31. October 2009 by Dan Walkow, CFA, CMT.

For all the bluster about cracking down on Americans who hide money overseas, the U.S. turns a virtual blind eye to foreign tax cheats who are parking money in the U.S. banking system. In particular, the U.S. effectively serves the role of Switzerland for Mexico, which suffers from rampant tax evasion — rates go as high as 70% among professionals and small businesses, and 40% among larger businesses. Much of the estimated $42 billion a year of illicit funds flowing out of Mexico each year (not including drug cartel money) ends up in U.S. banks, according to Global Financial Integrity, an advocacy group in Washington.

It’s not that the U.S. has no policies in place to stem the flow of illicit monies into the U.S. banking system. American banks are in fact required to file suspicious activity reports (SARs) for cash deposits over $10,000 or when they detect deposit patterns in lower amounts, known as “structuring.” The problem is that the U.S. government is overwhelmed by more than a million of these reports a year. Computers can detect some irregularities, but these need to be combed through carefully by 85 SAR review teams — combining FBI, IRS, DEA and U.S. Attorneys — across the country. That’s why, says international white collar crime lawyer Bruce Zagaris, “U.S. officials have practically begged banks to call them when they have something really good.”

This could change significantly with a seemingly simple regulatory adjustment, which Mexico has requested: they want the same information-exchange arrangement that Washington exclusively has with Canada, which automatically reports interest income paid by U.S. banks to Canadian account holders.

Look for even tigher reporting regulations and make absolutlely sure you file reports and disclosures to the IRS in a timely fashion.. Read More here.

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31. October 2009 by Dan Walkow, CFA, CMT.

Ottawa did not promise a guarantee fund in the pension-reform package announced this week. Such a promise might only have made matters worse.Instead, the measures unveiled by federal Finance Minister Jim Flaherty would inch companies that are under federal watch toward making their promise to employees of a future income in retirement more storm-proof, more reliable.

Ottawa will block banks, airlines, railways, telecommunications and other federally regulated companies from taking contribution holidays when their pension plans are less than 105 per cent funded.

It will block those companies from improving benefit promises when their plans are less than 85 per cent funded.

It will require the companies to top up within five years the plans they deliberately terminate, without the company going out of business, as the provinces already require.

Other countries have pension guarantee funds that cover employees of bankrupt companies.

Ontario also has a guarantee fund, such as it is. But the Pension Benefits Guarantee Fund (PBGF) also has no money.

So, in the last provincial budget, the government emphasized it has no obligation to make up the shortfall or extend loans as it has in the past.

The pension issue is front and center for most Canadians. If you belong to a defined benifit program you really want to understand the health of your plan and if it is a signifigant portion of your retirement wealth you may want to take proactive action. 

It does little good after the fact, ask any Nortel pensioner who are faced with tough decisions at this point in time. Read more.

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28. October 2009 by Dan Walkow, CFA, CMT.

Abuse of wealthy elderly parents by their greedy adult children and other relatives is as common as sin — so common that legal eagles have coined a name for it: elder abuse. More than 500,000 reports of such abuse against elderly Americans are sent to legal authorities every year, and millions more cases are thought to go unreported. Indeed, U.S. Senate sources estimate that only 16% of all elder abuse cases are reported.

A comprehensive survey by the MetLife Mature Market Institute concludes that — Read more

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28. October 2009 by Dan Walkow, CFA, CMT.

A wealthy accountant who provided extensive help in the tax evasion probe of Swiss bank UBS AG was sentenced to a year of house arrest Wednesday after admitting he concealed about $6-million (U.S.) in assets from the IRS.Steven Michael Rubinstein, 55, was the first U.S. citizen charged in the probe. U.S. District Judge Marcia Cooke said his prosecution sent a message around the globe about the risks of hiding assets in offshore accounts — and that he deserved credit for helping U.S. investigators find more tax cheats and crooked bankers within UBS and other institutions in Switzerland and elsewhere. Read more here.

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26. October 2009 by Dan Walkow, CFA, CMT.

The U.S. Standard & Poor’s 500 Index is about 40 percent overvalued and headed for a drop as central banks pull back on securities purchases that pushed up asset prices, according to economist Andrew Smithers.Declines are also likely because banks will need to sell more shares to raise capital and restore their financial health, the economist and president of research firm Smithers & Co. said in an Oct. 23 interview at Bloomberg’s Tokyo office. A 40 percent tumble from the S&P 500’s price at the end of last week of 1,079.60 would take the gauge to 647.76, below its March low.

Smithers is not some pollyanna and his views merit condsideration. Read more here.

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25. October 2009 by Dan Walkow, CFA, CMT.

Former President of France,  Charles de Gaulle famously resented America’s paramount position in the global economy in the 1960s. He complained that the US enjoyed exorbitant privileges and deficit without shedding tears created by dollars, and that it plundered resources and factories of other countries with its worthless waste paper.

A view from China, to read the whole thing go here.

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14. October 2009 by Dan Walkow, CFA, CMT.

Heads up for Canadian Pensioners. The rules are changing.

Deferring collection of your Canadian Pension Plan benefits could pay off financially under proposed changes to the CPP rules, but first it’s important to undertake the somewhat morbid task of figuring out how long you expect to live.

The proposed changes, which will begin to be phased in in 2011 if they’re approved by Parliament and the provincial governments, aim to provide retirees and older workers with greater flexibility and more choice.

If implemented, the changes would increase or decrease pension adjustments for people who choose to receive their CPP benefits either earlier or later than the normal collection age of 65. Read full story here.

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13. October 2009 by Dan Walkow, CFA, CMT.

According to Mark Hurbert “the data from TrimTabs Investment Research shows that the net outflow for the month of September from domestic equity open-end mutual funds was $11 billion — the biggest monthly outflow since March, the month in which the bear market hit bottom. This trend continued for the first five trading sessions of October (through this last Wednesday, in other words), over which time an additional $4.1 billion was pulled out.

By the way, the other trend I mentioned in my mid-September column appears to be alive and well and, if anything, getting stronger: I am referring to mutual fund investors’ love affair with bonds. According to TrimTabs, open-end bond mutual funds in September had their strongest month of the year in terms of net new cash invested in them. And, if we extrapolate on the data for the first five trading sessions of October, October might be a month of even bigger net inflows.” Read full story here.

This rally continues to climb a wall of worry. Could the masses be wrong again with bond prices at nose-bleed levels while stocks continue to recover but only benefiting the courageous few?

Bubble bubble me thinks its the bond market!

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13. October 2009 by Dan Walkow, CFA, CMT.

Three days after the Reserve Bank of Australia unexpectedly raised interest rates, the monetary policy committee of South Korea’s central bank held a meeting. The Oct. 9 gathering was closely followed because the Australian move raised expectations that other central banks would also tighten. Korea held the line. Citing “uncertainty as to the economic growth path,” the Bank of Korea kept interest rates at an ultra-low 2%, the result of six rate cuts over the past year.

Still, it is only a matter of time before Korea follows Australia’s lead. So will the People’s Bank of China, the Reserve Bank of India, the Reserve Bank of New Zealand, the Monetary Authority of Singapore — and perhaps several months down the road, the European Central Bank. As economies recover and jobless rates fall, most policymakers will raise interest rates to head off the inflation that could result from the massive fiscal stimulus spending launched by governments around the world to combat the global recession.

Most will raise rates — but one very conspicuous central bank is unlikely to follow suit. With the U.S. jobless rate at 9.8% and still rising, the U.S. Federal Reserve cannot risk a rate increase anytime soon, despite the danger of inflation. Read full story here.

Interest rate increases around the world will only increase pressure on the downward move in the USD.

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13. October 2009 by Dan Walkow, CFA, CMT.

Many Americans dread April 15, the deadline for filing their income tax returns. But some well-heeled people are trembling over another looming tax day: Oct. 15.

Thursday is the deadline for Americans to come clean about the money they have hidden offshore, in places like Swiss bank accounts. No one can say with certainty how much money is out there — the accounts are secret — but the hoard may be tens of billions of dollars.

Several thousand wealthy people have come forward, hoping to avoid large fines or possibly even prison. But many others are still weighing their options. The choice is stark: They can confess and pay the penalties, or gamble that they will not get caught. With the deadline only days away, tax lawyers say they are being inundated by anxious clients.

Read the full story here.

This is an American story but I would not get to comfortable as a Canadian as one should expect to see similar actions from the CRA.

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