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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Monday Aug 23, 2004 - Vol. 6 No. 159
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In This Issue:
* COMMENT: Lies, Damned Lies, & Statistics.
* OFFSHORE: No 9-11 Cash Offshore. King of Pop's New Principality?
British OSTs Meet. Bahamas IBC Law Update. Puerto Rico Tax Breaks.
Guernsey Funds Up. Aussie Taxes. California Law Rejection.
* WEALTH: IRS Lawyers Suspended. Lawyers Indicted. $1 Million Lien.
* PRIVACY & RIGHTS: PATRIOT Act Hidden. Regaining Lost Liberty.
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COMMENT: Lies, Damned Lies, & Statistics.
Dear A-Letter Reader:
If it feels like you're drowning in economic statistics, you're not
alone.
Every day, steely eyed economists laboring in windowless cubicles in
Washington, DC inundate us with dozens of seemingly precise indicators
of economic data: gross national product, unemployment, balance of
payments, and many others.
Only the data isn't as precise as you might think. Indeed, it's subject
to near continuous revisions, and in many cases, even the revisions are
revised. In fact, after a particularly large revision in 2002, which
showed much slower economic growth in the years 1999-2001 than had been
previously reported, the past president of the National Association for
Economics accused the government of not noticing a recession until it
was over.
Well, it may be happening again, in the form of the latest unemployment
numbers to be reported by those intrepid Washington economists. Only
this time, the news looks much worse than it probably is in fact.
This was brought to my attention by Scott Barrie, co-editor of a new
weekly investment service called the 'Money Trader'. Scott, a former
trader in the raucous Chicago Board of Trade bond pits, is also
President of Commodity Futures and Equity Analytics, author of
trading "Almanacs" used by professional traders, and a consultant to
institutions investing in bonds and commodities markets.
"Payroll numbers are widely watched by the market for two reasons,"
Scott writes. "First, the consumer is king of the US economy and if
people have jobs, they tend to spend money and support the economy.
After all, how many unemployed people really buy the big ticket
consumer items like cars or TVs which give the economy a big Keynesian
kick?
"Secondly, when Greenspan first took the helm of the Federal Reserve
too many years ago to count, he said he watched these numbers. Simple
logic -- which is all us old pit traders are capable of -- says that if
the economic numbers are good for Chairman Greenspan, they're good
enough for us mere mortals."
For these reasons, says Scott, the release of what he calls the
'Unenjoyment Report' often leads to great market volatility. 'If you're
on the wrong side of the number,' he writes, 'the losses can come quick
and large. If you are right, well, visions of yachts and Italian sports
cars dance in your head.'
It turns out that the unemployment numbers for July were MUCH weaker
than most analysts had predicted. There was a paltry gain of 32,000 jobs
in July, well below the 200,000 increase that analysts were expecting.
And, this led to a bloodbath in stocks and the dollar.
But Scott points out that these numbers are highly suspect, and for that
reason, the US economy is much stronger than it might appear. He points
out, 'The Bureau of Labor Statistics, the government body which compiles
this report says the confidence level for their figures is +/-350,000
jobs.' In other words, within their margin of error, the economy could
have actually added 382,000 job, 10 times more than the official
estimate.
Based on this analysis, and reviewing other statistics that aren't
subject to as much uncertainty, Scott predicts that the economy seems
ready to climb out of the 'soft patch,' as Fed Chairman Greenspan puts
it. Scott's predicting higher interest rates in the coming months,
which means that the value of bonds, particularly long-term bonds, will
fall.
If you agree with his analysis, you may want to consider shifting your
bond portfolio to notes of shorter maturity, as they're less affected by
interest rate spikes. Traders can also speculate with puts on bonds as
Scott is currently recommending to his readers.
In any case, Scott's healthy skepticism of statistics reminds me of a
comment from 19th-century British Prime Minister Benjamin Disraeli:
"There are three kinds of lies. Lies, damned lies, and statistics." Keep
that in mind next time you read that the market has been roiled by an
unexpected statistical announcement, revision, or revised revision.
Mark Nestmann
Vienna, Austria
PS: Find out more about Scott's analysis and trading strategies and
how you can make profits, even during a period of rising interest
rates and falling stock prices, click here.
LINK: http://www.youreletters.com/t/48761/3790594/641837/0/
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COMMENT LINK:
* US Economy Is Strong and Getting Stronger.
LINK: http://www.youreletters.com/t/48761/3790594/644631/0/
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* OFFSHORE *
9-11 COMMISSION FINDS NO OFFSHORE TERROR CASH
Countering charges against offshore havens as terror sources. LINK:
http://www.youreletters.com/t/48761/3790594/644632/0/
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MICHAEL JACKSON HEADED FOR LIECHTENSTEIN?
Is King of Pop headed for tax haven principality?
LINK: http://www.youreletters.com/t/48761/3790594/644633/0/
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BRITISH CARIBBEAN COLONIES MEET
GEORGE TOWN, Cayman Islands: UK territories discuss British ties.
LINK: http://www.youreletters.com/t/48761/3790594/644634/0/
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BAHAMAS UPDATES I.B.C. LAWS
NASSAU: Amendments aim at keeping islands competitive.
LINK: http://www.youreletters.com/t/48761/3790594/644635/0/
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PUERTO RICO BUSINESS TAX HAVEN ENDS IN 2005
Unless US Congress extends historic tax breaks. LINK:
http://www.youreletters.com/t/48761/3790594/644636/0/
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GUERNSEY FUNDS AT ALL-TIME HIGH
ST. PETER PORT: �63.6 billion (US$ 115b) total a 36.7% over a year.
http://www.youreletters.com/t/48761/3790594/644637/0/
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AUSTRALIA STEPS UP OFFSHORE TAX PROBES
Tax Office seeks account info, tax info exchange treaties. LINK:
http://www.youreletters.com/t/48761/3790594/644638/0/
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CALIFORNIA LEGISLATURE REJECTS ANTI-OFFSHORE BILL
SACRAMENTO: Assembly votes down corporate inversion bill. LINK:
http://www.youreletters.com/t/48761/3790594/644639/0/
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* WEALTH *
I.R.S. LAWYERS SUSPENDED FOR FALSE TESTIMONY
IRS agents made deal with witnesses for false testimony on tax abuse.
LINK: http://www.youreletters.com/t/48761/3790594/644640/0/
* Utah lawyers, accountants guilty of offshore tax fraud. LINK:
http://www.youreletters.com/t/48761/3790594/644641/0/
* IRS files $1 million tax lien against baseball's Pete Rose. LINK:
http://www.youreletters.com/t/48761/3790594/644642/0/
* IRS rules on capital gains tax on home hardship sales.
LINK: http://www.youreletters.com/t/48761/3790594/644643/0/
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* PRIVACY & RIGHTS *
GOVERNMENT HIDES PATRIOT ACT INFORMATION
Refuses to reveal use of Act's powers on citizens. LINK:
http://www.youreletters.com/t/48761/3790594/644644/0/
* Liberties taken after 9-11 difficult to get back.
LINK: http://www.youreletters.com/t/48761/3790594/644645/0/
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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER.
* Bob Bauman, Editor * Daniel Aponte, Jr. Research Asst.
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