Monday, June 30, 2008


What if I told you gasoline is cheaper today than it was 45 years ago! Its true and I can prove it!!

In 1963 gasoline was about $0.30 to $0.35 per gallon. Back then there were these things called silver dollars and they were interchangeable with paper dollars. So one dollar would buy you about 3 gallons of gasoline. (By the way when was the last time you received a piece of real silver as change?) Today that same silver dollar worth $17.50 will buy you over 4 gallons of gas! What's going on?!?!!

Any comments?

Posted by Eric Malachowski of Project Liberty Read more!

Saturday, June 28, 2008


I get a lot of questions about this. At one of the last Master Minds, one of the participants posed a scenario in which he has a company where he purchases aircrafts and then leases them out. These aircrafts are useful for this purpose for about 3 years, at which time they are usually sold and replaced. He asked me what type of corporate entity he should use and also how he would go about accelerating the depreciation of the aircrafts in this first 3 years. I will attempt to answer his question in this posting.

The income of a C corporation can be taxed twice: once at the entity level and again at the individual level when profits are distributed as dividends to shareholders. Not so with an S corporation or LLC; the income from these entities passes through directly to the owner’s individual tax return, thereby escaping double taxation. In this regard the S corporation and LLC enjoy an advantage. However, Section 179 of the Internal Revenue Code (modified after the September 11 attacks and again as part of the Economic Stimulus Act of 2008) can enable owners of C corporations to save thousands of dollars more per year on taxes than if they were to use the S corporation or LLC structure. Section 179 deals with the election to expense business equipment in the first year that it is placed into service (see “Qualifying Property” at the link I’ll give below) as opposed to depreciating it over the course of its useful life. The same deduction is also available to the owner of the C corporation on his individual tax return. Yes that’s right. The owner of the aircraft leasing business can claim the deduction for his aircraft on his corporate return and then again on his individual return. Gotta love that loophole!

Using another example, suppose in 2007 a business owner purchased $125,000 of computer equipment, used 100% for business purposes; and a $50,000 SUV (weighing at least 6,000 pounds--see ) used 50% for business. The maximum 2007 section 179 write-off is $125,000, so an S-corporation or LLC would allow the owner to reduce taxable income by the full cost of the computer equipment; however, because the owner is not considered an entity separate from the S-corporation or LLC for tax purposes, the SUV would not be available for section 179 treatment. But the owner of a C-corporation could write off the computer equipment on the corporation’s return; then reduce his taxable personal income by $25,000 ($50,000 cost X business use %, subject to $25,000 limit for SUVs) for the vehicle.

We use 2007 as an example because the Economic Stimulus Act of 2008 allows amended returns to be filed for 2007 at late as October 15, 2008—assuming extensions have been obtained. But 2008 has its own unique Section 179 allowances, chief of which are increased limits and bonus depreciation. The maximum amount that can be expensed under Section 179 for 2008 is $250,000 and the phase-out begins at $800,000 (e.g. if 2008 equipment purchases total $900,000, the available 179 deduction is reduced dollar-for-dollar by the amount in excess of the cap, to $150,000) increases of $125,000 and $300,000, respectively, over 2007. In addition, bonus depreciation of 50% (in addition to regular annual depreciation) is available for 2008. See for an example. As the table below indicates, Section 179’s generosity is scheduled to evaporate as of 2010.

Though Section 179 cannot be used to reduce taxable income below zero (that is, to generate a loss), it can be exploited to produce tax savings that are more than cash paid for expenses. With a non tax/capital lease, $250,000 a person or entity can write off $250,000 in leased equipment, despite cash outflows for the lease payment being substantially less than this amount. See

Comments? Questions?

Posted by Greg Miller, CPA

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Thursday, June 26, 2008

Listen to PL Advisor interview on Gold Investing with Dr. Paul!

For this episode of Live On Purpose Radio, Dr. Paul interviews Eric Malachowski, who has an interest in and considerable experience with gold and silver. The diluting of paper money is discussed, with the solution being a return to real value, both in our money and in our focus. Finding the ways that you can personally add real value to others is the foundation of establishing a firm economic future.

The interview can be heard here at Live Purpose Radio Read more!

Using the Illinois Land Trust as a creative tool for real estate acquisition or liquidation. What are the potential pitfalls in this deal scenario??

At one of our Master Mind sessions, we had John Acquisto join us to illustrate how these Trusts can be used as a creative vehicle for acquiring or liquidating real property. John Acquisto specializes in helping investors use this tool properly. John gave us a variety of examples where an investor could use the Trust in an acquisition and/or liquidation. However, we only saw all of the good sides, or how the deal could work successfully. What I want to know is: What are the holes? OR how could this deal potentially fall apart? Let’s consider one of the examples he gave us at the Master Mind:


  • Kevin is trying to sell a house and has a loan on the property. (Seller)
  • Melanie has amazing credit score, 780.
  • Rick wants to buy the property. (Buyer)
  • John is intermediary, putting the deal together. (Investor)

Let’s say the Seller, Kevin, has an adjustable arm loan and is going to lose the property as he can no longer afford to make the payments. The Lender agrees to do a short sale, and Melanie (the FICO borrower) buys the property at a discounted price. (Takes a loan on the property in her name). Rick (the buyer) agrees to buy the property, making payments on Melanie’s loan. Here, the Investor has structured the deal with Rick to purchase the property at a higher value than the loan Melanie has on the property. This would be a positive cash flow every month from the difference between Melanie’s mortgage payment and Rick’s payment. In this example, you can structure the Trust Documents such that you can create this unique deal scenario. The Trust is like “silly putty for real estate” in that you can use it to accomplish whatever creative ends you wish to achieve through it. The percentages to the beneficiaries in the Trust as described by the Trust documents could potentially be:
  • Positive Cash Flow every month: Investor beneficiary and Credit beneficiary in the Trust split the positive cash flow each month. (the difference between Rick’s payment and Melanie’s debt service on the loan).
  • Investor beneficiary gets 75% of equity when Rick “purchases” the property. Credit beneficiary could get 25% of this beginning equity. (Terms are obviously negotiable here).
  • Future Equity in this transaction: If Rick refinances at a later date or finds a buyer once the property has appreciated above his loan amount, he then gets 50% of Future Equity. Investor beneficiary gets 40% of future equity, and credit beneficiary gets 10%. (Sometimes credit beneficiary will demand more like 25% of future equity out of the transaction).
As I understand it, the best part about using a Trust to structure a deal like this is that the Trust documents can be written such that each party in the deal has their part legally defined and everyone is protected. However, what are the potential pitfalls here? Could anyone comment on this and help me see them if there are any??

by Corey Curwick of Project Liberty. Read more!

Monday, June 23, 2008

Abandoning our Gold Standard=Abandoning our Morals?

According to history, does the Gold Standard provide more than just a sound monetary system? Does the economy affect the morals of a society?

These are questions I find myself asking as I have learned more about the history of money, particularly the use of fiat currency in history in lieu of gold and silver.

What is the evidence?

In 1935, there were three Gold Clause cases brought before the Supreme Court where all three plaintiffs were disputing the confiscation of gold during the Roosevelt administration and the abandonment of the gold standard. In effect, these case were testing the constitutionality of the U.S. government casting aside the gold standard in a Joint Resolution of Congress in 1933.

Publius This resolution effectively amended the Constitution (contrary to the Amendment process in Article V) voiding Article I, Sec. 10, Cl. 1 wherein it states "[No State shall ...] make any Thing but gold and silver Coin a Tender in Payment of Debts...".

No big deal, right? All is well in America because a gold standard, a fixed monetary standard with specific weights and measures, is not necessary anymore, right? We need to put our trust and faith in the Federal Reserve and the direction it most assuredly gave the FDR Administration, right? Regarding the allowing of money issuance to be given to a private bank, Jefferson said:

"I believe that banking institutions are more dangerous to our liberties than standing armies . . . If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." -- Thomas Jefferson -- The Debate Over The Recharter Of The Bank Bill, (1809)

Jefferson, as well as many of wise and history-learned men and women, warned us about amending the Constitution and putting the power to control the issue of currency in the hands of private banks. Abandoning the gold standard was the next logical choice, right?

Were there any warnings, even prophesies, made at the time of this Supreme Court decision? Did anyone see something wrong with the above-mentioned resolution?

The simple answer is yes. Justice James C. McReynolds was one of the four judges that disagreed with this resolution and voted against it. The speech he gave was considered to drastic to be printed in the court records so a spoken version was printed in the Wall Street Journal on February 23, 1935. As you read excerpts from his comments, think about the questions I posed at the beginning of this blog piece.

"Mr. Justice Van Devanter, Mr. Justice Sutherland, Mr. Justice Butler and I do not accept the conclusions announced by the court. The record reveals clear purpose to bring about confiscation of private rights and the repudiation of national obligations. To us these things are abhorrent and we cannot believe the wise men who framed the Constitution intended they should find shelter there. On the contrary, words that ought not to be mistaken strictly inhibit them."

"It is impossible to estimate the result of what has been done this day. The Constitution as many of us have understood it, the Constitution that has meant so much, has gone. The guarantees which men and women heretofore have supposed protected them against arbitrary action have been swept away. The powers of Congress have been enlarged to such an extent that no man can foresee their limitations. We stand today stripped of the fundamental guarantees we heretofore supposed stood between us and arbitrary action."

"No one denies the power of Congress to adopt a monetary system, but is does not follow that because Congress may adopt some monetary system that it may adopt any system. I must adopt a reasonable and proper one to carry out the purpose for which the power was given. What was the purpose? It was to fix standards, to permit Congress to provide a circulating medium. It was not intended to enable Congress, under the guise of law, to repudiate. It was intended to give Congress the power to meet its honest obligations. That was the effort in the Legal Tender cases. But here we have the monetary system---the intent, I almost said the wickedness, of which is almost beyond comprehension."

"We protest. That never was, it never ought to be law. Shame and humiliation are upon us."

"...anarchy and despotism are at the door. Moral and financial chaos may confidently be expected..."

What is all the fuss? Was Jefferson right? Was Justice McReynolds right?

Any thoughts?
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Friday, June 13, 2008

Reason For High Gas Prices?

If we increase supply, gas is cheaper. Very simple. Congress is creating an oil shortage. You be the judge as to why our gasoline prices are high.

May 21, 2008
Earlier today, the Senate Judiciary Committee summoned top executives from the petroleum industry for what Chairman Pat Leahy thought would be a politically profitable inquisition. Leahy and his comrades showed up ready to blame American oil companies for the high price of gasoline, but the event wasn't as satisfactory as the Democrats had hoped. The industry lineup was formidable:

* Robert Malone, Chairman and President of BP America, Inc.;
* John Hofmeister, President, Shell Oil Company;
* Peter Robertson, Vice Chairman of the Board, Chevron Corporation;
* John Lowe, Executive Vice President, Conoco Philips Company; and
* Stephen Simon, Senior Vice President, Exxon Mobil Corporation.
Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats. One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market. John Lowe pointed out:
”I cannot overemphasize the access issue. Access to resources is severely restricted in the United States and abroad, and the American oil industry must compete with national oil companies who are often much larger and have the support of their governments. We can only compete directly for 7 percent of the world's available reserves while about 75 percent is completely controlled by national oil companies and is not accessible.”
Stephen Simon amplified:
Exxon Mobil is the largest U.S. oil and gas company, but we account for only 2 percent of global energy production, only 3 percent of global oil production, only 6 percent of global refining capacity, and only 1 percent of global petroleum reserves. With respect to petroleum reserves, we rank 14th. Government-owned national oil companies dominate the top spots. For an American company to succeed in this competitive landscape and go head to head with huge government-backed national oil companies, it needs financial strength and scale to execute massive complex energy projects requiring enormous long-term investments.
To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day.
Because foreign companies and governments control the overwhelming majority of the world's oil, most of the price you pay at the pump is the cost paid by the American oil company to acquire crude oil from someone else.
Last year, the average price in the United States of a gallon of regular unleaded gasoline was around $2.80. On average in 2007, approximately 58 percent of the price reflected the amount paid for crude oil. Consumers pay for that crude oil, and so do we.
Of the 2 million barrels per day Exxon Mobil refined in 2007 here in the United States, 90 percent were purchased from others.

Another theme of the day's testimony was that, if anyone is 'gouging' consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers' anxieties about gas prices by reducing taxes.

The last theme that was sounded repeatedly was Congress's responsibility for the fact that American companies have access to so little petroleum. Shell's John Hofmeister explained, eloquently:
”While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation's consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations.”

Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.
Senator Sessions: “I agree, it is not a free market.”

According to the Department of the Interior, 62 percent of all on-shore federal lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.
The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record. When many of these policies were implemented, oil was selling in the single digits, not the triple digits we see now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies. As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources. The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exploration and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.

Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Democrats' latest efforts to block energy independence:
HATCH: I want to get into that. In other words, we're talking about Utah, Colorado and Wyoming. It's fair to say that they're not considered part of America's $22 billion of proven reserves.
HOFMEISTER: Not at all.
HATCH: No, but experts agree that there's between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that's good oil, isn't it?
HOFMEISTER: That's correct.
HATCH: It could be recovered at somewhere between $30 and $40 a barrel?
HOFMEISTER: I think those costs are probably a bit dated now, based upon what we've seen in the inflation...

HATCH: Well, somewhere in that area.
HOFMEISTER: I don't know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.
HATCH: I guess what I'm saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.
HOFMEISTER: I believe we could.
HATCH: And we could help our country alleviate its oil pressures.
HATCH: But they're stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.
HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.

The committee's Democrats attempted no response. They know that they are largely responsible for the current high price of gasoline, and they want the price to rise even further. Consequently, they have no intention of permitting the development of domestic oil and gas reserves that would both increase this country's energy independence and give consumers a break from constantly increasing energy costs.

Every once in a while, Congressional hearings turn out to be informative

-Posted by Jake Lewis of Project Liberty

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Wednesday, June 11, 2008

Assessing Risks of Projects

One of the most effective mediums I have found to identify and then mitigate risk in a project is to have a Master Mind meeting about it. Over the years, I’ve gotten better at assessing risks associated with investments by using this tool described by Napoleon Hill in ‘Master Key to Riches.’ This tool is called the Master Mind Principle. Usually those who will be involved in the project or investment are in the master mind, along with one or more of my advisors such as my attorney or my CPA.

Assessing risk is much easier if you break it down by categories. What we do then is get together and go through each category one by one and try and find as many potential risks that we can think of in that category. Once we feel like we’ve identified all of them, we then try and think of ways to mitigate the risks if possible. Using the master mind in this way has been so helpful for me to be able to see if something is even going to work and if so, how it will work. Doing master minds has saved me a ton of time and money because usually other people are better at spotting things that you may have overlooked. This is what the master mind principle is all about. Here are a few examples of categories of risk that we pick through:
• Financial Risks-funding delays, each partner has own financial situation, cash flow situation, capital reserve
• Market-related Risks-seasonal sales cycles, competition, our recent sub prime crash is perfect example
• Political Risks-imminent domain, nationalization of industry, stock market affected by elections, tax law changes indirectly from newly elected leader or anticipated changes in the future
• Economic Risks-currency, recession, availability of commodities, price changes of commodities
• Social Risks-social trends and changes
• Environmental Risks-natural disasters, fire, flood
• Security Risks-crime, theft, vandalism, negligence
• Legal Risks-liability, lack of contracts, insurance-related

What else am I missing here?

By Corey Curwick
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Monday, June 9, 2008

How Do You Find Comps on Properties?

My friend Bart Hansen asked me how I get comps when evaluating investment properties. Well, if you aren’t a realtor and don’t have access to MLS data, ask a realtor to give you “sold” data for the last 6 months. You can use a couple of realtors for this but just remember, they will want something out of it. Its good too if you can find a friend who is a realtor that will print out the sold data for you. You can also go to MLS to find only “for sale” data. On average, houses sell for 10% below the asking price so you can factor that into your “for sale” data should you not have any “sold” data available.

By Cary Valerio Read more!

OPR – What the heck does this mean?

OPR stands for “Other People’s Resources” and this term is used when talking about investing. It’s a popular term used by Robert Kiyosaki in his books. What the heck does this really mean though? Having some form of control over your assets is called leverage. When you leverage Other People’s Resources to accomplish your investment goals, some examples are using outsourcing, utilizing virtual resources, or doing co-ventures or forming strategic business alliances. You can also count licensing as a form of leveraging OPR.

Posted by Chad Albury Read more!

Negotiation Jujitsu

Don’t we all wish we could be better negotiators? I just finished reading an amazing book on Negotiation called ‘Getting To Yes’ by Roger Fisher and William Ury. It’s the kind of book you want to read more than once as there is just so much good stuff in there. Some of my favorite content dealt with ‘tricky tactics’ used by some of the best negotiators. Being good at spotting these tactics during a negotiation can make or break it. An example is the use of deliberate deception. This is usually when someone is offering phony facts, giving less than full disclosure on things, or is just not being clear on who has authority to make decisions. I had someone try and use this on me recently. This investor and I have been going back and forth on two separate deals. One deal is in his best interest to get closed and the other deal is in my best interest to get closed. Every time that he and I would get together to negotiate on the terms, this guy would employ the tactic of deliberate deception. He would always give less than full disclosure on the details. When I finally cornered him at the end of the negotiations, he would always say he had to consult his attorney before making any decision. Almost as if he couldn’t give me an answer because his attorney had utmost authority or something!!?? After reading this book I feel more confident about being able to identify these kinds of tactics and either counter them or call out the person out who is trying them on me. Does anyone have any negotiation stories they’d like to share on this subject? Any tricky tactics that have been used on you?

By Corey Curwick Read more!

Any Experience Using Illinois Land Trusts to Acquire or Liquidate Real Estate?

Does anyone have experience using trusts with real estate investment properties? Most people utilize the Trust as an asset protection medium but they seem to be a good tool for acquiring and/or liquidating properties, particularly in today’s real estate market. You can pretty much structure the Trust documents to accomplish whatever ends you wish to accomplish with a piece of property. It seems that the Trust is also a medium through which you can come to an agreement with multiple parties, each party playing its unique role in the deal, each role described in a structured, legal language (Trust documents) that protects each party.

If anyone has used this tool please share your experiences.

By Melanie Dewey Read more!

China’s Communist / Capitalist Hybrid - “Market Stalinism”

America is truly unique in that we were the first Nation where the Founding Law was structured specifically to allow the entrepreneur to thrive. Good or bad, man was finally given the opportunity for his mind to be free to create whatever he wanted in a unique environment (U.S.A.) that guaranteed his liberties. With this new freedom came an initiative for man to create things he never had sufficient reward to create in the past. From this new initiative came an explosion of progress, technology, and life as we now know it.

On this note, has anyone seen this article in this month’s Rolling Stone, “China’s All Seeing Eye” ?? Here is the link:

This article discusses a major issue we are dealing with right now which is the gradual erosion of our liberties, i.e. freedoms that we were guaranteed by the Founding Laws of this Nation. With the actions taken by Homeland Security in recent years, I can see that what is happening in China is also beginning to take place here in the U.S. and ultimately our citizenry will be convinced by the media that it’s a good idea. Here’s an excerpt from the article:

The end goal is to use the latest people-tracking technology — thoughtfully supplied by American giants like IBM, Honeywell and General Electric — to create an airtight consumer cocoon: a place where Visa cards, Adidas sneakers, China Mobile cellphones, McDonald's Happy Meals, Tsingtao beer and UPS delivery (to name just a few of the official sponsors of the Beijing Olympics) can be enjoyed under the unblinking eye of the state, without the threat of democracy breaking out.

Please take a look at this article and comment on it. What will be the result if one or more of our cities hosts such an ‘experiment in control’ ??

Posted by Corey Curwick
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