I'd like to make you a business offer. Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment...
Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in – as long as it's legal. But I can't give you any capital – you have to come up with that on your own. I won't give you any labor – that's definitely up to you. What I will do, however, is demand you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business. That's my role in the affair: to tell you what to do.
Now in return for my rules, I'm going to take roughly half of whatever you make in the business, each year. Half seems fair, doesn't it? I think so. Of course, that's half of your profits. You're also going to have to pay me about 12% of whatever you decide to pay your employees because you've got to cover my expenses for promulgating all of the rules about who you can employ, when, where, and how. Come on, you're my partner. It's only "fair."
Now... after you've put your hard-earned savings at risk to start this business and after you've worked hard at it for a few decades (paying me my 50% or a bit more along the way each year), you might decide you'd like to cash out – to finally live the good life.
Whether or not this is "fair" – some people never can afford to retire – is a different argument. As your partner, I'm happy for you to sell whenever you'd like... because our agreement says, if you sell, you have to pay me an additional 20% of whatever the capitalized value of the business is at that time.
I know... I know... you put up all the original capital. You took all the risks. You put in all of the labor. That's all true. But I've done my part, too. I've collected 50% of the profits each year. And I've always come up with more rules for you to follow each year. Therefore, I deserve another, final 20% slice of the business. Oh... and one more thing...
Even after you've sold the business and paid all of my fees... I'd recommend buying lots of life insurance. You see, even after you've been retired for years, when you die, you'll have to pay me 50% of whatever your estate is worth. After all, I've got lots of partners and not all of them are as successful as you and your family. We don't think it's "fair" for your kids to have such a big advantage. But if you buy enough life insurance, you can finance this expense for your children. All in all, if you're a very successful entrepreneur... if you're one of the rare, lucky, and hard-working people who can create a new company, employ lots of people, and satisfy the public... you'll end up paying me more than 75% of your income over your life. Thanks so much.
I'm sure you'll think my offer is reasonable and happily partner with me... but it doesn't really matter how you feel about it because if you ever try to stiff me – or cheat me on any of my fees or rules – I'll break down your door in the middle of the night, threaten you and your family with heavy, automatic weapons, and throw you in jail. That's how civil society is supposed to work, right? This is Amerika, isn't it?
That's the offer Amerika gives its entrepreneurs. And the idiots in Washington wonder why there are no new jobs...
For the first time since Lehman's collapse, Treasury bill rates fell below zero Thursday. They remain negative today... When Lehman collapsed, the negative rates signified a flight to safety. Investors were terrified of the market, and they were willing to lose a fraction of a percent while sitting in cash. Today, the popular trade is long commodities and short the dollar – and it's worked perfectly.
But eventually, the trade has to correct and scare some people out before going back up. So the smart money is taking some money out of their longs – they don't want to unwind their trades completely – and holding it in T-bills. This is a short-term strategy... They want to sit on the sidelines to see what's going to happen. And T-bills are the only option for parking cash right now. If the smart money is right, the next move we'll see is a quick rally in the dollar...
On November 17, Jeff Clark sent this note to his S&A Short Report subscribers: "Now is the best possible time to make this downside speculation."
The S&P had just hit a new high, but one of Jeff's technical indicators said the rally was losing steam. He recommended buying short-term call options on The Direxion Small Cap Triple Bear ETF to scalp a quick profit. The market fell two days in a row (including today), and Short Report subscribers made almost 100%.
Right now, Jeff is watching the currency markets. He says we're about to have "the mother of all short-selling opportunities," and he's close to pulling the trigger on a new trade. To learn more about Short Report, click here...
In early November, the National Association of Realtors announced it licensed technology from Lender Processing Services that allows realtors faster access to housing data. The association says this will make its realtors more effective... but we doubt it. We like our realtor, but we'd never expect him to think for us.
Last May, Doc Eifrig told Retirement Millionaire readers a way to avoid realtors altogether, saving money and the 5%-6% commission they charge to check "comps" of houses in your area... It's a website called Zillow (www.zillow.com). Eifrig wrote:
Hop on Zillow and you'll have all the answers you need in seconds. List [your house] yourself at a price that will sell quickly (because it's accurately priced) and save the commission on top of that.
This tip alone could save you a lifetime of Retirement Millionaire subscriptions.
The dozens of money-saving, investment, and health tips in Doc's Retirement Millionaire could save you tens of thousands of dollars every year... All for $49. For example, his issue last month showed readers how to use their homes to get a cheap vacation, how to hedge against inflation, and how to lower blood pressure with a simple 10-minute exercise. To access this and other issues – and learn how to save as much as 80% on things you buy – click here.
New highs: Burlington Northern Santa Fe (BNI), iShares Silver (SLV), Keyera Facilities (KEY-UN.TO), Coca-Cola (KO), Yamana (AUY), Royal Gold (RGLD), Northgate Minerals (NXG), Enzon Pharmaceuticals (ENZN), Silvercorp Metals (SVM), Jinshan (JIN.TO).
In the mailbag... It's a little boring today. Just two thought-out, reasonable questions. We miss the crazy rants. Do your best here: feedback@stansberryresearch.com.
"I spend 4-6 hours a day sifting through all the information provided in the daily newsletters and additional reports. We understand the importance of owning physical gold, a strategy which we have undertaken. However, there is so much information that I can't seem to grind it through the sifter fast enough to arrive at a clear philosophy or direction. We do not seek to surrender any responsibility for our wealth, but it is clear that you all have decades of economic and investment expertise that would be impossible to acquire, starting from this point in our lives (late 50s). Your daily newsletters are full of advice and opinions and general philosophy, all of which I enjoy. But I fear I am missing a solid foundation upon which to measure your guidance and chart a course. Have you put together, or could you suggest, a beginner's guide to getting in the game?
"We are drawn mostly to the gold sector. We understand the different levels of risk between physical gold, stocks, annuities, speculation, and the other distinctions in Jeff Casey's reports. We have understood the importance of limiting stops and position size on stocks. We are up to the point of opening an account with a broker. After our experience with commodities futures, however, I feel like we are getting near the edge of the cliff. Being fully responsible, beginning with only moderate funds, coming from financial ignorance, hungry to learn and engage while simultaneously fearful of utter disaster, how would you recommend that we, as humble novices, proceed?" – Paid-up subscriber Stephen BE
Porter comment: I strongly recommend reading the September issue of my newsletter, The Seven Real Secrets of the World's Best Investors. It's an examination and explanation of the seven best strategies I've learned in my career. If you read it, I'd like to know what's missing from the perspective of a new investor. And if you're not already a subscriber to PSIA, you can sign up here.
"If it becomes uneconomical for utilities to produce power (let's say due to excessive punitive taxation) what will be the consequences in the U.S.A.? It may take some time, but won't the capacity to generate electricity be degraded over time? Power companies are not going to expand and maintain equipment if it is not profitable. Perhaps the government will nationalize power utilities and transmission lines in the ensuing 'emergency'? I spent almost 30 years in India and the Middle East and power outages were a way of life. In fact, power was the exception, not the rule. Here the effects would be amplified due to crime and loss of production.
"From my reading of your articles about the 'End of America', it seems this is also something to be concerned about and plan for. I like your idea of having farmland. (In a nonsurvivalist, practical sort of way) If you have your 40 acre farm and your clean water how do you get the fuel for your tractor and electricity? I suppose I get it on the black-market with one of my silver coins; likewise I will bribe the government hospital official if I need medical attention like I had to do overseas. Do you have any ideas or projections on power generation based on the economics to come? What you describe I have already experienced for a large part of my life, overseas, so I listen very intently to what you have to say." – Paid-up subscriber MB
Porter comment: In my newsletter, I've already recommended selling short one major U.S. power company for exactly the reasons you describe here. In regard to generating your own power, the only thing I've seen people do successfully (and at a reasonable cost) is install wind power. I don't know whether that's feasible at your location of course, but I think it can be far more economical than solar.
Regards,
Porter Stansberry and Sean Goldsmith
Baltimore, Maryland
November 20, 2009