against inflation. Gold is timeless wealth and it will be around much longer than the current monetary system. 

• Take advantage of stocks while they are rising.

• Diversify your assets globally. It is absolutely essential to get some of your money outside of a financial system that is not sustainable.

• If you have a loan, take advantage of the rate environment. The past couple years has been a great time to refinance your house.

• If you own or work for a company that is looking to put some extra cash to work in the bond market; look into purchasing 5-10 year tax free muni bond from a water district or school in a financially well off area. Municipals have the most attractive yields in the bond market and one of the lowest default rates at 0.04%. As of November 2013 there is opportunity in this market. Hedge this investment by shorting a small amount of treasuries with the ETF TBT. By doing this you are calling the Feds raising rates bluff. Please do not take this last piece of advice unless you do the respective research.

The long term trend is entrenched deep in American culture. We live in a quick fix culture that will insure that bad decisions will continue to get made every time a crisis arises. The U.S. debt will never get addressed in a serious manner because politicians don't want to make the hard decision it requires.  Politicians just want to be reelected and all of their decisions are based on that premise. The can will be kicked down the road until it is too late and their hands will be forced.

This quick fix mentality is entrenched in the central banking system as well. Central banks response to any crisis or just a normal event for that matter will be to expand their balance sheet and create more currency units. They do this because in the short term they see an initial boost in the economic activity as the new money filters into the system. Unfortunately the long term consequences of these policies rob the citizens of their wealth and purchasing power. These actions also create a debt based society where almost nothing is affordable. This lowers the standard of living for all but those in power.

The long term trend of this quick fix American mentality will be detrimental. For every issue that comes up in society, money is thrown at the problem and it will ensure the bankruptcy of the nation. In fact, we are already bankrupt and the trend will continue until it cannot anymore.

By identifying this trend you can position yourself financially and politically. The best thing you can do is to diversify your financial assets globally across many different countries. Open foreign bank accounts, purchase foreign stocks and store precious metals abroad. Everyone should consider getting dual citizenship or applying for residency in another country. This is important because when countries enter the final stages of bankruptcy history tells us things turn really bad. Governments typically confiscate citizen's wealth, capital controls are set, unemployment escalates, social unrest spreads to the street, and wars are started. Take the appropriate steps. You don't lose anything by adding to your alternatives.

It is important for everyone to think for themselves and evaluate the trends in society. By looking at the cause and effect of policies, market events, and business decisions you can positively position yourself for coming events. If you keep your eyes open and brain ticking you can make the trend your friend.

Signing Off,

T. Norman

"Behind the Pentagon’s doctored ledgers, a running tally of epic waste" (CNBC)

Linda Woodford spent the last 15 years of her career inserting phony numbers in the U.S. Department of Defense's accounts.

Every month until she retired in 2011, she says, the day came when the Navy would start dumping numbers on the Cleveland, Ohio, office of the Defense Finance and Accounting Service, the Pentagon's main accounting agency. Using the data they received, Woodford and her fellow DFAS accountants there set about preparing monthly reports to square the Navy's books with the U.S. Treasury's—a balancing-the-checkbook maneuver required of all the military services and other Pentagon agencies.

And every month, they encountered the same problem. Numbers were missing. Numbers were clearly wrong. Numbers came with no explanation of how the money had been spent or which congressional appropriation it came from. "A lot of times there were issues of numbers being inaccurate," Woodford says. "We didn't have the detail … for a lot of it."

The data flooded in just two days before deadline. As the clock ticked down, Woodford says, staff were able to resolve a lot of the false entries through hurried calls and emails to Navy personnel, but many mystery numbers remained. For those, Woodford and her colleagues were told by superiors to take "unsubstantiated change actions" - in other words, enter false numbers, commonly called "plugs," to make the Navy's totals match the Treasury's.

A review of multiple reports from oversight agencies in recent years shows that the Pentagon also has systematically ignored warnings about its accounting practices. "These types of adjustments, made without supporting documentation … can mask much larger problems in the original accounting data," the Government Accountability Office, the investigative arm of Congress, said in a December 2011 report.

As the use of plugs indicates, pay errors are only a small part of the sums that annually disappear into the vast bureaucracy that manages more than half of all annual government outlays approved by Congress. The Defense Department's 2012 budget totaled $565.8 billion, more than the annual defense budgets of the 10 next largest military spenders combined, including Russia and China. How much of that money is spent as intended is impossible to determine.

It said that $585.6 million of the 2012 figure was attributable to missing records. The remaining $8 billion-plus represented what Pentagon officials say are legitimate discrepancies. However, a source with knowledge of the Pentagon's accounting processes said that because the report and others like it aren't audited, they may conceal large amounts of additional plugs and other accounting problems.









References:
http://www.cnbc.com/id/101206230

http://www.peakprosperity.com/

Broke and Making Money

"There is only one basic human right, the right to do as you damn well please. And with it comes the only basic human duty, the duty to take the consequences."
P. J. O'Rourke


Welcome to The Golden Sense! Once upon a time I knew a rich guy and a poor guy...and guess what? Both were broke. Contradictions don't exist in life, so the rich guy wasn't really rich. He made the kind of money rich people made but in reality he was broke. I knew another "rich" guy once, and guess what? He was actually rich.

Ricky did not have any money saved up. He worked at a restaurant as a waiter and made enough to get by. In total, Ricky made $2,000 a month.  Despite Ricky's low pay he owned a nice new Jeep Liberty, iPhone, Mac Air, clothes from Nordstrom, and a new Rolex! Ricky's expenses came in at $2,000 a month. So how did Ricky live? He lived on credit and was one paycheck away from missing a payment. On the surface, his peers thought he was doing well. Really well! Under the surface of this façade Ricky was in bad shape financially. Things were comfortable now, but Ricky found himself in a place where there was no way out and no way to handle an unexpected event. If he lost his job, broke his arm or his car broke down he would be in major financial trouble. Ricky was stressed. He didn't think he would ever get ahead financially and unfortunately he was right to have those concerns.

James was a doctor. His friends called him Doctor J. He made $250k a year and had just finished his residency two years prior. Previously during residency he was only making $40k a year and owed close to $500k in student loans. Since his big salary increase he bought a new house, drove a Mercedes, had a country club membership, and owned all the new Apple products.  Dr. J was living big. Along with all the great items he owned, he had great status in the community. Unfortunately for Dr. J, there was a lot of paying off to do. Dr. J thought that since he earned such a high paycheck he could afford all the expensive things in life. Unfortunately, this type of thinking got Dr. J in trouble. Despite his high income, his expenses were just as high and $500k in loans doesn't go away over night. You see, Dr. J wasn't really rich. He could manage the expenses going forward but he was living a stressful life of mandatory work in the future. If his work for some reason stopped, his lifestyle would go from extremely great to extremely bad.

Raymond was in the manufacturing business. He didn't appear rich because he often wore old faded jeans and had beaten up chairs from the 1970's that inhabited his office. When Raymond first started making money he saved money and invested it in financial securities that paid good yields or dividends. During this period of his life Raymond lived within his means. His expenses were well below his income. After a while, these dividends and yields amounted to a second income. Time passed and a third income developed. That's when Raymond went and bought the nice car, the nice house and the new tech toys. At this point it was okay for Raymond to buy these things because he was still living well below his income. Raymond's future was great. He had no financial stress and he could survive any obstacle in the future. He was rich.

There are a few things that separate Raymond from Ricky and James:

• Raymond used his money to buy income producing items while Ricky and James used their money to buy items that depreciated in value or carried additional expenses.

• Raymond has multiple incomes while Ricky and James depend on only one income source.

• Raymond avoided going deep into debt while Ricky and James racked up credit card debt or large mortgage payments.

• Raymond's expenses were well below his income while Ricky and James had expense that equaled their income levels.

• Raymond delayed his gratification while Ricky and James wanted a lavish lifestyle from day one.

Ricky and James now have stressful lives because every day they go to work they are working for yesterday's pleasures. Raymond lives for today and looks forward to tomorrow. Raymond enjoys what he owns because it is already paid for.

It is almost impossible to avoid going into some sort of debt in today's world of high asset prices. The key is to manage debt and not over use it. The person who keeps his expenses below his income is always better off than the person who earns more but spends tomorrow's paycheck.

Over and Out,

T. Norman





Famous Psychological study revisited by the Huffington Post:

A famous Stanford experiment from the late 1960s tested preschool children's ability to resist the lure of instant gratification -- and it yielded some powerful insights about willpower and self-discipline. In the experiment, four-year-olds were put in a room by themselves with a marshmallow on a plate in front of them, and told that they could either eat the treat now, or if they waited until the researcher returned 15 minutes later, they could have two marshmallows.

While most of the children said they'd wait, they often struggled to resist and then gave in, eating the treat before the researcher returned, TIME reports. The children who did manage to hold off for the full 15 minutes generally used avoidance tactics, like turning away or covering their eyes. The implications of the children's behavior were significant: Those who were able to delay gratification were much less likely to be obese, or to have drug addiction or behavioral problems by the time they were teenagers, and were more successful later in life.


Simon Black, www.sovereignman.com


Try this experiment.

Ring up your credit card company at the end of this month. Tell them that you and your spouse can't seem to reach an agreement about how to allocate your monthly budget.

So in the meantime, you have been forced to shut down your household... but you hope to be back on track in a few weeks.

Chances are, they won't take you seriously. Yet for some reason, this has been dismissed as commonplace and benign in the Land of the Free.

Here's a list of quotes we've heard from the telescreen talking heads over the last 24-hours:

"We're still the richest most powerful nation in the world." 

"It doesn't matter, the bond market is going up."

"The United States will never default."

The hubris and arrogance here is amazing. And it just goes to show that if you just repeat something over and over again, people will believe it... no matter how absurd.

This is the basic premise behind propaganda. Start with an idea. Inundate the population through constant repetition. And soon it becomes the unquestionable truth.

To suggest that the United States is NOT the richest country in the world, or that the government could default, is tantamount to blasphemy.

It doesn't matter that every objective scrap of evidence points to the inevitable conclusion that the US government is going to have to default on its obligations.

They could default on their obligations to foreign creditors-- China, Japan, the Gulf states-- and risk a total collapse in the dollar's 'value' internationally...

Or they could default on the Federal Reserve, rendering the central bank insolvent, and risk an epic currency crisis...

Or they could default on domestic financial institutions and risk an even bigger banking crisis...

Or they could simply default on their obligations to citizens by curtailing Social Security and debasing the currency.

The only question is-- who gets screwed?

Having this sort of public discussion, however, is considered ludicrous and irrational. The propaganda is so effective that people continue to believe in this fairy tale that America is the Land of the Free and the richest country in the world.

Yet it's this fairy tale that is ludicrous and irrational. Looking at the data objectively, having a candid discussion, and getting your own affairs together to withstand the inevitable fallout-- this is the most rational thing that anyone can do.












References:

www.sovereignman.com

http://www.huffingtonpost.com/2013/10/18/20-psychological-studies-_n_4098779.html

Setting up Flags

"Man is the only animal that is able, within definite limits, to adjust his environment purposely to suit him better."

-Ludwig Von Mises

Welcome to The Golden Sense! Setting up flags is a term that comes from the military. A flag represents either a safe place, a place to store resources, or offers a different tactical position. For centuries armies and nations have jostled for 'flag' positions throughout the world. This tactical strategy is not solely for the military. Individuals should use it in their personal life as well.

The world is a volatile place. War, economic turmoil, political repression, taxation, spying, monopolies, fraud and theft are very common occurrences in the world.

If you are honest with yourself, you will admit that these occurrences are the norm throughout history while peace and prosperity are much rarer. A huge mistake many people make is that they ignore all of this and think none of this will ever affect them. With transportation and communication as good as it is, you can internationalize yourself and set up your own flags. This is the smart thing to do for any free-thinking person. No longer are people planted to one region for their entire life; they can find prosperity by setting up flags all over the globe. The great thing is, you don't have to be rich to do it either.

The idea behind setting up flags is to globalize yourself so you are not restricted to one country, one economy, and one political regime. If you set up your flags properly, you can truly be a sovereign man where the sky is the limit. This idea of becoming a "Sovereign Man" was created by Simon Black of www.sovereignman.com.

I have a friend who has been setting up flags all over the globe. She doesn't even realize she is doing it. It is just part of her curiosity. She is chef by trade. After college she travelled the world. She traveled through Africa, Asia, Europe, and South America. She now has connections from Sweden to Paris to Puerto Rico and beyond. Not only does she have connections but she has also worked in multiple countries as a chef. She now lives in Los Angeles. She is by no means rich, but she does have a profession that has international appeal. Her father is French, so she has secured dual citizenship. Now that she has worldwide connections and dual citizenship she can focus on building her wealth and actively diversifying it. Having these connections and flexibility will allow her to always have somewhere to go and somewhere to prosper.

Flags can represent a wide variety of things. The best kinds of flags are the following:

• Friends and Connections in other countries
• Job Opportunities
• Dual Citizenship
• Foreign Residency
• Foreign Bank Accounts (FBAR filing required)
• Gold Storage (FBAR filing required)
• Foreign Real Estate
• Foreign Stocks

Setting up flags doesn't occur over night. It takes time, travel and research. You will want to set up a wide range of flags. Some flags will cost money and others will be free. It is a building process and not an event that occurs overnight.

By traveling as much as possible and networking you can make friends and connections worldwide. With the Internet, you can keep in touch and exchange ideas with your foreign friends. This is incredibly important as you never know when an amazing opportunity might arise.

Opening a foreign bank account or a gold storage account can be done from home. It really isn't that hard as long as you have a computer with an Internet connection. Of course, it is important to do the necessary research before committing funds to any institution. Check as many alternatives as possible and seek professional advice. Reporting requirements can be strict and you are usually required to send an FBAR form to the U.S. treasury on an annual basis. The benefits are huge as it is very important to keep money outside of the United States. Foreign bank accounts offer you political diversification while foreign stocks can offer great growth opportunities. This is incredibly important because whenever a government descends into bankruptcy one of the first things it does is confiscate its own citizen's wealth through capital controls and inflation. Many Russians never thought their country would go bankrupt. Either did the Greeks, Argentinians or the citizens of Cyprus. How about the Germans in the 1920's? Historically, the list of countries going bankrupt is extremely long. Just like these people, many Americans today have the same mindset. Foreign accounts can provide an escape valve for you.

The United States is the most diverse country in the world and many people have parents that were born in other countries. Make this diversity an asset by applying for citizenship of the country your parents are from.

There are also dealers out there that can help you purchase citizenship to welcoming countries. Check out  http://dollarvigilante.com/ or www.sovereignman.com to find out how to go about this. Residency can also be obtained quite easily in countries like Panama or Costa Rica. Having dual citizenship or residency in a foreign country opens up multiple doors for you. By having this you can work in another country with a different economy and a different set of laws. This is the most valuable asset you can ever give yourself. Why would you want to be restricted to one country when there is a whole world of opportunities out there?

Purchasing foreign real estate is another alternative. Of course, this usually takes a larger sum of money. Purchasing foreign real estate makes it easy to apply for residency or citizenship and offers you a great alternative place to live. Make your purchase a vacation rental, which allows you to turn an asset with expenses into an asset that produces an income. There are many alternatives in the world with some real estate markets over valued and some undervalued.

You don't have to be a banker or an international chef in order to set up flags worldwide.  It doesn't matter if you are a dental hygienist, a pharmacy technician, a babysitter or a computer programmer. With a little motivation anyone can do it. This is a mandatory strategy to take if you are serious about securing and growing your wealth. With every flag you set, another door of opportunity is opened.


Sincerely,

T. Norman

The Income Problem

 

"Don't go around saying the world owes you a living. The world owes you nothing. It was here first."

-Mark Twain


Welcome to The Golden Sense! The title of this post probably resonates with everyone. Whether you are rich or poor, an individual or a company, a state or a country, income is hard to come by.

The poor guy can't find work and the rich guy can't find a place for his money to work for him. The world is saturated with products and deflationary forces are cutting into the income of businesses worldwide. The Governments of the world are broke and they're running out of places from which to take money.  Income is the problem and it is seen as the new normal.

How does one approach the income problem?

I'm not too worried about businesses. Their entire operation is about finding and optimizing sources of income. I'm not worried about Governments either. Most are going bankrupt whether they like it or not.

The focus lies on the individual. What can you do to build and optimize your income?

There are three steps when attacking the income problem.

First: If you want a good income you have to network and do business with people that think and operate with the amount of money you desire. Whether you start your own business or work for a company, you should choose a line of work that falls in line with your income expectation.

If you work for a business that operates in terms of "thousands" of dollars, you will probably earn "hundreds" of dollars.

If you work for a business that operates in terms of "millions" of dollars, you will make "thousands" of dollars.

If you work for a business that operates in terms of "billions" of dollars, you might make "millions" of dollars.  

The point is, don't expect a million dollar paycheck if you work at a pizza parlor. Don't get me wrong, working at a pizza parlor is honorable work but if you want a higher income you have to identify where the money is and get involved. There is much more to choosing a profession than just money, but don't get involved in an industry that cannot support your income expectation.

The idea is to find a primary source of income and enhance it to the best of your ability.

Second: Set up multiple income streams. Income streams are anything that creates a cash flow. A job, additional contractual work, dividends from a stock, interest received from bonds, or any product that sells and generates an additional income.

Most people just have their sole job or business that acts as their only source of income. Don't stop there, make your money work for you or create a product that can be sold. By creating three or four income streams, cash flow becomes less of a problem.

People often mistakenly don't follow up with developing additional income streams because they deem them to be too small or insignificant. Whether they are big or small you want to create as many additional incomes as possible. After securing multiple incomes, you will be pleasantly surprised with your cash flow.

If you have an additional $500 to $2,000 you can purchase a dividend paying stock or a bond. You can do this by opening up an account with an online broker such as TD Ameritrade or Scottrade.

For example, you could open up one of these accounts online and put in a buy order for 100 shares of Taiwan Semiconductor Manufacturing (TSM) and receive a yield of 3% or $50 a year. Another alternative would be to purchase 100 shares of PIMCO Income Strategy Fund (PFL) and receive an extra $9 a month. Please remember, these are strictly examples and not investment advice.

With multiple income streams you will be less dependent on your primary source of income. This is vital to your financial security and it will eventually give you more financial freedom.

Third: Hedge your income sources. This means you should set up income streams that offset the variables incurred by your other income sources.

If your primary income stream is variable such as selling art or real estate (usually commission based), then the best practice would be to put your extra money to work in a stable dividend paying stock or a bond. The idea is that these securities will provide a stable cash flow while your main source of income will come in large chunks at a time. The two income streams will balance each other out and provide you with greater stability.

If you work in the finance industry, then you should put your money to work in foreign stocks or store it in precious metals to hedge against a job loss or a possible catastrophe in the fragile financial sector.

When setting up additional income streams you want to give yourself variety. Never become dependent upon one entity or industry.
Diversifying your income and savings will create stability and provide a larger cash flow for you.

Generating income can be tough, but without income life gets tougher. By identifying where the money is, setting up multiple incomes, and hedging your risks the income problem will cease to exist. It will be nothing more than something that requires routine maintenance. It comes down to implementing a strategy; because having a strategy is almost always better than not having one at all.

 

Sincerely,

T. Norman






Come mid-October, the U.S. government will no longer be legally allowed to issue more debt, according to a letter written by Treasury Secretary Jack Lew to Congressional leaders earlier today. That’s when the Treasury will exhaust the so-called “extraordinary measures” it has undertaken to avoid going over the Congressionally imposed limit on total federal debt of $16.7 trillion set in a budget deal in May.

Read more: http://business.time.com/2013/08/26/treasury-secretary-to-congress-u-s-to-hit-debt-ceiling-in-october/#ixzz2dC4QNeKr

Simon Black of Sovereignman.com
Reports from  

Spoleto, Italy
August 22, 2013

One of the really great things about being in Italy is that this whole country serves as a constant reminder that wealth and power in the world are constantly shifting.
 
Two thousand years ago, Italy (Rome specifically) was the pinnacle of civilization, at the forefront of medicine, art, technology, commerce, and military tactics.

You can still see so much of this today; Italy is full of monuments and ancient public works that are still in amazing condition to this day. They put so much care and attention into their craftsmanship, they clearly designed to very high standards and built everything to last.

Everything, of course, except for their political and economic system.

In its later Empire years, totalitarian control of everything-- the military, finances, money supply, commercial code, etc. fell to a very tiny elite... in most cases, one man.

And as one Emperor after another bankrupted the treasury through foreign wars, palatial opulence, and unaffordable social welfare programs, Rome gradually changed for the worse.

Desperate to keep the party going, later Emperors debased the currency to the point of hyperinflation. They imposed wage and price controls under penalty of death. They raised taxes so punitively that people simply quit working altogether.

With each successive emperor, Romans would foolishly believe that the 'new guy will be different' and that things would improve. Of course, apart from the occasional sage, Rome's political leadership became more destructive.

By the time foreign barbarians began invading Italian territory, Roman citizens were so fed up that many of them welcomed the marauding hordes with open arms. What was left of Rome officially fell in 476. But by that time, wealth and power had already shifted.

For more than 1,000 years, other kingdoms and empires assumed the role of the world's economic and political superpower-- from China's Tang Dynasty to the Mongolians to the Ottoman Empire.
 
Eventually, though, wealth and power shifted back West... to Italy once again. Venice flourished and became the leading power center in Europe.

Its recipe for success was quite simple: at a time when the vast majority of human beings barely eked out an existence under the feudal system, Venice enshrined economic freedom.

In Venice, people who were born with absolutely nothing could become fabulously wealthy with enough hard work, risk taking, and a little bit of luck.

It sounds a bit like the American Dream... nearly 1,000 years ago.

It was under this freedom that modern banking was invented in the 12th century. Foreign exchange contracts. The bond market. All of this came from Venice. And just as with Rome, the monuments and buildings erected during this period still stand, a testament to the strength of their civilization.

Of course, they eventually screwed it up.

In the early 1300s, the ruling elite eliminated the economic freedom that had made enriched so many people. The government also began charging exorbitant taxes and nationalizing trade routes. A police force was introduced in 1310 for the first time ever... not to protect the people from criminals, but to protect the government from the people. And Venice soon faded into obscurity.

Other cities in Italy-- Florence, Genoa, etc. soon had their time in the sun as well. But power and wealth eventually shifted from Italy to the Habsburg Empire, then the French Bourbon monarchy, the British Empire, and ultimately to the United States.

This is a very familiar and inevitable cycle that has repeated throughout history... and at least twice in Italy. Wealth and power always shifts.

This is happening right now in the West. The US and Western Europe are getting progressively weaker-- more indebted, and less free.

This isn't something that happens overnight... it's a long, gradual shift that has already been unfolding for decades. But it's Venice and Rome all over again. And the current is accelerating.

Coupled with the decline of the central bank-controlled fiat system, this is likely to be the biggest story in modern history.

The warning signs are all there-- it's almost like having a time machine and being able to go back to 14th century Italy.
Imagine being able to travel back in time and arrange your business, your portfolio, and your assets, knowing exactly how things would unfold.

We have that opportunity now. And depending on how far in front of this trend you are, it could really make all the difference between being a victim, barely surviving, or building generational wealth for your family.

Find Your Investing Style

"Only great minds can afford a simple style."

Stendhal

 

Welcome to The Golden Sense! Everyone has got their own style. Some women like to wear black and white fashion while others prefer bright colors. Some women like both depending on the season. Style is a personal preference. When it comes to investing, style is incredibly important because your style often dictates the return you receive on your investments.

If you are new to investing, the first thing you need to do is take an approach that fits your line of thinking. Everyone approaches a question or problem in a different manner. When it comes to investing there are a couple of approaches that are often used.

Top-down Investing

Top-down investing strategies involve choosing assets based on a big theme. This means looking at the big economic picture and observing the general trend of the market over the long term.

For example, if an investor anticipates that the economy will grow sharply, he or she might buy stocks across the board. Or the investor might just buy stocks in particular economic sectors, such as industrial and high technology, which tend to outperform when the economy is strong.

If the investor expects the economy to slump, it may spur him or her to sell stocks or take positions in bonds or less volatile stocks.

Many top down investors have chosen precious metals for their investing strategy. They see a decline in value of all international currencies over the long term and have chosen to protect their wealth by acquiring assets that retain and appreciate in value.

"The great advantage of top-down is that you're looking at the forest rather than the trees," says Mick Heyman, an independent financial adviser in San Diego. That makes screening for stocks or other investments easier.

Bottom-up Investing

Bottom-up investors choose stocks based on the strength of an individual company, regardless of what's happening in the economy as a whole or the sector in which that company lies. The idea behind this style of investing is that if the company has strong branding and financial health the share price should rise over time. Bottom up investors believe that good companies last and can weather the changing economic seasons ahead.

Fundamental Analysis

Fundamental analysis involves evaluating all the factors that affect an investment's performance. For a stock, it would mean looking at all of the company's financial information, and it may also entail meeting with company executives, employees, suppliers, customers and competitors. You will want to analyze management and really understand what's driving the company and identify where the growth is coming from.

Technical Analysis

"What I'm interested in is price, not the story behind the movement." Richard Russell

Technical analysis involves looking at the trends of an investment's price. You choose assets based on prior trading patterns. This type of security analysis is used for forecasting the direction of prices through the study of past market data, primarily price and volume.

The power in technical analysis is that you can see the asset's price at any single moment and it reflects all the information available about it.

Contrarian Investing

Contrarian investors choose assets that are out of favor.

Contrarian investing echo's Rothchild's famous quote:

"Buy when blood is running in the streets". 

A contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong. If people are heavily selling a particular type of security, contrarian investors will jump in and buy that security at bargain prices.

"The contrarian style is generally aligned with a value-investing strategy, which means buying assets that are undervalued by some statistical measure", says Wharton's Geczy.

The contrarian style generally rewards investors, but you have to choose the right assets at the right time. The risk, of course, is that the consensus is right, which results in wrong bets and losses for a contrarian investor.

Dividend investing

As the name suggests, dividend investors buy stocks with a strong record of earnings and dividends.  Investors like stocks that pay a dividend because it offers them a regular payout. This payout acts as an additional source of income. 

"Even if the price goes down, at least you're getting some income," says Russ Kinnel, director of mutual fund research at Morningstar.

It's a nice way to supplement income if you're retired. However, it is important to beware of funds with extremely high yields. That could be a sign that companies are taking out sized risk and are headed for a decline.

In the end, it's important to choose the investing style that fits your lifestyle and personal mindset. Chopping and changing strategies will often yield below average results so it is important to stay with an approach that you identify with.

Saving money in today's world is extremely difficult. Incomes are low and expenses are high. However, saving money is still possible. Saving and investing are a mindset and you can make it happen if you want to. It just involves a little sacrifice. When you start saving and investing it is very boring -- b-o-r-i-n-g. Or I should say it's boring until (after seven or eight years) the money starts to build up and pour in. After that, believe me, investing becomes very interesting. In fact, it becomes downright fascinating!

It is your choice when to start.

 

Sincerely,

T. Norman

 

Lipper reports municipal bond funds saw outflows of $1.2B in the in the end of July, driven by concern Detroit's bankruptcy filing could set a precedent and lead more cities to follow. This marks the 9th straight week of municipal bond outflows. Detroit's bankruptcy could be just the tip of the iceberg as many other cities and states are in just as bad a shape financially. Furthermore, the Dodd Frank Act has indirectly restricted bank funds from investing in municipal securities by issuing burdensome credit reporting and research requirements for each municipal bond owned. Now, Bank's don't want to deal with the hassle so they no longer purchase municipal securities as a part of their portfolio.

 

Simon Black of Sovereign Man reports: 

July 11, 2013
Athens, Greece

 

My friend Illias took a drag of his cigarette as he contemplated my question.

"Our government tells us that this will be a better year. No one really believes them. But all we can do is be optimistic. Too many people are committing suicide."

 

His statement probably best sums up the situation in Greece right now. It's as if the hopelessness has gone stale, and the only thing they have to replace it with is desperate, misguided, faux-optimism. And anger.

There are roughly 11 million people in this country. 3.4 million of them are employed, of which roughly one third work for the government.

1.34 million people are 'officially' unemployed. To put this in context, it would be as if there were 36 million officially unemployed in the US.

More startling, if you add the number of 'inactive' workers (i.e. those who gave up looking), the total number of unemployed is roughly 57% of the entire Greek work force.

And as you probably know, the situation for young people is even worse. Only 1 in 3 people aged 25 and under have a job.

This phenomenon, sustained for several years now, has cut deeply into the psyche of an entire generation that is growing up without productive work experience or the prospect of improving their lives.

The middle class here has been completely gutted. Aside from a few pockets of wealth, the country is either unemployed or working poor, hamstrung by debilitating debt.

The ugly consequence of all of this is that people have been driven to desperation. The suicide rate here has skyrocketed, crime is noticeably higher, and prostitution is rampant.

The government is limping along based solely on handouts from the rest of Europe, adding to the country's already untenable debt burden. Given the rate at which they keep increasing the debt, they'll still be paying it off ten generations from now.

They've taken some baby steps to attract foreign investment-- most notably by offering residency to foreigners who purchase Greek real estate in excess of 250,000 euros.

But such initiatives won't move the needle much. And the Greek government has no real options other than to continue defaulting on its debts or to leave the Eurozone and inflate its own currency.

Given what I'm seeing on the ground here, it's clear that the situation is more explosive than it has been for years.

 

 

 

 

 

 

  






References:

http://www.sovereignman.com/
http://ww1.dowtheoryletters.com