Thoughts and perspectives

By JACK SCHROEDER

In my article last week, I commented on the impending tsunami that is approaching our shores as a potential global meltdown. Last week, Hungary announced an impending collapse of its economy and the Dow dropped 323 points. As you were reading the article last Friday, the anticipated first wave hit the foot of Wall Street and mild panic set in. Coupled with the electronic 1,000 point loss and subsequent gain in the Dow a few weeks ago, one only needs to understand what is happening to the market in these troublesome times.

Investors around the world have now determined that runaway deficits are a reality and are reacting accordingly. They are slowly realizing that deceptions have been laid before them as it relates to not only deficits, but debt also as a percentage of Gross Domestic Product. Suddenly, it has been noted that unemployment is much higher than reported, government debts masked as capital and the large debt disguised all together. It is now being suggested that a global deception exists in the credit ratings that investors rely on. I will attempt by next Friday to research this potential fiasco and report what reality exists in this area.

I promised a section on taxes today, so I submit this for your consideration. By the end of the year, the tax cuts given us in 2001 and 2003 are no longer. This could substantially raise the middle class tax burden by almost 10 percent. Congress will not be extending those tax cuts. Coupled with this news is the upper bracket of the federal tax will rise to 39.6 percent from 35 percent, and the tax brackets below that raised proportionally. The highest federal dividend tax rises from 15 percent to 39.6 percent, the capital gains tax rate to 20 percent from 15 percent and the estate tax to 55 percent from zero. Since I have argued that taxes will be going up, I can further argue that if this layer of tax is not sufficient to cover the 20 trillion dollar anticipated deficit within ten years, that additional taxes will become necessary. We are out of control in a free fall without a parachute. These, coupled with the intensity of the alternative minimum tax, will substantially create an additional tax burden on almost 30 million more Americans next year. Some middle class tax payers could be paying an additional $2,500 a year with this tax liability.

Higher taxes mean less disposable income, fear of running our cash reserves lower than where they are, fewer purchases leading to less manufacturing and services, tighter credit, inflation, the housing bubble continuing and more unemployment. The affected European countries in peril of bankruptcy have an average 20 percent unemployment at this time.

So, where do we go and what do we do? If you have any assets at risk whether it be a 401K, an IRA or other retirement accounts, a brokerage account or marginal stock inventory, I suggest you strongly recalculate where you have been, where you want to go and how to deal with potential long term slides in your fund. As I mentioned, there are no forces, in my opinion, that will create a substantive recovery. We have simply printed too much money and have too much debt with no plan to change the equation.

My financial seminars are next week and the week after. I have no magical formula as to how to handle these new scenarios. There is no book or journal written about how to go about solving this new global meltdown which is now at our shores. What I can offer you is safety and the ability to stop the bloodletting, preserve your principle and grow your fund intelligently without risk. I suggest you call the 800 number in my ad on this page, reserve space at the workshop, and begin to control your future. You can create your own bailout, preserve what you have worked hard to achieve and ensure your assets will be there when you need them. In my opinion, the worst thing you can do is... NOTHING... See you next week.

Jack Schroeder is a licensed insurance agent in Idaho and Washington. He can be reached at (208) 773-2507