The Online Investing AI Blog

We have a serious problem that I believe can only be solved by a resolve to redistribute wealth.

In this case, it’s a wealth of talent.

With dozens of NBA teams unable to afford access to quality offensive and defensive skills, teams are going without. And losing.

As a rich, powerful country, this strikes me as offensive and we simply must do something.

I recommend we socialize the talents of great basketball players, like Lebron James, by creating a progressive scoring system.

Here’s how this would work.

Read more…

Investing, Money, Online Investing AI, Success, US Economy basketball, financial, lebron james, Money, nba, satire, tax, taxation

The unemployment rate is considered a lagging indicator. In other words, once the economy revs up, it takes awhile for the unemployment rate to change.

Since the process of determining company employment levels, reviewing applications, interviewing, and hiring people can take weeks, if not months, the unemployment rate lags the rest of the economic indicators.

In our current economic climate, we’re seeing economic indicators that  indicate a recovery is on the way. The market has adjusted. Earnings are improving. When this happened in other economic periods, the unemployment rate slowly dropped.

But this economy isn’t like other ones.

Read more…

Business Strategy, Investing, Money, Online Investing AI, US Economy debt, employment, jobs, Money, regulations, tax, unemployment

quinn_anya@Flickr

According to the Wall Street Journal, the government is considering a tax on financial transactions that could raise $100 billion for the government coffers.

This week, the left-leaning Economic Policy Institute floated the idea of a national transaction tax that would raise $100 billion to $150 billion a year. The tax, at a rate of 0.1% to 0.25% of the value of the trade, would be levied on all financial transactions such as stock trades, but not on consumer transactions such as with credit cards.

This will include a tax on your stock purchases. And your stock sales. (In addition to capital gains tax.)

Using a little math, that would mean that there’s $100 trillion in transactions each year. It sounds like another cash cow for the bureaucratic milking. Who will miss a couple hundred billion here or there?

But, as with most things, the law of unintended consequences rules and the question remains, what effect will this have on investors?

Read more…

Business Strategy, Investing, Money, Online Investing AI, US Economy economy, government, Investing, investors, overseas, tax

CC Photo--anaorchosyn

The United States existed as a nation for almost a hundred years without levying a personal income tax. And even when the first income tax was eventually foisted on the American people it was due to the substantial costs of the Civil War.

The first income taxes were in the single-digit ranged. After some court wrangling, the legally-debatable income tax was pegged at 2 percent, but only for 10 percent of the wealthiest Americans.

The tax code could be summed up in a few pages.

Now the tax code is thousands of pages, fluctuates continually, and has risen to take well over a third of a person’s income.

How did the tax code become such a ponderous, mysterious document?

In a word: Power.

Read more…

Investing, Money, Online Investing AI, US Economy economy, Money, power, tax, US Economy, wealth

Can you imagine the following scenario:

You go to the bank with a couple thousand bucks and you decide you’ll open up a certificate of deposit. You ask the teller, “What’s the interest rate for my account?”

“Oh, zero.”

“The interest rate is zero?” you ask again, incredulously.

“Right. Zero. Nada. Null. Nothing. None. El Zippo.”

Then the teller adds, “We keep your money for a year and then we’ll give it back to you.”

If you’re smart, you’ll leave the bank and this surreal scenario in quick order. But, actually, in real life, most people do the very same thing when they treat their tax return as some sort of annual magic windfall. In truth, they just gave a no-interest loan to the government.

But, people who don’t have the discipline to save, use it almost like a Christmas club account. And, when they receive the check, they sort of act like mini-lottery winners; they waste it.

There’s a simple reason how this no-interest loan became a financial tradition.

Most people don’t want to end up owing the government money in one lump sum at the beginning of the new year. And, most people don’t want to trust their interpretation of the rather extensive tax code to figure the right saving amount to cover their tax liabilities.

Some tax experts suggest that you have your employer deduct the minimum amount necessary. Then, take advantage of every legal deduction you may qualify for. Then, each month, set aside an amount in an interest-bearing account that would cover any possible amount you might owe. (One way to do this is to take last year’s return and divide it by 12. Save that amount each month.)

If you can do this, you can be both a good citizen and a smart investor.

This is the third post in a series about financial myths that make you poor. For more information, you might want to read the previous article in this series. It’s called: Myth: Falling Markets Threaten Your Wealth.

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Investing, Money, Online Investing AI, US Economy government, income tax, IRS, no interest loan, return, savings, tax, tax day, taxes

Most people approach personal finance the way they would follow a trail in a forest. The more worn and marked the trail is and the easier it is to follow, the better the likelihood it’s a good trail.

Unfortunately, that well-worn path can lead right over the cliff unless your willing to do your own reconnaissance and keep your eyes open while you’re on the hike. That well-worn path might also disguise a simpler, more direct route.

Over the years, a series of financial myths and fiscal half-truths have been created and spread throughout the personal finance community that can drive behaviors that can actually lead to poverty-generation, not wealth-generation.

Here are a few of those myths:

Myth: Retirement accounts aren’t designed to help you retire.
Truth: They’re designed to keep you in the workforce as long as possible.

Myth: Falling markets threaten your wealth.
Truth: Money can be made in any market.

Myth: A good salary provides financial freedom.
Truth: A good salary can lead you into financial ruin.

Myth: Your tax return is free money.
Truth: It’s a no-interest loan to the government.

Myth: Only full-time traders make money trading the market.
Truth: New technology can level the playing field for part-time traders.

Financial myths are different from the myths of the world’s great religions and cultures. Myths typically are little fictional stories that make you wise. Financial myths are little fiscal stories that make you poor.

We’ll start our in-depth look at these financial myths–and hopefully set you on the right path to financial freedom–tomorrow.

Business Strategy, Dreams Come True, Investing, Money, Online Investing AI financial freedom, financial myths, myth, myths, retire, tax

My friend told me about the time he visited New Orleans on a business trip and decided to visit one of those Voodoo shops. The owner, a priestess of sorts, gave my buddy a magic bag–or a mojo bag–to help him with his sales presentation.

What the heck, he said, and took it along to the meeting… And his presentation was a smashing success.

Now, my friend isn’t a superstitious guy, so he decided to open up this strange bag to find what magic amulets or lucky coins had driven the success of his presentation. Inside of the mojo bag, he was a little disappointed to find a bunch of twigs and stones. All quite common.

My friend concluded the magic was never in this little purple velvet bag tied by a red ribbon; he had carried the magic inside himself.

I was just reading over Warren Buffet’s letter to Berkshire Hathaway shareholders and I think Buffet points out the major ingredient in the market’s mojo bag: confidence.

Buffet writes:

By the fourth quarter, the credit crisis, coupled with tumbling home and stock prices, had produced a
paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle.

Fear led to business contraction, and that in turn led to even greater fear.

But I’m willing to go into the root of this problem one step further. Americans are dysfunctional about wealth-creation. As a general rule, people love to create wealth for themselves and are envious when it is created for others.

Over the past few years, I have heard the constant drumbeat in the media that rich people are evil. Granted, rich people can be jerks. So can poor people. In fact, on any given day, I can be a jerk.

But, trying to shake down anyone’s money–rich or poor–because they may be jerks will never cause money to flow better.

There’s another concern. Once, investors really had no choice but to keep their money in American accounts. That’s no longer the case. We are part of a global economy and a global investment environment. Smart countries will be glad to take investments from Americans and let them compound their money without cumbersome taxes.

Change has not come to America. It’s the same old politics of greed and envy and it’s producing the same old bad mojo. Until we correct our own attitudes toward wealth creation, long-term prosperity and equality can never take root.

Online Investing AI Dow, market, mojo, NASDAQ, rich, riches, S&P, stock market, tax, tax structure, taxes, wealth, wealthy

Did I just say, “don’t save for retirement”?

Yep. But maybe I should have said, “don’t JUST save for retirement.”

I think the government and financial industry, whether unconsciously or not, have perpetuated the retirement savings scam. Through the creation of retirement plans, like 401Ks and IRAs, and financial instruments, like mutual funds and index funds, these organizations want you to put your money in a lock box and pull it out, at the point when you’re least likely to enjoy the benefits of wealth.

For the financial industry, this makes sense because the longer it takes you to build wealth, the longer they have to siphon their take away.

For the government, it keeps people financially dependent and reliant on its agencies and decisions. It also keeps people slugging away in cube farms and on factory floors. That’s why they penalize you with fees and taxes if you pull out money in those accounts to… I don’t know… enjoy your life.

These positions, which may be based on good intentions, are no longer tenable. For two reasons:

• Wealth generation should not be crimped in this economic environment. People should be able to invest and use the proceeds of those investments.
• As advanced technology increases, the life span will increase, too. Our savings will then become the carrot that the government will eternally keep out of reach.

I don’t propose to eliminate 401 K and IRA plans. I don’t believe mutual funds or index funds should be eliminated, either. I don’t believe we should penalize people for creating wealth, either. A fairer tax structure that inspires wealth generation should be implemented. Flat tax, sales tax and even a graduated tax structure that protects your ability to compound your money makes more sense than the current confiscatory tax policy.

And, I think that’s the key: the most powerful financial tool you, the average investor, has is the ability to compound money. Go head and tax the money that is taken out of an account as a form of income, don’t tax the saved and growing money.

How hopeful am I that we’ll live to see this day… or even retire to see it? Not very hopeful. People are creatures of habit, to begin with, and most folks have been taught to fear technology and finances. Jealousy also plays a role. People won’t want to see other people get wealthy by making the right decisions.

But I am hopeful that what we’re creating at Online Investing AI will be so powerful that it, in addition to smart personal tax strategies, could render the penalties on investment meaningless.

Until that day… Keep adding to that 401 K.

Accelerating Technology, Business Strategy, Investing, Online Investing AI 401k, 403b, confiscatory, ira, plan, retire, retirement, tax, tax policy

I don’t mean to turn this blog into a political soapbox, but I think there have been some issues missed by the media, who seem always to boil down arguments to the simplest and most divisive denominators. So, I thought I would explore.

By now, we all have met Joe the Plumber. Joe says that a tax hike on people making over $250,000 would hamper his ambitions to expand his company.

But there’s a more direct impact of new tax plans. I call him–and her–Joe and Josephine Investor. Capital gains and dividend tax increases will be levied against all investors, not just rich ones. For those who reinvest dividends, the tax is a triple whammy. Corporations are taxed. Their dividends are taxed. And then when the money is re-invested, this is taxed as “income,” although technically it’s not being used as such.

In other words, taxing investment income will hurt all investors, not just the rich it’s aimed at.

The middle class investors, who are hoping to one day rely on his trading and investment incomes to become financially independent, would find the barriers to that entry perhaps not stopped, but hindered.

So, maybe they could take solace in the fact that this money would be redistributed to help the nation’s poor. After all, we’re constantly told that the wealthy are getting wealthier and the poor are getting poorer. The government would use this money to “spread the wealth around.”

Unfortunately, a quick look at the statistics suggests that this isn’t true. Tax receipts have steadily climbed with economic expansion, right along with this “income gap” between rich and poor. Similarly, the budget–and, despite this increase in funding, the deficit–have rapidly increased.

From this, we can deduce that the real problem doesn’t seem to be redistribution of wealth, but that the redistributors, i.e. the government, aren’t doing such a great job. In fact, they’re doing a lousy job.

The solution, I feel, isn’t to increase taxes.

An initial solution is to move beyond looking at the economy as a zero-sum game between classes and unleash the exponential investment power of the entire population. The wealthy have become wealthier in large part due to the investment choices they have. The poor and middle class don’t have the access to exponential-type investments, like hedge funds and private equity firms.

This will take improved education and better investment vehicles (which we’re trying to work on).

Obviously we need to remove the middle man (or middle bureaucracy) from the equation; or at least improve the redistributors. Investing directly into people might be a start. Whether it’s a corporation or a web of government agencies, mindless bureaucracies have less of a chance to improve conditions like wealth disparity, but direct investment and individual action will.

Business Strategy, Dreams Come True, Investing, Money income tax, Investing, redistribution, tax, taxes

I’ve been watching reports about the recent political races from a new vantage point. What if a technological singularity is ramping up? What will this mean for politics?

The effect of advancing technology on politics–American or global–hasn’t been deeply addressed by any of the books on the Singularity that I have read. But the effect will be deep.

Just analyze some of the issues that are hotly debated:

Universal Health Care, Medicare, and Medicaid
If advancing technology begins to cure diseases and health conditions, do these programs become irrellevant?

Energy Policy
New ways of tapping energy in a non-centralized way (solar, for instance) will be one of the most disruptive technological advances, at least for the government, which derives revenue from energy taxation, and for utility companies. 

Taxes
At some point, we’ll leave the age of scarcity and enter the age of abundance. Taxation and wealth redistribution will not be needed.

If any of these situations arise as we advance toward a singularity, the business of politics will be changed forever. Politics in our current environment reminds me of a crab pot. I’m not sure if you ever saw a bucket of live crabs. Pro crabbers (crab fishermen) say that you never have to watch a pot of live crabs, even though they’re just inches from freedom. Why?

As soon as one crab almost escapes the pot, another crab reaches out with its claw and drags him back down. Likewise, we keep people in their place with policies that cement the class structure and hardens the government’s position as the ultimate manager of finances, morality, and physical well-being.

What happens when the foundation of this power structure begins to shift… or crumble?

I wish I had the answer.

Accelerating Technology, Money, Online Investing AI government, policy, singularity, tax