Author: Petros

The New Berlin Wall IV: A reader’s comment

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The United States government is acting like a trapped animal in a desperate attempt to keep capital in the United States.  The New Berlin Wall consists of the various laws, many of them recent, which attempt to force American citizens and companies to keep their capital in the United States.  But instead of having success, these laws will cause many to leave permanently, with no intention of ever returning.  It will eventually result in a mass exodus if the U.S. doesn’t begin to implement measures that tries to entice capital to stay rather than measures that try to stop it from leaving.  The exodus of capital is already occurring.

A reader responded to my first New Berlin Wall with the following comment, which I edited to protect her and myself from a rapacious evil government (I’ve changed the identity of her country to X and omitted her name):

I am in the exact same situation as you. I have lived in X for thirty years. I have been told by the IRS when I call as I have been a stay at home mom of a disable X-IAN child that I did not have to file since I did make enough to file but, that I might want to fine and use my husband *who claims me as a dependent** income, he is X-IAN. I do not have to file her as “American for tax purposes” but, was told I could. Why would I want to do that?

My health is not good and this is such a royal pain. It is exceedingly confusing. This year I inherited some money when my mother passed away. I will of course report it but, it’s right in the middle of this U.S. tax change for citizens residing in other countries.  …

Why should people of lower middle income be subjected to this after living outside the country for so long. I no longer have any desire to be American because of these draconian practices. It puts such hardship on law abiding citizens. I want to renounce. The stress of it all is too much. I am only worried about being able to visit my family in the U.S. occasionally but, have no desire what so ever to EVER live there again.

Shame on you United States for this monetary slavery. We are not rich and my husbands income supports me *I have lupus and RA* AND my son with disabilities. Now you want me to feel like I’m a servant to you though I’ve done nothing wrong. This puts such a hardship on people.

I have already applied for my X-ian citizenship, I want to renounce American citizenship and not be penalized for traveling on my X-IAN passport. Thirty years of not living in the U.S. and we still have to contend with this ridiculousness.

Of course now that I will be travelling on Canadian passport, I can still visit the US but I can’t reside there any more.  But expatriation and the relinquishing of my US citizenship is what I had to do to avoid the stupid and draconian legislation against Americans who live outside the country.  The government is attempting to stop millionaires from expatriating their capital and is instead making life hell for stay-at-home mothers.  Shame on you indeed.

The New Berlin Wall series

TD Canada Trust: The Gay Bank II

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Almost a year ago, I expressed my disapproval of the TD Canada Trust’s sponsorship of the gay lifestyle, and I sold my shares of the stock, but maintained a banking relationship with them based on my understanding of 1 Cor 5.9-13.  I have now, however, moved my personal accounts elsewhere because the branch manager could not guarantee that my banking information would be safe from the intrusion of a certain foreign state (which will remain nameless to protect the innocent–me).

To my surprise, this first Gay Bank post has become my all-time most popular.  So I did a google search and learned why that is.  The Toronto Gay Pride parade has become an outlet for anti-Israeli protests.  The organizers are in trouble now.  The city of Toronto is threatening to withdraw its funding of the parade because it has become political.  And apparently some are organizing protests against TD Canada Trust because of its continued sponsorship of gay pride events.  Well, it’s not as if I didn’t warn them.  I consider it unwise indeed to promote such a visible sponsorship of such a contentious event in order to potentially gain a few clients while the sponsorship has the potential of alienating many millions of customers.

Consider the following videos:

At 0:58 seconds in this second video, you will also see a placard with the words “F— the Police & F— Capitalism”.  I wonder how that makes the millions of investors feel, those who invest using TD Bank and TD Waterhouse, that TD Bank is sponsoring an anti-Police, anti-Israeli and anti-capitalism parade?

New Berlin Wall III: No renewal of passport until IRS satisfied?

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The U.S. Government Accountability Office has recommended withholding passports from people who have unpaid tax bills owing to the IRS.

That’s a really good idea.  Now I have another.  Let’s build a really high wall at all of the land borders and post guards with machine guns to keep Americans who owe taxes from leaving the country.

On why capitalism is better for workers than statism

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An example from Antiquity shows why in principle private enterprise has been historical more humane to its workers than state-run operations.  J. G. Davies, “Condemnation to the Mines: a Neglected Chapter in the History of the Persecutions”, Univ. Birm. Hist. Journal. 6 (1957/8) 104, writes about mines during the Roman period:

The ownership was mainly in the hands of the State, although there were some private concessions, while others were granted to municipalities.  One of the results of this State control was a disregard for the working conditions of the miners.  While the private owner would have to find the money to replace slaves who might die and was therefore concerned not to kill his men by overwork, replacement cost the State nothing since it could merely divert to the mines more prisoners of war or more convicts.  In such a situation, those upon whom this sentence was passed were driven to the limits of their endurance; their lives were cheap and the mortality rate was high.

My trading objective: To increase net worth as a function of book value

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Yesterday we attended a seminar with Jason Ayers of Optionsource.net on how to create cash flow using options.  He spoke a little about his trading and how his company has taken their holdings to 50% cash before this recent downturn and how they plan to buy back in at reduced rates.  Sometimes I regret not being a better trader and having such superb market timing.  Kudos to Jason!  If you have an opportunity to learn from this guy, it’s really worthwhile, for he’s an excellent speaker and knows his stuff.

I have a different trading strategy.  If you ask me if my portfolio is up or down, I’d have to admit that my “net worth” based on market capitalization is down 7% since February peak.  Ouch!  But what if my goal is not to increase my net worth in market capitalization–but instead to increase it in book value?  Book value is itself not an indicator of the market value of a company, which is really about the profitability of that company in the years to come, but of the total assets (cash, real estate, lands, equipment, inventory) minus liabilities.  Book value is much more stable than market capitalization because it points to the value of the company as a company:  i.e., if another company were to buy out your company you would expect that company to pay book value plus a premium based upon the future profitability of the company:  you will only sell if you think that the premium–i.e., the cash in hand today is more valuable to you, for whatever reason, than your own ability to extract profits from the company in the future.  If the potential buyer offers less than book value then either there is something terribly wrong with your company (Nortel) or you just simply show them the door.  Why would you sell your company at less than book value?  You would only do that if you were insolvent and were forced to sell.

I like junior oil companies and I discovered a means to de-risk them–pay attention to the book value.  This requires looking at the quarterly reports because it changes regularly–as the oil companies use cash to develop their lands.  If the reported book value is higher than the market capitalization, then you are buying the assets of that company at a discount while obtaining its future profits for nothing.

As a strategy, buying junior oil and gas companies at below book value has worked for me with Midway Energy, Crocotta Energy, Prospex (just bought out by Paramount) and Great Plains Exploration (bought out by Avenex).  These were the first junior oil companies that I bought and their share prices are now all well above what I paid despite the recent weakness in junior oils.  Each one was originally purchased below book value.

So while I am down 7% in terms of net worth as a function of market capitalization, as a result of averaging down on junior oil companies, I now own more book value than ever before.  So I consider myself to be doing well despite the current market.