 | | The Daily Reckoning | Tuesday, December 27, 2011 |
- Are you properly prepared for Uncle Sam’s death tax?
- Revisiting the state’s ongoing assault on enterprise,
- Plus, Bill Bonner on Ron Paul’s chances, the insiders’ “devil deals” and plenty more...
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Why I’ll “Pay” You $7,403 to Cancel Your Subscription***
I know that sounds funny — me “paying” you thousands of dollars to cancel...
But that’s exactly what I want to do today.
Please look here to get to the bottom of this insane situation.
***For-your-eyes-only invitation expires promptly on January 4th, 2012
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[Ed. Note: Before we continue with our Daily Reckoning Best of 2011 Series...a personal message from Bill’s son, Will Bonner, Executive Director of the Bonner & Partners Family Office...
|  | | | Are You Making This Devastating Family Wealth Blunder? | | |  | | Will Bonner |
Dear Reader,
My dad, Bill Bonner, and I have spent the best part of the last four years studying how some families stay wealthy...and others don’t.
Most people think wealth comes down to the investment decisions you make. Far from it.
In fact, I’d say straightforward investment decisions play only a modest role in whether your family successfully holds on to what it’s got.
Take the story of Llano, Texas, family — the Leveretts...
Clayton Leverett comes from a long line of cattlemen. His great- great grandfather — James Clayton Stribling Sr. — moved from Tennessee to Texas in the 1860s.
He was a rags-to-riches pioneer.
Stribling leased land and grazed cattle. He saved his money and bought small parcels of land from the people he was leasing from. Through hard work and frugal living, he was able to put together a ranch of several thousand acres.
The ranch passed down from generation to generation. And for nearly 150 years all was well in the Leverett family.
But when Clayton’s grandmother died in 1997 the IRS came knocking. Its agents wanted the Leveretts to pay 38.5% tax on the appraised value of the land.
The family wasn’t prepared. And the estate didn’t have much in the way of liquid assets to pay the tax bill.
So, Clayton’s father took out the largest loan available and sold several thousand acres of the family ranch to meet the tax bill.
Clayton’s father fell ill in 2006. This time, the family got together a team of lawyers and accountants to defend themselves from the dreaded estate tax — spending $60,000 on the various fees and services in the process.
But their efforts were in vain...
And once again they had to face the full brunt of the estate tax.
The ranch passed to Clayton and his brother — the fifth generation to own and work the land. But the revenues weren’t enough to cover the tax. And the $60,000 the family had spent on lawyers and accounts had used up all their remaining liquid assets.
So, Clayton and his brother took another large loan. And they sold more land to pay the IRS.
The Leveretts now have to make two estate tax payments every year. One for their grandmother’s estate. The other for their father’s estate.
They will be making these payments for the next 15 years.
The Leveretts made a devastating family wealth blunder. They didn’t put the proper estate planning structures in place in time.
According to Clayton, they will probably have to sell more land to pay Washington. The more land they sell the more it hurts the profitability of their cattle ranching operation.
It is a vicious cycle that destroys thousands of otherwise prosperous family businesses.
My family’s publishing business, Agora Inc., was in the same danger as Leveretts’ ranching business.
My father saw that if he didn’t act in time, my brothers and sisters and I would end up in a situation like the Leveretts.
Thankfully, we are not going to have to do that because we setup something called a family office — probably the biggest “ wealth preserver” possible for a family like ours.
We are not going to stand around while the feds tighten the noose around our necks.
In tandem with our own family office, we have set up a small family- based research advisory for non-family members, Bonner & Partners Family Office.
As far as we know, it is the only one of its kind. Its mission is to help people protect family wealth and avoid becoming victims of government wealth grabs and unscrupulous Wall Street operators.
The legal structures we recommend to members lock away family assets from tax and legal threats such as the ones the Leveretts were hit by.
With the help of our legal advisors, we have developed some of the most aggressive, completely legal, international tax avoidance strategies in existence.
We have paid hundreds of thousands of dollars in legal fees to develop these techniques. And we are still in the process of making them as water tight as possible.
But we expect the effort to save tens of millions of dollars in the years ahead.
Of course, inheritance taxes are just one of the many blunders made by unprepared families.
There are disastrous investment decisions, too.
For example, the Wall Street pros will tell you to put your money in “safe, conservative” investments.
And the business consultants will tell you to put your business in the hands of “competent professionals.”
Don’t believe a word of it.
The only way your business and your wealth is likely to flourish is in your own family’s competent hands.
Warm regards,
Will Bonner
Executive Director, Bonner & Partners Family Office
P.S. Membership is currently closed at Bonner & Partners Family Office. The next intake — our only one of the year — is January 2012.
If you’d like to receive an invitation to join at that time, simply fill out this brief declaration of interest here.
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[Ed. Note: As part of its ongoing attack on enterprise, the US Government earlier this year busted in to Tennessee-based Gibson Guitars and confiscated millions of dollars worth of private property. The actions were taken in defense of the dubious Lacey Act but, as you’ll read below, the details of the “case” are far from open and shut.
“Guns vs. Guitars,” which first appeared in these pages on September 2, serves as today’s installment of our Daily Reckoning Best of 2011 Series. Please enjoy...
| | The Daily Reckoning Presents | | Guns vs. Guitars | |  | | Joel Bowman |
If I leave here tomorrow
Would you still remember me?
For I must be travelling on, now,
’Cause there’s too many places I’ve got to see.
— “Free Bird” by Lynyrd Skynyrd
Bullying small and medium businesses, sending armed goons to American factories, confiscating private property, closing down production and harassing business owners and their employees; a curious strategy for nurturing domestic job creation, wouldn’t you say?
The above strategies might seem ludicrous, even downright criminal, to we laypeople, but to government officials, it’s “all in a day’s work.” Take, for example, the latest case of The Feds vs. Gibson Guitars.
Actually, it’s not even a case yet, not officially...but that didn’t stop armed agents from the US Fish and Wildlife Service (these guys have guns?) from raiding two of Gibson’s production facilities in Tennessee and its Nashville headquarters last Wednesday. The agents confiscated “nearly $1 million in Indian ebony, finished guitars and electronic data,” according to the company’s CEO, Henry Juszkiewicz.
“It was a nightmare,” fumed Mr. Juszkiewicz after the incident, “We had people sitting there making guitars. We had no weapons.”
This is not the first time the feds have actively sought to bum Gibson’s vibe (a job-creating vibe, let us not forget — Gibson’s Tennessee factories alone employ over 700 people). The feds last crashed the party back in 2009, seizing a shipment of ebony from Madagascar. They claimed they were there — and, again, armed — to enforce the Lacey Act, a century-old endangered species act that was amended in 2008 to include plants and animals.
But before activists get their patchouli incense sticks in a knot, it’s worth noting that Gibson is not your typical — or even atypical — enemy of the planet.
“Agents seized wood that was Forest Stewardship Council controlled,” Juszkiewicz noted, in a quote carried on the company’s website. “Gibson has a long history of supporting sustainable and responsible sources of wood and has worked diligently with entities such as the Rainforest Alliance and Greenpeace to secure FSC-certified supplies. The wood seized on August 24 satisfied FSC standards.”
Your editor has no idea where the Forest Stewardship Council, the Rainforest Alliance and Greenpeace stand in this particular case...but we’d bet it’s not on the side of the “greedy, seal- clubbing, old growth-uprooting capitalist pigs.”
“We’ve been importing this wood for 17 years, consistently, on a regular basis, with no problem,” Juszkiewicz told Fox News yesterday. “And our competitors continue to use and buy this wood without any problem today.”
Juszkiewicz says the government won’t tell him exactly how — or if — his company has violated that law.
“We’re in this really incredible situation,” continued Mr. Juszkiewicz. “We have been implicated in wrongdoing and we haven’t been charged with anything,” he says. “Our business has been injured to millions of dollars. And we don’t even have a court we can go to and say, ‘Look, here’s our position.’”
It’s also worth noting that the relevant law doesn’t actually protect the trees themselves...just how — or, more specifically, where — the wood is finished. It’s perfectly legal for Gibson to use the wood, in other words, it just can’t use its own workers to fashion the wood into a guitar. That work needs to be done in India. Call it “mandatory outsourcing”...from the same people who will next week bring you their ideas on how best to create jobs in America.
In response to their...uh... “treatment,” Juszkiewicz and Gibson have mobilized their supporters via social media networks, encouraging people on Facebook and Twitter to write their representatives and demand action. The company also launched a Twitter campaign under the hashtag:
“ThisWillNotStand.”
Tweeted Juszkiewicz last Friday: “Why is big government spending our money to harm ordinary citizens and small businesses?”
For the record, your editors here at The Daily Reckoning have no political dog in this fight. That a “red state” company is being harassed by a “blue state” administration may or may not be a “fluke.” Either way, the politics of it all is of little interest to us. In the end, we are fans of private action and government inaction, not the other way around.
But since the government insists on acting — and acting in the only vulgar, brutish way it knows — we’ll return the favor and harass them a little...peacefully, without guns, in the only way we know.
As you probably already know, next week Obama is scheduled to deliver his much-lauded “Jobs Speech.” We are already getting a flavor of what it might contain as advice from tenured economics professors, leading experts and other well-degreed blowhards begin seeping into the pages of the mainstream press. Unsurprisingly, the proposed solution to having over-spent and under-saved is...you guessed it...more spending!
Here’s a snippet from The Huffington Post:
At the top of many to-do lists is government spending into the tens of billions of dollars to finance large-scale public works projects, a strategy that could address a gaping mismatch: Nearly 14 million Americans are officially out of work, yet a great deal of work needs to be done, from repairing dilapidated roads and bridges, to retrofitting government office buildings with energy-efficient infrastructure. Gary Burtless, a former Labor Department economist and now a senior fellow at the Brookings Institution in Washington, chimed in, “If the government spends the money directly on government-funded projects, that puts people on payrolls.”
And here’s Pavlina R. Tcherneva, an economist at Franklin & Marshall College, echoing Mr. Burtless’ brilliance, “We still have mass layoffs in those [manufacturing and construction] sectors. It seems very obvious that we can absorb large numbers of workers in those sectors for the public good.”
Ah yes...it’s all so obvious! More spending!...More public works!...More government involvement! You know, because all this worked so very well for the country with The New Deal...
Following the above logic, the government ought to spend billions of dollars it doesn’t have undertaking projects it has no demonstrable skill in completing simply to “put people on payrolls.” Heck, why stop at billions? Hasn’t academia heard? Billions are for wimps. Trillion is the new figure du jour. Why not pay every un- or under- employed American a thousand bucks a minute to scrape gum off the sidewalk? Think of the boost to GDP! Think of the payroll numbers! Think of all that “public good!” And think of all the Chinese-made trinkets and Indian-fashioned guitars those people could then buy with their million-dollar bank balances!
One is left to wonder: with thinkers like these, who needs idiots?
Joel Bowman
for The Daily Reckoning
[N.B.: Lynyrd Skynyrd guitarist, Allen Collins, used a Gibson Firebird, and later switched to playing a Gibson Explorer. Starting in late 1977, he also occasionally used a double-cutaway Gibson Les Paul Junior.]
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| | | | Bill Bonner | | Devil Deals | |  | | Bill Bonner |
Reckoning from Baltimore, Maryland...
Occasionally, when we’ve had too much to drink, we lull ourselves to sleep with the notion that someone like Ron Paul might succeed. Maybe America won’t become a police state after all. Maybe it will abandon its empire and its imperial death-wish before it’s too late. Maybe it will cut its budget and save the dollar.
Maybe the zombies can be brought under control before the nation is ruined by them...
Then, we sober up. And make sure our passport is up to date.
You’ve seen our theories...
The insiders who run the government will take as much as they can get away with.
Gradually, more and more people become insiders.
And gradually fewer and fewer people are still adding real value to the economy.
The zombies multiply. They vote. The system is “locked in” to disaster. Eventually, war...revolution...or a bankruptcy stop them. The old systems blow up. The incompetent, the corrupt and the zombified are swept aside.
A Dear Reader wrote to tell us what we had guessed for ourselves. The insiders are behind the latest outrage — the defense authorization bill that allows the feds to put anyone in jail and hold them there forever, without trial.
You probably won’t read, more than once, this news: A lobbyist for passage of the NDAA [formerly S. 1867] works for a company that got a juicy Defense Department contract.
For some reason, you probably never knew that former Homeland Security chief Michael Chertoff lobbied to have Homeland Security’s Transportation Safety Agency [TSA] install the hated nude-body scanners in US airports. Chertoff, a dual US-Israeli citizen, works for the company that manufactures these nude-body scanners.
As to the lucky company in the current news, Surefire, is it a US company? Where does this company manufacture its night raid equipment?
With help from industry lobbyists, the laws to implement a police state are in place. An incident of some kind will precipitate their bloody use:
The Intel Hub
December 20, 2011
According to reports from the Daily Kos and Russia Today, a company specializing in night raid equipment was awarded a 23 million dollar contract from the Department of Defense and subsequently went on to lobby for the NDAA which has given the government the power to indefinitely detain American citizens.
Surefire LLC openly lobbied for the House version of the NDAA, a bill many have claimed has effectively ended the Bill of Rights, months after receiving the 23 million dollar contact from the DOD.
Why would this company be receiving a contract which could outfit at least 30,000 troops with new and updated night raid equipment when the US is supposedly pulling troops out of Iraq and, to a smaller extent, Afghanistan?
Why has this same company gone on to lobby for a bill that has turned the United States into a war zone?
From the Daily Kos:
So what does Surefire make? In a word, night-raid equipment, with a fresh new $23 million contract from the DoD even as we saw troops pulling out of Iraq and they are about to pull out of Afghanistan.
The product catalog main categories read things like “weapon lights, helmet lights, sound suppressors, high capacity magazines.” The equipment is relatively cheap, not big ticket items in Defense Department terms. That means this is a big contract. A $23 million contract would buy enough of these things to outfit maybe 50,000 soldiers.
If we are pulling out of Iraq and Afghanistan, what is all this stuff for? Night-raid gear? These are basically made to blind people as they awake from you busting down their door, not for open combat.
In a night firefight you don’t want any lights near you whatsoever. That gives the other guy an easy target. Let’s see, if you’re going to get rid of the Bill of Rights, you might as well get rid of the First Amendment as well as the rest of them. Don’t worry; the feds are on the case. Another proposed law — SOPA — would give the feds the power to shut down websites that they don’t like.
Yes, dear reader, it is all coming together...
Perpetual war overseas. Police state at home. Spend...spend...spend to support the zombies.
And when you run out of money? You print some more!
Industries that used to provide value for money are corrupted. Each makes a deal with devil government. The education industry hasn’t produced any real gains in 40 years — despite a massive “investment” of public and private funds. The health care industry gets no better results — measured by life expectancy — than Cuba, even though it spends 45 times more per person. The defense industry — with its related empire spending — now costs the nation about 7% of GDP, and probably makes the country much less safe than countries that spend a small fraction of that amount. Taken together, with the rest of government spending added in, and more than half the economy is now zombified — producing little or nothing of value. And more than half the voters, too, are now dependent on the feds.
And now the bankers have made their devil deal too.
There was a time when banks were honest businesses. Bankers took deposits and made loans. The banker himself was responsible for the losses. If the bank went down, so did he. More than one banker, ruined by losses, blew his brains out rather than face the embarrassment of his own mistakes.
Now banks are shielded from the harsh light of legal liability by corporate veils and federal umbrellas. They can still make money — more than ever. But now they are no longer working in the private sector, providing a service, making profits and always threatened the risk of fatal losses. Now they are practically public utilities — like Amtrak or the Post Office.
Here’s the deal: the feds keep the incompetent bankers in business...and the bankers help the feds borrow money.
That is the message of the European bank bailout last week. Banks are no longer private sector enterprises. They provide a public service. In return, they are protected from their own gross errors.
What public service?
The Bank of Tokyo Mitsubishi recently noticed that it now owns more government debt than private loans and corporate bonds. It is no longer a private enterprise; it made its pact with the feds. It takes bailout money; and it helps fund the government’s deficits.
But given all that has gone on over the last 5 years, you have to wonder whether bankers are clever enough to figure it out. So, French President Nicholas Sarkozy spelled it out for them: the ECB would give them 489 billion euros (and call it a loan); they should use the money to buy government bonds (and call it an investment).
This cozy arrangement suits the bankers. They make profits without taking real risks. Besides, how hard is it to borrow from the ECB at 1% interest and re-lend to European sovereign nations at 6%? Even a banker could make money under those circumstances.
But now we have another major industry — one that was responsible for 40% of all US corporate profits in the mid-’00s — that sups with the devil. And now major capital allocation decisions — involving billions or even trillions of dollars — are no longer made by independent, profit-seeking investors. Instead, they are made by favor-seeking zombies.
Who can guess where the zombies will place their money? Into risky, visionary new businesses which, if successful, will create new jobs and help power a renaissance of real output? Or, into more zombie projects?
And poor Ron Paul. Last week he was leading the Republican pack in Iowa polls. The zombies were petrified. They attacked in waves. Some said he was a ‘racist’ — referring to fears of a ‘race war’ attributed to him in 1993. Others said he was anti-gay... Ron Paul represents no real threat to blacks or gays...
But the outrageous slings and arrows that did the most damage were those that attacked his support for America’s military empire. Here’s The Wall Street Journal:
What Ron Paul Thinks of America...
It seemed improbable that the best-known American propagandist for our enemies could be near the top of the pack in the Iowa contest, but there it is. Ron Paul’s supporters are sure of one thing: Their candidate has always been consistent — a point Dr. Paul himself has been making with increasing frequency. It’s a thought that comes up with a certain inevitability now in those roundtables on the Republican field. One cable commentator genially instructed us last Friday, “You have to give Paul credit for sticking to his beliefs.” He was speaking, it’s hardly necessary to say, of a man who holds some noteworthy views in a candidate for the presidency of the United States. One who is the best-known of our homegrown propagandists for our chief enemies in the world. One who has made himself a leading spokesman for, and recycler of, the long and familiar litany of charges that point to the United States as a leading agent of evil and injustice, the militarist victimizer of millions who want only to live in peace. Regards,
Bill Bonner,
for The Daily Reckoning
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