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-- Posted Friday, 7 November 2003 | Digg This Article
A very sinister piece of news has made almost no headlines It is a piece of legislation that has been passed by the Senate and is just waiting for House approval, which most likely will be certain. I took this excerpt from Forbes
“The Journal's coverage of the tax measure focuses on a provision to allow U.S. multinationals a one-year window to repatriate profits from abroad at a reduced tax rate of 5.25%, instead of the current 35% rate. The bill would also eliminate a tax exemption for Americans working overseas.” Full story http://www.forbes.com/2003/05/16/cx_da_0516topnews_print.html If you did not get the implication of that message, let me elaborate on it. First, by allowing US multinationals to repatriate their earrings back to the US at a rate of 5.25% is tantamount to a 29% across the board cut in Taxes, which will more than push them to come to the US. This 29% break more than makes up for the current devaluation in the dollar. Who would not take such an offer? Its basically free money. Now here is where the situation gets sticky. In order to repatriate that money the multinationals have to change from whatever currency they are currently holding to the US ollar, effectively they will be buying the US dollar and dumping their local currency. This will have the effect of suddenly propping up and giving the US dollar strength, and as the dollars starts to gain, Gold will definitely be its victim. So it’s highly likely that Gold’s upward trajectory will be momentarily halted and that the day of reckoning will be postponed till after 2004. Not only will the multinationals benefit from the 29% break, but they will also benefit as the US dollar starts to gain strength. Notice how this provision is only effective for one year, which coincides perfectly with the coming elections. The companies who take advantage of this offer early will be able to make another 10-15% gains as the currency appreciates, so in total they stand to gain upwards of 39%. Based on this information, I have to recommend that individuals who have two gold portfolios (trading and long term) take precautionary measures and take profits from their trading portfolio’s as Gold is going to run into some potentially very strong resistance soon. We, at the Tactical Investor, have already advised our subscribers to take profits and will be sitting and watching this situation closely.
Also, if you look at this chart that I put up in my last update of the Gold and the Dow you notice that the Dow is gaining on Gold once more. Could it be the markets see something that most of us are missing? You be the judge
You can see now the channel formation very clearly from early 2003; the Dow has actually been winning the battle and is at a critical point. This legislation might be all that the Dow needs now to go and challenge the old high levels where it took 35-40oz to buy the Dow. I am going to zoom in on this chart. 
First of all, you can see the Dow has been gaining on Gold since Feb 2003, about the same time that Gold started loosing value in terms of the Rand (which I currently believe is the world’s best performing currency). We are also in the process of completing a wedge. The moment we break through this wedge the price action should be explosive and now with this new piece of legislation we are all but assured that this move will take place What should you do? Well almost all the Gold bugs and smart investors who got in early should be sitting on some profits so it won’t hurt to take a little of the table, but by no means sell out all your positions. We have told our subscribers to take profits in their smaller trading portfolios but to hold their long-term portfolios. When and if Gold does pull back here and should it get to the point where it takes 35-40oz to buy the Dow, I would view this as a mouth watering opportunity to load up on gold shares and Gold bullion. My trusted associate and Pal John Tyler from the www.infognome.com has this to say . The machinations behind this move run deep and are open to several interpretations. The rate of M3 growth sank, and the whole system is devouring dollars with an unquenchable thirst. The Fed needs to keep liquidity in the domestic economy, and this move can be seen as just that. It is another shift of the The Titanic’s deck chairs. The band plays on; the ship appears unsinkable. Is this bill the lifeboat that US business needs before the dollar is allowed to FALL to ITS REAL VALUE? There is off course one strategy to deal with the twin risks of a plummeting dollar and inflation. SOS – Save Our Savings – and get some gold! Use any weakness to build positions for the secular gold bull market! For those of you writing in non-stop asking to open our other services, which are closed, we instead launched a new very low priced service for the person who is willing to take control of their finances. It’s called the Highlanders Club. Two very good articles that have been written recently are these please read them slowly you will find them extremely interesting. http://www.whereisthemoney.org/S00223_collateral.htm and the second one is posted on our site, written by Gale bullock. The title is In the Eye of the Hurricane -- or Collateral Damage? Pheromones of Fraud and Debt
-- Posted Friday, 7 November 2003 | Digg This Article
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