 | Investment U E-Letter: Issue # 488
Monday, November 21, 2005 Where To Invest Your Money NOW…When Your 15% Investment Tax Is On the Line
by Mark Skousen, Chairman, Investment U
Earlier this month, I warned you about the "excess" profits tax on oil companies, and how it might hurt your oil and gas investments. Thankfully, gasoline prices have fallen sharply across the country in the past month, and the excess profit taxes will probably be tabled.
But yet another threat has suddenly appeared on the national scene, which could wreak havoc on your entire investment portfolio. Because of rapidly expanding federal programs (including hurricane relief, Avian Flu, the war, etc.) and the growing deficit (which is now estimated to exceed $500 billion), Congress is seriously considering NOT renewing the Bush tax cuts. While the Senate voted last week to extend them, the discussion is far from over, and we're all anxious to see what happens over the coming months.
For investors, the 15% maximum tax rate on dividends and capital gains may be eliminated in 2008. What could that mean? Tax rates could be boosted 50% or more! Below, we'll look into why such reckless fiscal policy hurts investors…and what you can do about it, and we'll also offer some timely advice on where to invest your money now in consideration of today's shaky financial world.
Deficits Don't Matter? It's Not Econological!
There's an important lesson here in public finance. I've written favorably about supply side economics, but Congress is dead wrong to suggest "deficits don't matter." It's not econological - or of sound economic thinking. If Congress doesn't care about deficits, it won't control its spending. With government spending out of control and deficits skyrocketing, the Bush tax cuts - which have been so beneficial to the economic recovery - are now in danger of being cancelled.
Moreover, the President's commission on tax reform came out last week with another bombshell. Not only did they fail to support Steve Forbes' excellent idea of a simple flat income tax, but the commission is also urging Congress to sharply reduce the cap on the mortgage interest rate deduction, from $1.1 million to $420,000. I don't think it will happen, but you never know with this crazy Congress.
This ill will has not gone unnoticed on Wall Street, and the stock market continues to flounder at a time when we expect a year-end rally. To protect yourself, it makes sense to look to invest in non-traditional markets. Let's explore some of the investment areas that make sense today… Advice on Where To Invest Your Money NOW: - Minimize your exposure to U.S. stock index funds.
- Buy natural resource stocks, like gold, silver, oil and gas, uranium, etc.
- Buy more favorable foreign stocks (Europe, Asia and Latin America are performing well right now).
- Buy real estate, which still offers good tax breaks.
- Buy gold and silver coins.
The writing is on the wall, fellow investors: Congress is determined to increase taxes to pay for its spendthrift ways. It confirms my belief that you should look to invest in individual stocks, natural resources, and foreign markets to maximize your profits in today's uncertain market. Today's IU Crib Sheet - Read more on Steve Forbes' tax and investing ideas in Investment U # 477 and # 478.
- Remember to cast your vote for The 2005 Benny Award! Investment U issue # 486 has all the details on Investment U's new annual award, and be sure to tell us who you think deserves to win by responding to editor @ investmentu.com before December 1. We'll announce this year's winner in February.
Good trading, AEIOU,
Mark Related Articles: Investment U Archives
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