Taxing the Per Mile you Drive – Hunt for Taxes


There are a number of states now looking into imposing a tax on every mile you drive your car. The leader of the pack has been the West Coast.  I previously reported that California wanted to tax space shots per mile they flew into the sky. Then California wants to tax taxi drivers per mile they drive.  Oregon was looking into taxing per mile you drive. Illinois was looking at taxing motorists 1.5 cents per mile they drive.

Well, California is losing money as oil prices are down and people are shifting to electric cars more so there than perhaps anywhere else in the country. So what is the solution to needing more money? Of course, you guessed it, California now says what the heck, let’s just tax everybody per mile they drive and that will make up for the loss at the gas pump.

Bitcoin = Money, Commodity, or Shares?


QUESTION: I read your article on Bitcoin. I found it fascinating that defining what it is changes everything. You did not actually say what you thought it was, money, stock, or a commodity. Curious as to what you would classify Bitcoin as.

All the best

ANSWER: The definitions I presented are from the government perspective of taxation. They will naturally define it to be whatever produces the greatest tax for themselves.

Economically speaking, anything that can be exchanged to facilitate a barter transaction becomes a MEDIUM OF EXCHANGE. That really can be anything. It has been food, sheepskins, seashells, cattle, bronze, silver, gold, or a derivative of something as paper money began.

Pictured here is a bronze ingot of the Minoan society. It is bronze cast in the form of a sheepskin. This reflects the transition from sheepskin to the Bronze Age. Above is a Roman ingot with the picture of a bull, which also reflects that this was a transition for cattle that was money previously.

Cryptocurrency is the next transition from tangible items being used for money moving toward electronic. It is a Medium of Exchange and that makes it really a currency and not the object itself of desire. Money will always exist in different forms because humans are not all equal in motivation, only human rights and that depends if the government has something to gain then you have no rights at all at that moment.

The Practicality of Cryptocurrencies – Not Really Ready for Prime Time


Trying to actually use Bitcoin in the economy is anything but something that will replace any government currency. The transaction fees are outrageous typically 3 to 4 times that of a cash withdraw from an ATM. In this video, a journalist tries to actually use Bitcoin. The pizza ends up costing him $76.16 and the fee to use Bitcoin is $9.47.

To use Bitcoin, there are middlemen who are the equivalent of a foreign exchange broker. It can take hours to get a simple order in to buy a pizza.

From a practical viewpoint, cryptocurrencies are not quite ready for prime time. They are all hype and offering a futuristic vision of beating the governments, but the computing time it takes to actually use cryptocurrency and the complexities, demonstrate that what we are dealing with is by no means some instant success story that has beaten paper currency or a credit card, which is really also electronic money.

Interstate Banking & Changes to the Federal Reserve


QUESTION: 

Hi Marty,

You say, “The one-size-fits-all policy of central banks with regard to interest rates pits East v West in both Canada and the United States. Farmers, oil producers, and miners are forced to pay higher interest rates when their economies are declining because of speculative booms in Toronto or New York.”

I can see how regional Central Banks could have supplied different stimulus in different regions back in the time of the Fed’s formation when the mediums of communication were not what they are today, but how would that work now. With the ability, today to borrow money electronically from where ever it is cheapest, wouldn’t people in the high-interest regions simply borrow in the regions where the money was cheapest defeating that strategy?

Regards,

F

ANSWER: About 70% of small business are routinely turned down for business loans. The small farmers, miners, and oil producers cannot simply borrow from the cheapest source. I myself always found banks calling me asking if wanted to borrow money when things were great and I never needed it. If you are watching your business model decline, nobody will lend to a ship taking on even a little water. There is a huge difference between a consumer loan on credit cards and a small business.

Consumers already pay interest rates set by a bank which are usually covering various regions. It is true, after the collapse of 9,000 banks with the Great Depression, thereafter banks were prohibited from Interstate Banking. Indeed, Interstate Banking allowing banks across state lines became widespread in the mid-1980s, when state legislatures passed legislation that allowed bank holding companies to acquire out-of-state banks on a reciprocal basis with other states. I had been on the board of a regional bank in the early 1980s. After Interstate Banking was allowed, a New York bank came down and put in a bid for Capital State Bank. It was sold and everyone cashed-in on their shares.

The main point is that there remain regional lending problems. The banks will lend to a market that is booming and will shun away from the regions in trouble. Today, a major bank in New York goes down and it impacts the entire country thanks to Interstate Banking.

So yes, you are correct – things are different today. The regional approach served the local economies. Even the S&L industry was regional and intended to serve the local economies. Today, the restructuring of the central banks eliminating and responsibility for regional disparities combined with Interstate Banking produces a completely different set of problems that will fuel the various separatist’s movements. In Europe, we see a huge disparity between the local economies of Southern Europe v Northern Europe and there too they are trying to impose the one-size-fits-all approach to central banking. Wherever we see economic disparities, we will see separatist movements

The Dow & Trump Tax Reform


The Trump Tax Reform reducing the corporate tax to 21% and taking effect January 1st, 2018 rather than being delayed until 2019, will be one of the biggest positive catalysts for US equities in decades. This is very interesting because it is now fundamentally validating what our computer has been projecting for highs going up to the 40,000 level on the Dow back in 2009.

Many of the domestic and institutional investors overseas are NOT in this market. They will now be forced to reposition their portfolios once the bill is passed. How to Trade a Vertical Market is absolutely critical at this point in time. This is by no means going to be easy.

We are already above the top of the Upward Channel and this will be 21,017.30. Our projections for 2017 stood at 25,648.40 and this rises to 28,045.71 for 2018. This is the next area of resistance. Once we push through that projection, the market will come back to test it. That will be the start of the slingshot upward.

The same model produced the projection at 195.97 for 1928. The year 1928 opened above the projection at 203.40, fell back to retest it dripping to 194.50, and then entered the slingshot running to 301.60 intraday and closed that year at 300.00. Keep in mind our project model gives us 25,648.40 so we are not yet through that level.

This is why I have always warned AGAINST fundamental analysis. The fundamentals ALWAYS unfold to validate what our computer forecasts to start with. Our forecast that BREXIT would win and Trump back in 2016 was possible ONLY because the computer was picking up the change in public sentiment which is driven by economics. The Trump Tax Reform is a reflection of the discontent underlying the economy. The Democrats will naturally vote in block against it because they simply like the higher taxes even if it produces fewer jobs and lower economic growth. They cannot change their color now.

NOBODY could have forecast this back in 2009. Barron’s though we were crazy back in 2011 forecasting the Dow was off to new record highs. Socrates can beat anyone, even me. So why will mainstream media not report our model’s success? Because it is not in the self-interest of themselves or government. Why interview people with opinions to fill their pages if all you have to do is try to figure out why the forecasts Socrates puts out will unfold on schedule? Don’t worry about it. Our big clients prefer that our forecasts are not on their front pages.

After the New Year, we will produce a special report on the US share market for 2018 with the turning point and price objectives for the year.

Australia gives Parking Ticket to Man in His Own Driveway


Once upon a time, police aspired to protect society. Today, police, in general, are more interested in harassing the public to raise money for the government. In Australia, a man was given a parking ticket in his own driveway. The incident has gone viral in Australia and the government claims his car partially blocked the sidewalk.

I had friends who were police decades ago. Something has changed. They were never vindictive and nasty. Today, you literally take you like in your hands just being pulled over by a cop. Every encounter I have had that never ended with any ticket I have found the police starts with an attitude and the assumption everyone is up to something

The Separatist Movements in Canada & One-Size-Fits-All of Marx


Many people are aware of the various attempts of Quebec to separate from Canada. What they are unaware of is the supporters of the Western Independence Party of Alberta. There has been an undertone of the separatist movement in Alberta which actually stems from the Great Depression usurpation of the Federal Reserve by Franklin D. Roosevelt.

 

Why is the Western Canada separatist movement caused by Roosevelt’s usurpation of the Federal Reserve? Everyone looks to the United States and assumes whatever structure they adopt must be correct. The Euro was crafted because the USA has a single currency. They did not consolidate all the debts and that has created a nightmare. Canada, likewise, assumed the one-size-fits-all policy of Roosevelt and has been paying the price regionally ever since.

So what is the link with the structural usurpation of the Federal Reserve? When the Fed was created, it was the solution to the Panic of 1907, which was set in motion by the disruption of the internal domestic capital flows caused by the San Francisco earthquake of 1906. The insurance companies were in New York. Consequently, the cash flowed to the West and a shortage developed in the East.

The original structural design of the Fed was to establish 12 branches to manage the capital flows domestically. Interest rates would decline where there was an excess of cash and rise where there was a shortage. This, they believed, would cause capital to move between the branches to balance the national capital flows and economy. Each branch acted independently to manage the capital flows. When crops would come to market, then Kansas would have an excess of cash and rates would decline as we can see from the table showing the rates set by each branch in August 1927.

When Roosevelt comes to power in 1933, he wanted to control the economy for his socialist agenda. He usurped the power of interest rates from the various branches of the Fed and consolidated then into Washington DC making it one-size-fits-all. He, therefore, abandoned the structural design of the Fed and ever since the capital flow focus has been internationally, not domestically.

As a result, the regional problems have resurfaced. The central bank raises interest rates to stop real estate or stock market bubbles in New York and that harms the commodity regions in middle America. When commodities have boomed, the financial regions are normally suppressed. The Fed raises rates to stop stock speculation in New York and prevents farmers from running their operations when commodity prices are at their lows. Canada has done the same thing raising interest rates to stop real estate booms in Toronto while the commodity-based economy in Alberta is sent into bankruptcy.

I have called this the Texas-New York arbitrage. Here is a chart showing when oil peaks in price, it is typically counter-trend to the financial markets. Oil peaked in 2008 when the stock market was crashing. Once again, oil prices are down and Alberta suffers while the financial markets are booming in Toronto.

What is resurfacing is the regional differences within Canada as well as the United States. The one-size-fits-all policy of central banks with regard to interest rates pits East v West in both Canada and the United States. Farmers, oil producers, and miners are forced to pay higher interest rates when their economies are declining because of speculative booms in Toronto or New York.

This is the root cause of the regional separatist movements we are witnessing in Canada. The structure of the central banks was originally intended to manage the domestic capital flows. That has been part of the whole socialit agenda to abandon that policy and create the one-size-fits-all policy of Marxism.

Trading v Socrates


QUESTION: Marty; All of these Robo trading plans are simply a flat model. Socrates is forecasting short and long term rather than just trading a flat model. Am I correct?

PT, Canada

ANSWER: Correct. The approach to modeling is traditionally flat. It will take one market and attempt to create a buy/sell model on that market exclusively to the exclusion of all other markets. This is the reason these flat models will blow up even such things as the Black & Scholls, which won the Noble Prize before it created the Long-Term Capital Management collapse in 1998. That is the subject of the book titled – When Genius Failed.

The flat model approach is a disaster. They will work for a while and the blow up BECAUSE they are incapable of grasping the wildcard contagion. That is what happened in the LTCM collapse. The illiquidity in the collapse of the Russian market led to the selling of all other markets to raise cash. There are plenty of people who are soliciting money claiming they have “mastered” our model. That is absolute nonsense because they are interjecting their own OPINION and that will be a guaranteed loss down the road. This requires NO OPINION and the fact that someone will try to supplement by writing reports on markets shows they are basing their trading on opinion.

Here is the Euro traded by Socrates just using Reversals without cycles from a pure hedging perspective. There is a huge difference between being more active using short and long-term Reversals. Hedging models are either long or short and DO NOT add to positions as they unfold as is the case with Speculation.

 

The Speculation models also differ depending upon using just the long-term Reversals and if you use both the Short and Long-Term.

In both instances, this is using the Weekly Level of activity. You can step back and use just the Monthly level. The trading performance will vary differently depending on what your objectives are.

Obviously, anyone soliciting model trying to claim they are using Socrates are just not telling the truth. They will inject their own OPINION and that will override everything.

We are reviewing REPUTABLE firms that will use our model WITHOUT interjecting OPINION. During the 1987 Crash when the Brady Commission investigated what they thought was caused by computer trading, the discovered that the computers were right, the traders did not follow them.

Bitcoin To Be or Not to Be?


QUESTION: Hi Martin,
despite the Bitcoin fanboys arguing that Bitcoin is untouchable by governments, would you agree that once governments, in particular, the Chinese government, make it unlawful to own Bitcoins, the additional introduction of proceeds-of-crime legislation would make it extremely difficult, if not impossible, to use Bitcoins to acquire assets, and dealing a permanent blow to Bitcoins’ value? At some point, Bitcoin owners need to be able to interface with the real market to buy assets, and that’s where the government can catch them and ask them to prove how an asset was acquired.

Will you be giving a forecast on Bitcoin’s price at some point?

Keep up the great work.
regards

AG

ANSWER: Bitcoin has replaced gold as the hot anti-establishment medium which has been gaining momentum. In light of India canceling their currency, there is a growing position against government currencies. This is certainly part of the entire shift from a Public to a Private Wave on the Economic Confidence Model. The overall confidence in government has been declining significantly on economic and political levels – i.e. the election of Trump, BREXIT, and Merkel collapsing to 32.5%.

In a purely economic sense, Bitcoin is really the medium of exchange in a barter situation. That is what BARTER was all about. It was some object that was recognized as acceptable among a group of traders so it becomes the medium of exchange. The problem with Bitcoin is that it is limited and therefore does not represent a true currency that many expect to compete against the government when there is not enough to go around for everyday use among the people.

Historically, when the government of Japan abused its power to issue money, people simply refused to accept it and used Chinese coins and bags of rice. Japan lost the power to issue its own money for 600 years. Even in Zimbabwe, the hyperinflation resulted in people using the currencies of other countries with the U.S. dollar at the top of the list. The same trend unfolded during the hyperinflation of Germany. There is a long historical record of people using the currencies of anyone other than their home government. We see this in ancient times as well. India, back in the day, struck imitation gold coins of the Roman Empire. They were often even overweight. Nonetheless, the image of a Roman coin was more trusted than a local issue.

Much of the entire problem with Bitcoin stems from the fact that it is in a very gray area. Is it truly a currency or an investment product like a stock? Or is it just a commodity serving as a medium of exchange in a barter situation? The tax implications are strikingly different for each.

If we look at foreign currency, the way this is handled is significantly different from shares. Any transaction under $600 is exempt from taxation due to fluctuation gains or losses. This is typically in play for those who travel on vacation. Exceed a transaction of $600 and you are liable to report that transaction gain to the government for taxation. Profits are theirs and losses are yours.

However, when you are dealing with a currency, then you must always be aware of the crime known as Structuring which is the act of parceling what would otherwise be a large financial transaction into a series of smaller transactions to avoid scrutiny by regulators or law enforcement. In other words, you are going to make a transaction of say $35,000. To avoid the bank reporting that transaction, you withdraw $9,500, $9,500, $9,500, and $6,500. You beat the regulation and that is a crime for which the government commonly throws people in prison and confiscates all the money involved.

Dennis Hastert 2

Dennis Hastert, the former Speaker of the House, was indicted by a grand jury on charges of structuring and lying to the FBI. Back in 2014, a Hartford, Connecticut man was sentenced to 18 months in prison for structuring $48,195 to buy a Corvette and a 2012 BMW 650i. They took the money and the cars. Also, a doctor from Georgia was sentenced to 36 months in prison and ordered to forfeit $870,238 which he engaged in Structuring to beat the reporting. This is far more common than people suspect. Retail stores accepting cash often have problems and must explain their operation to the bank to avoid the bank reporting them as a Structuring violation.

Under stock investing, your stockbroker issues you an IRS report under the 1099-B form which accounts all your gains and losses. This is a major difference between currency and legitimate stock market investments. Under currency, you must report your gains and losses. As I reported previously, I retired from making-markets in precious metals because the IRS declare me to be a bank and thus a financial institution. In the case of the summons against Coinbase users, the Department of Justice demanded the turnover of everyone. There are no rules so those people will be audited.

The IRS can simply make a rule and that will be the end of the issue. Congress has introduced the Cryptocurrency Tax Fairness Act which requires the Treasury Department to issue guidelines for informational reporting on digital currency transactions for which capital gains is due. The agency will make the rules and those rules are sufficient as laws that carry criminal penalties. The interpretation belongs entirely to them and the courts will defer to them as the expert. So much for courts being independent checks against arbitrary government.

The critical issue will be what does the IRS do? Will they declare everyone who mines Bitcoin is a financial institution and must then report every transaction of $10,000 or more and suspected s as financial institutions? The regulatory burden will severely curtail those involved with Bitcoin.

All of that said, what if Bitcoin is just a commodity? Normally, if I have an apple and I trade it with you for an orange, that is not a cognizable transaction for tax purposes. The problem with Bitcoin is its marketing as a currency. It may really just be a commodity for all practical purposes economically speaking. However, because it is presented as a cryptocurrency, it may be a duck that quakes as a commodity since it is NOT “legal tender” and acceptable by any government for taxes, but, if they call it a pig, it is a pig for tax purposes.

Bitcoin is included in Socrates basic level right now. The Futures contract on the CBOE will make prices much more tangible since people can put up prints with just one Bitcoin trading at $17,000.

The futures contract will for the first time put a legitimate price mechanism that is not as easily susceptible to fraud and market manipulations as cash markets are. Just go watch the Big Short. The banks would not make a real market until then off-loaded their own risks. That is why CDOs were regulated to go through a clearinghouse – no more off-exchange quotes. This advance for Bitcoin will be the first MAJOR step in really making it a viable market. Up until now, the quotes are always subject to fraud. It is easy to put up prints. Then everyone things all their Bitcoin is suddenly worth that new high price. Let everyone say SELL, and watch the price collapse

EU To Restrict Movement of Cash


The EU is now developing strict rules for carrying cash when traveling to non-European countries and returning to Europe. The revision of the First Cash Control Regulation from 2005, which stipulated that EU citizens should register cash in excess of € 10,000 when leaving the EU or when returning to the customs authorities have to, is what is under review. They want to lower the number and include gold, gemstones, and cash debit cards.

Interestingly, cryptocurrencies are not to be regarded as cash. Why? They are not sure how to detect them. The EU explanation reads: “Despite the high risk emanating from cryptocurrencies like Bitcoin, these are not added to the cash. The reason for this is that the customs authorities lack the technical means to discover cryptocurrencies. “

The customs authorities can now seize any amount of cash less than € 10,000 if they suspect that the money is somehow involved in any criminal activity. This is authorizing the Civil Asset Forfeiture that has been so profitable to the United States. Hence, the EU does not clearly define what suspicion is required to classify as a possible criminal activity. That will be avoiding taxes.

The EU is also extending the new rules to any freight shipment involving cash. Already, one cannot send cash by mail. This is now freight shipments. A friend used the service where you can send your baggage ahead of you for a trip. He was called down and had to remove $2.75 cents that were in a suitcase headed back to London. So there is no amount too small.

The purpose of the rules is now openly being justified to fight against tax evasion, along with moonlighting and terror financing. The government clearly understands that cash is the only way for citizens to protect their savings from access by states and banks and any special levies or wealth taxes. Closing this door merely opens the door to cash investment turning to movable assets particularly shares.