Tax Angles & Quantum Wealth


A reader asked the question about tax angles and the question led to thoughts about quantum wealth.

Yesterday’s message Quantum Wealth Evolution pointed out that when we do what we love we enjoy greater success.

Having tax efficiency is a big part of quantum wealth.

Below is one of the best ways to earn and legally avoid tax.

First, the reader’s question.

Dear Gary,  May I ask your opinion?

It used to be that owning income real estate in the US was the best tax shelter, unless one owned a business.

What, in your opinion, is the best type of investment today that provides a dependable income and a tax shelter? (if I can find the right investment type, I need to boost my income by ~ $1000 per month and yet have it shelter most, if not all, of this increase in income)

Thank you very much.

I’ll answer the tax question in a moment.  First, let’s outline the history behind the answer.

Recently a friend, Don Mahoney, sent me this note. Don, Merri and I go way back… over 20 years.  We do not see each other very often.  It’s funny.  Our paths seem to always narrowly miss… yet we always seem to be on the same track.

Don wrote:

Might I beg a favor?

Dear Family and Friends,

I have embarked on a very challenging journey and would like to ask your help. I’ve bought a house in upstate New York. It’s a historic house, known as The Andrew Mann Inn in the Town of Unadilla, New York, in Otsego County, on the Susquehanna River. It’s listed on the National Register of Historic Places. Built around 1795 by an architect named James DeCalvin, it was designed to be an inn to serve the Catskill Turnpike, which terminated in Unadilla. Apparently it was one of the first homes built in the area.

The reason I’m asking for help is that the house is now in utter disrepair, and if nothing is done within one or two more years it will be beyond saving. Some parts of it are already beginning to collapse. Some parts are even unsafe. I figure it will take a good three to five years and a few hundred thousand dollars to renovate it. The banks won’t loan on it and there is virtually no state or federal money available (wonder why?). So I’ll have to pay cash on the barrelhead for every nail.

So I decided I’m not too proud to ask for help. Whatever I get I get. The local media has said they’ll cover it when I get up there from Florida, so I’ll probably get a little support from the area. It’s a magnificent building, and dates almost to the Revolutionary War. I invite you to take a look at the website, and if you’re in the area, dew drop inn. My friend, Cuban artist Frank Monteavaro, is coming up to help, so he’ll be in the West wing with a working studio. He does everything from painting to sculpture, so it should be interesting. I may set up a little coffee shop while we’re there, too.
Anyway, if you can help with $5 or $10, it’s only a minute to put it through the website, and it goes straight into the house fund.

The whole story and photos are on the website, so drop in and take a look. It used to sit on the main route west from Catskill and Albany. At one point it was the frontier, until development went past it. You can almost hear the horses and wagons that used to pull up there. Ghosts still dancing the minuet in the ballroom.

Thanks for reading, thanks for looking if you do, and many thanks if you donate a couple of dollars. You’ll be helping to put some local craftsmen to work, so they thank you too!  All help is welcome, all media is welcome.

www.AndrewMannInn.com

Thanks again and best wishes,

Donald Mahoney and family

My reply to Don gets down to the essence of quantum wealth… doing what you love… and being tax efficient.  This provides the perfect answer for the reader who wants to reduce tax and earn an extra $1,000 a month.

I replied:

Don,

Way to go!  You are as crazy as I am.  And it seems we keep moving along similar tracks.  Can’t resist old places. We have seminars in them… the old Bel Mido in Tampa… Green Park Inn in Blowing Rock…  Mt. Washington Hotel in New Hampshire are a few. Now we have our Florida seminars in the Lakeside Inn… built and in operation since 1860… a record.

Some delegates hate this… the mustiness and creaky boards.

Yet we cannot get enough of it… restoring the history.

We are currently redoing a big old place… (not so old as yours) in Umatilla, Florida. We have done this all our lives.

I was originally hooked when I bought this old manor house called Forwood near Minchinhampton, Gloucestershire.

small-town-USA

Princess Anne was our next door neighbor at Gatcombe Park. She nearly killed me one day. I was jogging She was riding. There was a blind corner.  Construction there began in the 1500s and ran into Victorian… what a mishmash.  And the cost of Cotswold Stone for the roof. Ahhhh!

Then we redid a 100 year old house in Naples, Florida…. one of the first ten built there.

smalltown-usa

We lived there and fixed slowly almost 20 years.

Then two old Blue Ridge farm houses…

small-town-USA

on a creek. We still have this one.
small-town-usa

that emerged from this.
smalltown-usa

The crown jewel though has been the 180 year old colonial hotel in Cotacachi, Ecuador.

ecuador-fixer-upper

This is going strong and profitable…

You would have thought that would be enough but… no… we are doing it again… restoring a 16 acre estate… orange grove and all…we are beginning to look really good here now…

small-town-usa

in central Florida.  This one is not so old… but was a wreck anyhow.

small-town-usa

Sometimes we cannot understand ourselves!  Doing these crazy things but an old friend once wrote to me and explained when I told him about our latest restoration venture: “I love the metaphor. It echoes your and Merri’s stated love of old things and bringing them into service!”

Maybe that’s it… bring old things back into service… old houses. ancient knowledge about better living… even old hotels to live better in.  There is a bug… more than a cockroach… in our bonnet somewhere.  Plus it is fun and pays its way as well.

Anyway, there you have it… we have old places in North Carolina, Florida and Ecuador right now…. all brought from wrack and ruin to serving quite well.

Yours is a worthy cause and I’ll write about this if you like in our Smalltown USA focus.  We have a over 20,000 readers so perhaps it’ll help.

Any ideas on what to say and coordination welcome.

Regards,

Gary

Merri and I love fixing up old places… finding good bones… restoring the flesh and adding our touch. Obviously Don Mahoney does as well.  This is a great way to earn extra income if you love real estate and bring old things back into service.

And the US government in its infinite wisdom has made the process of doing this tax free.

I have told each of my children… if they love the idea that the most tax efficient way to live is to buy an old house… live in it and fix it.. then sell it after two years.  Capital gains (up to $250,000) on your residence is tax free.  Where else can you earn $125,000 a year and not owe a penny of income or capital gains tax?

A variation in the theme is to do as we have done in Ecuador. Buy an old hotel or B&B… live in it… fix it up and rent.  You have some tax to pay then… but  not that much.

There are three keys in the beautiful melody of this theme… love…  value and tax savings.

If you love fixing up… there are incredible values on the real estate market now. It is difficult to sell new homes in good shape… much less places with problems.  You get extra low prices and yet can increase value dramatically with your energy and a can of paint!  Few outlays bring as much return on investment as a small… a few bucks a gallon… investment in Sherwin Williams, Behr or Valspar.

The tax benefits are a great added bonus.

Flexibility is another big benefit for those of us who love to be fixer uppers. Here we are…Merri and me… in our North Carolina heaven… our Florida lakeside grove and in Ecuador in the mountains and on the sea.  You can do what you love and earn… tax free or on a low tax basis almost anywhere!

See more about this idea in Ecuador.

Real estate in Ecuador can also offer tax advantages. See a Mindo Ecuador house for sale here.

Gary

How We Can Serve You

How to Have Real Safety in 2020

The most important investment you can make in 2020, is in yourself. 

Invest in more time.  Invest in less stress. Invest in greater security.That’s why four years ago we created the Purposeful Investing Course (PI) because when it comes to finances, there are only three reasons why we should invest.  We invest for income.  We invest to resell our investments for more than we had invested.  We invest to make our world a better place.

We should not invest for fun, excitement or to get rich quick, or in a panic due to market corrections.

The core model portfolio we teach in the PI Course rarely changes, but is highly diversified in thousands of shares around the world… so there is higher long term profits, less stress and greater safety.

The portfolio consists of 19 country ETFs.  During the four years since we created the Purposeful Investing Course and set up a $40,000 real time portfolio at Motif Brokers, we have held the same 19 shares and have only traded three times.

The portfolio started with $40,000 and has risen to $53,591 ($49,015 in shares and the balance in accumulated cash).

The portfolio did really well from 2015 to 2018, better than the DJI Index.  Then as the US dollar grew in strength it fell behind.

The chart below shows the actual results of thos portfolio compared with the S&P 500.

motif

 

This good value portfolio above is based entirely on good value financial information and mathematically based safety programs developed around investing models that date back 91 and 24 years.

The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets developed combining my 50 years of investing experience with study of the mathematical market value analysis of Keppler Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers, such as State Street Global Advisers, use his analysis to manage over $2.5 billion of funds.

The Pifolio analysis begins with Keppler who continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  He compares each major stock market’s history.

Fwd: keppler

Michael Kepler CEO Keppler Asset Management.

Michael is a brilliant mathematician.  We have tracked his analysis for over 20 years.   He continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  He compares each stock market’s history.  From this, he develops his Good Value Stock Market Strategy and rates each market as a Buy, Neutral or Sell market.  His analysis is rational, mathematical and does not cause worry about short term ups and downs.  Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each BUY market.

This is an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

A BUY rating for an index does NOT imply that any stock in that country is an attractive investment, so you do not have to spend hours of research aimed at picking specific shares.  It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.  Investing in the index is like investing in all the shares in the index.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pifolio consists of Country Index ETFs.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.

Here is the Pifolio I personally use.

70% is diversified into Keppler’s good value (BUY rated) developed markets: Australia, Austria, France, Canada, Germany, Hong Kong, Italy, Japan, Norway, Spain, Singapore and the United Kingdom.

30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: Brazil, Chile, China, Colombia, the Czech Republic, South Korea, Malaysia and Taiwan.

The Pifolio consists of iShares ETFs that invested in each of the MSCI indicies of theseall good value BUY markets.

For example, the iShares MSCI Australia (symbol EWA) is a Country Index ETF that tracks the investment results the Morgan Stanley Capital Index MSCI Australia Index which is composed mainly of large cap and small cap stocks traded primarily on the Australian Stock Exchange mainly of companies in consumer staples, financials and materials. This ETF is non-diversified outside of Australia.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

The fact that the Pifilios are invested in all the shares of the MSCI Index in each good value market reduces long term risk.

When the US stock market bull ends, know one knows for sure how long or how severe the correction will be.

When the bear arrives, what will happen to global and especially good value markets?

No  one knows the answer to this question.

What we do know is that the equally weighted, good value market Pifolios have the greatest potential long term and that math based trailing stops can be used to protect against a secular global stock market correction when it comes.

My fifty years of global investing experience helps take advantage of numerous long term cycles that are part of the universal math that affects all investments.

What you get when you subscribe to Pi.

You immediately receive a 120 page basic training course that teaches the Pi Strategy.   You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last four years.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

Included in the basic training is an additional 120 page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets).  This analysis looks at the price to book, price to earnings, average yield and much more.

You also receive two special reports.

In the 1980s, a remarkable set of two economic circumstances helped anyone who spotted them become remarkably rich.  Some of my readers made enough to retire.  Others picked up 50% currency gains.  Then the cycle ended.  Warren Buffett explained the importance of this ending in a 1999 Fortune magazine interview.  He said:  Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!

I did well then, but always thought, “I should have invested more!”  Now those circumstances have come together and I am investing in them again.

The circumstances that created fortunes 30 years ago were an overvalued US market (compared to global markets) and an overvalued US dollar.  The two conditions are in place again!

30 years ago, the US dollar rose along with Wall Street.  Profits came quickly over three years.  Then the dollar dropped like a stone, by 51%  in just two years.  A repeat of this pattern is growing and could create up to 50% extra profit if we start using strong dollars to accumulate good value stock market ETFs in other currencies.

This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago.  The trends are so clear that I have created a short, but powerful report “Three Currency Patterns for 50% Profits or More.”   This report shows how to earn an extra 50% from currency shifts with even small investments.  I kept the report short and simple, but included links to 153 pages of  Good Value Stock Market research and Asset Allocation Analysis.

The report shows 20 good value investments and a really powerful tactic that shows the most effective and least expensive way to accumulate these bargains in large or even very small amounts (less than $5,000).  There is extra profit potential of at least 50% so the report is worth a lot.

This report sells for $29.95 but in this special offer, you receive the report, “Three Currency Patterns for 50% Profits or More” FREE when you subscribe to Pi.

Plus get the $39.95 report “The Silver Dip” free.

With investors watching global stock markets bounce up and down, many missed two really important profit generating events over the last two years.  The price of silver dipped below $14 an ounce as did shares of the iShares Silver ETF (SLV).   The second event is that the silver gold ratio hit 80, compared to a ratio of 230 only two years before.

In September 2015, I prepared a special report “Silver Dip 2015” about a silver speculation, leveraged with a British pound loan, that could increase the returns in a safe portfolio by as much as eight times.  The tactics described in that report generated 62.48% profit in just nine months.

I have updated this report and “Silver Dip” report shares the latest in a series of long term lessons gained through 40 years of speculating and investing in precious metals.  I released the 2015 report, when the gold silver ratio slipped to 80.  The ratio has corrected and that profit has been taken and now a new precious metals dip has emerged.

I have prepared a new special report “Silver Dip” about a leveraged speculation that can increase the returns in a safe portfolio by as much as eight times.

You also learn from the Value Investing Seminar, our premier course, that we have been conducting for over 30 years.  Tens of thousands of delegates have paid up to $999 to attend.  Now you can join the seminar online FREE in this special offer.

This three day course is available in sessions that are 10 to 20 minutes long for easy, convenient learning.   You can listen to each session any time and as often as you desire.

The sooner you hear what I have to say about current markets, the better you’ll be able to cash in on perhaps the best investing opportunity since 1982.

seminars

Tens of thousands have paid up to $999 to attend.

In 2020 I celebrate my 54th anniversary in the investing business and 52nd year of writing about global investing.  Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades.  This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.

In this special offer, you can get this online seminar FREE when you subscribe to our Personal Investing Course.

Triple Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report, access to all the updates of the past two years, the two reports and the Value Investing Seminar right away. 

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.

If you are not totally happy, simply let me know.

#2:  I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.

#3:  You can keep the two reports and Value Investing Seminar as my thanks for trying.

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential.

Subscribe to Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, the “Silver Dip” and “Three Currency Patterns For 50% Profits or More” reports, and value investment seminar, plus begin receiving regular Pifolio updates throughout the year.

Subscribe to a Pi annual subscription for $197 and receive all the above.

Gary