Issue 23

01/10/05

$100,000 Donation For Tsunami Relief

Issue #23 - $100,000 Donation For Tsunami Relief

1. Currencies v. The Dollar
2. Will Commodities Rise?
3. Bonds In 2005
4. $100,000 Donation For Tsunami Relief

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Dear Friends,

Welcome to the last issue of Investing With Mom before I turn over a
new digit in that ongoing march, called age. However, before you all
rush to send me birthday congratulations, or fabulous presents (Haha).
Allow me to direct your attention to the fourth and final section in
today's issue.

Please help me to raise $100,000 for tsunami relief efforts that are
already underway. My goal is to achieve this by the end of the month,
for reasons that I share below. It won't be all that difficult and in
fact, you will receive much more than you can possibly imagine in
return.

That is your guarantee!

Because this issue is so long and my trip next Sunday to Austin will
be so short, I am saving my travel itinerary update until next week's
issue.

Thus making the tsunami relief efforts the final and most important
part of today's newsletter. Thank you for allowing me to share my
thoughts regarding investing, and please help me in raising at least
the $100,000 goal I've stated.

Now let's get the unimportant stuff out of the way, before we discuss
the tsunami.

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Currencies v. The Dollar

First of all, the Chinese will revalue the Yuan. If they are to comply
with WTO and IMF rules they have to do so by 2007, the million dollar
question has been when they will do it and how they will do it.

However, even before the Chinese revalue the Yuan, I believe that
several Asian currencies will begin to rise against the dollar. Recent
speculation has been pointing to the Thai Bhat and the Japanese Yen,
but I'm also keeping a very close eye on the Korean Won.

The EU is facing many of the same financial problems that has been
causing the dollar to drop for the last several years and while I
think the dollar will continue to slip against the Euro, the drop in
2005 will not be as significant, dramatic or profitable, unless you
are a currency day-trader.

You may be thinking that currencies don't have much of an impact on
U.S. stocks and thus by extension on our Advisory portfolio, but I beg
to differ. Especially when you consider that 6 of the 20 stocks
currently in the Investing With Mom are international companies and an
additional 6 stocks have a significant portion of their sales
originating from overseas.

Here's why this is important, the Dollar dropped over 8% against the
Euro, over 7% against the Pound and nearly 4% against the Yen in 2004
alone.

If the Euro was your primary currency, but you had invested in the
U.S. stock market, you would have had a negative return when taking
into effect the currency devaluation and inflation, not to mention
commissions, fees, taxes and other costs of investing.

When looking at this in reverse, as an American investing in the U.S.,
generating a 13% return in the U.S., or a 5% return in European
stocks, you would have been completely even. In other words, an
American investing in Europe and generating a 6% return would have
nearly doubled an American investing in the Nasdaq or the S&P 500 in
2004,

...once you add inflation, taxes and fees into the equation.

2005 will see the Dollar dropping another 3-5% against the Euro and
Pound, but Asian currencies will be in the high single digits and in
some cases low double digits.

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Will Commodities Rise?

Secondly, commodities will continue to do well and while I doubt we'll
see a second straight year of over 33% gains in oil, we will continue
to benefit from high exposure to commodities.

While I didn't really cover commodities based currencies earlier, I
will say that countries whose entire economies are dependent upon
commodities will see a continued rise in the value of the currencies
through 2005, it will not however be a vertical ascent by any stretch
of the imagination.

As China begins to try tapping the brakes on their economy,
commodities speculators will throw up their hands in frustration and
hopefully exit the market for easier profits elsewhere. What this
means in plain English is simply that the stronger investors, who want
to make long-term gains on the wharehouses full of commodities that
they've been stockpiling, will be able to consolidate and increase
their holdings even more.

While at the same time, the speculators are moving on to greener
pastures.

Trust me when I say this, that several of the most famous long-term
investors of the last 20 years are quietly building up massive
stockpiles of various commodities, because they believe quite firmly
that in 5-10 years they'll be able to sell these stockpiles for a
king's ransom. These are not day-traders, or other Wall St. small fry,
but rather the types of long-term investors with the fortitude to do
what George Soros did to the Pound back in 1992.

Now these investors may never make a Billion dollars in one day like
Soros did, but I don't really care to be on the opposite side of this
current situation.

2005 will be a bit of a roller coaster ride for commodities, but
that's okay because we plan on profiting no matter which direction
individual commodities may go.

Oil will stay high and while we'll probably see a dip down into the
mid-$30's at some point in 2005, I believe that we will still see a
positive return for oil by this time next year. Instead of 2004's 33%,
it will be more along the lines of 5-8% for the year.

Gold will continue to consolidate in the $420-460 range, but will
probably settle for a second straight year of 5% or less. Which is
exactly why we won't invest in gold itself but rather stay in gold
stocks, especially the unhedged ones as they'll provide us with the
returns we're looking for, despite gold's continued sideways trending.

Silver had nearly double the S & P 500's 2004 return at over 17% and I
expect 2005 to be even better. In fact, I believe that silver will
spend significant time bumping up against $10/oz. For the year
however, I'm looking for silver to end 2005 at around $8-8.25 thus
providing us with a second straight 15% year.

Natural gas, steel, copper, timber, orange juice, they'll all do well
in 2005, in fact I'm expecting 10% or more from most of them. My job
of course is to find the safest ways to profit from them.

So far we've found ways to profit from oil, gold, platinum, palladium,
silver, natural gas, and timber among others, and we will continue to
do so.

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Bonds In 2005

Those of you who love U.S. Treasury bonds, might want to go get some
comfort food before you read this section, because it ain't looking
pretty for 2005.

First of all, I expect to see an inverted yield curve by the fall of
2005. For those of you who are not sure what that means, let me put it
into simple terms, "Run for your lives!"

An inverted yield curve means that the short-term treasury notes have
a higher yield than long-term notes. In other words, although you have
greater risk when you hold a long-term treasury note, you will get a
lower interest rate.

Not a good thing!

In fact, after numerous studies, the ONLY accurate prediction of a
recession is an inverted yield curve. Anybody who tries to tell you
otherwise, is smoking something that could land him in jail for
possession.

To quote John Mauldin from his recent 'Canary in a Coal Mine' article,

"In a normal world, short-term rates are lower than
long-term rates. This makes sense, as investors want to
be compensated for the risk of the longer holding
period. There are exceptions to this rule, and at times
short-term rates rise above long term rates, giving
rise to what is known as an inverted yield curve.
Typically, when the yield curve is inverted or negative
for 90 days, you get a recession in about 12 months.
Actually, it is more than typical. In the United
States, every time we have had a period of negative
yield curves, we have had a recession within a year.

"Thus, in August of 2000, as the yield curve in the
United States went negative, I predicted the United
States would enter a recession in the summer of 2001,
and since the stock market loses an average of 43% in a
recession, it followed that the stock market would
tank. Quite the out of consensus call at the time.
Although the NASDAQ was still in a swan dive, the New
York Stock Exchange was climbing to within shouting
distance of its previous high. The economy seemed to be
moving along quite nicely. But the yield curve was
staring us right in the face.

"Now, I was not the only one that had read the Fed
report. I am almost sure that every one of the Blue
Chip economists had read it as well. But none predicted
a recession. Things just looked too good, and none of
the other data suggested a recession in the works. You
can bet Greenspan had read the paper, but he waited
until January to start cutting rates."

Having given you the history, let me give you the future, too.

Those of you who live and invest in England, should watch out. You
currently have an inverted yield curve and I believe that you will
enter a recession by the middle of 2005.

Unfortunately for the U.S., those of you in England will be the
fore-runners, as we will follow your inverted yield curve within 10
months time. This means that we will also enter our own recession in
mid-2006.

What this means for bond holders is that long-term rates will continue
to slide in 2005, while short-term rates will increase at regular
intervals, each time the Federal Reserve raises rates. In fact, by the
time we see an inverted yield curve, short term rates will be between
3.5 and 4%.

If you want to invest in government treasuries, there is a way for you
to do so and also benefit from rising currencies. While my mom and I
will not be able to participate for various reasons, I will be sharing
the plan with my Advisory subscribers in the January mid-month issue,
due out on January 23rd.

You may not have any interest in my stock recommendations if you are a
true blue bond holder, but you should definitely pay attention to my
bond recommendations this month.

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$100,000 Donation For Tsunami Relief

You've probably already heard that Congress passed legislation making
all January donations to the tsunami relief efforts tax deductible on
your 2004 tax returns. While obviously some people will obviously take
advantage of this opportunity, there are probably not a lot of people
aware of a way to get double the tax benefit impact from the money you
donate, by also getting lower taxes in 2005.

The key is which money you use to donate. Obviously, you will not be
able to claim the donation twice, for both your 2004 and 2005 tax
returns, however there is a not so obvious way to have a similar
benefit without the IRS throwing a fit. In fact, those of you who have
been investing for some time, have probably used this method
previously, except that you were only allowed to do for one year at a
time. I've personally used this method of reducing my taxes for each
of the last 4 tax years and will continue to use it for as long as
there is an IRS and an insanely complicated tax code.

You've probably heard of tax loss selling before. It is where an
investor sells a stock investment at a loss, so that they can claim
the loss against their profits and pay less taxes, or no taxes, on
their profitable investments.

In fact, if you had enough losses in 2000, 2001 or 2002, you may have
bumped up against another IRS restriction and that is that you may
only claim a maximum of $3000 in total stock investment losses in any
given year and that any additional losses must be carried over to
future tax years, subject to additional restrictions of course.

Most people who are aware of this tax law are also aware of the
obvious fact that the initial losses must be from the same year, so
initially all the transactions occurred in the same year, thus causing
the enormous losses.

As a result, 99.9% of those who utilize this law will make most of
their stock sales for these tax purposes late in the year, because
that's when they have a better idea of what profits, if any, they will
be forced to pay taxes on. That's why we have a lot of tax-loss
selling in October, November and December of each year.

Now however, what Congress has effectively done is give you a way to
sell any stocks for a loss now and donate the money to tsunami relief
work. Then you claim the donation on your '04 taxes and the loss on
the stock sale against any gains you may have later in the year on
your '05 tax return.

Effectively extending the usual tax loss selling into a new year and
thus providing both a future and a past tax benefit at the same time.

Kind of cool, huh?

After all, you can always buy the stock back in 31 days time, if you
still really like the stock and continue on as if nothing happened. In
fact, you may make even more money on the stock if you lower your cost
basis when you buy it back.

However, I have a way for you to donate nearly $450, and get one
year's free access to the Investing With Mom Advisory service at the
same time. Of course, to receive the tax deduction on your '04 taxes
you must make the donation by January 31st, 2005, so the one year free
access, will also expire on January 31st.

What makes this deal so incredible is that you don't have to pay a
dime, because you will be reimbursed $500 in April or May, depending
on how quickly you follow through. This $500 is in addition to
whatever tax refund, you may or may not be getting for 2004 anyways,
because it's not the IRS who will be giving you the $500, but rather
it's me.

Yes, I will give you $500, if you make a minimum donation to the
tsunami relief efforts through my recommended group, People That Care
International, and you subscribe to the Advisory service by the end of
Jan.

I'll be sending existing subscribers a similar offer, so if you've
already subscribed, don't worry I'm not forgetting you. In effect,
you are making a tsunami relief donation, and getting the tax
deduction, with my money and you are receiving a year's subscription
to the Advisory service thrown in for free, not bad eh?

In order to recieve the $500, you must have a mortgage or a monthly
rent payment. And you will be required to sign up for what amounts to
an electronic bill paying service, with a company called Brixdale for
at least 3 months. The service does not have any fees of any kind, and
you can quit at any time, but to get the $500 you will have to try the
service for free for 3 months.

After the third month, $500 will be deposited into your bank account,
as I said earlier depending upon how quickly you follow through it
would be either April or May 2005. If you like the program, you can
continue with it past the 3 months. Continuing is completely optional,
but in order to entice you to continue, Brixdale will give you a $4000
vacation package.

All in all, a darn good deal for everybody involved. In fact, if just
1 in 10 people who receive this newsletter were to take advantage of
my generous offer, we would generate almost $107,000 for the tsunami
relief efforts.

So, that's the challenge, help me generate a minimum of $100,000 for
tsunami relief in the next 20 days.

Bruce Phillips and PTC Intl. have already gathered over $2 million
in needed supplies, our donations will help them get those supplies to
SouthEast Asia ASAP!

In order to do this, you need to contact Bruce Phillips at
relief@airmail.net or 972-262-7635 and tell him that you'd like to
make a donation of at least $421. Be sure to tell him that you heard
about PTC Intl. through me, Andy Prior, and the Investing With Mom
website.

Then you must subscribe to the Advisory service for a one year
subscription. After you subscribe, you must send me an e-mail telling
me that you donated at least $421 to PTC Intl. and providing me with a
check #, so that I can follow up with Bruce Phillips.

Once I have followed up with Bruce, which should take just a couple of
days, I will then send you an e-mail with instructions on how to
enroll in Brixdale's electronic bill paying service and receive your
$500.

It's really just that simple. In order to reach the $450 donation
figure I mentioned earlier, I will be donating 30% of all revenue
generated this month, just as I mentioned in my blog.

If you should choose to do so, you should definitely give more than
$421 to PTC Intl. and thus increase the total donation as high as
you'd like. For some of you that is no problem, but I realize that for
some of you the $421 might seem a stretch, so I'd like you to remember
that you will be getting both your donation and your subscription to
the Advisory back within 3 months.

Think of it this way, you're loaning me $421 to donate to tsunami
relief efforts, paying for my Advisory newsletter for one year and in
just 3 months time, I will repay your loan with $79 interest, for an
18.8% return in just over 90 days.

Not to mention the fact, that you haven't actually loaned me the
money, so you will still recieve the tax benefits of having made the
donation in 2004, thanks to Congress' recent legislation.

At which point, you can take the $500, use it to invest in several of
my recommendations and, based on last year, generate an additional 20%
give or take by the end of 2005. 20% on the $500, would come to $100,
for a total return of $179 on your original $421 donation, or a
almost guaranteed 42.5% return on your money in just your first year's
subscription to the Advisory service.

Oh and by the way, the $500 from Brixdale and me isn't necessarily an
offer that I'll be able to continue after the month's end, so please
take advantage right now and help out in the tsunami relief efforts as
well.

Show the world, that Americans are the most generous people in the
world and that we don't have to use the U.N.'s bureaucracy to make a
difference, either.

Finally, my apologies to my international subscribers as Brixdale only
does business in the US, so the $500 offer can only be made to US
subscribers. However, if you are an international reader of this
newsletter, send me an e-mail to learn how you can make a donation and
get a special offer, just for you. You must give me your exact address
and country in your e-mail for verification purposes.

Investments good for my mom and you,
Andy Prior

PS. Keep in mind that any tax-deductible donations to the tsunami
relief efforts will also lower your taxes. Now while that may seem
obvious, let me give you some numbers.

If you donate just the $421 that I'm recommending, and you are in the
highest tax bracket of 35%, then you will lower your tax liability by
$147. However, if you are in the 10% tax bracket, then you will lower
your tax liability by $42.

So no matter what, you will make an additional $42 on my offer, up to
a maximum of $147, just from your tax savings. This increases the
"interest" you make on the deal from 18.8% in 90 days, to at least
28.8% in 90 days. If you are in the highest tax bracket, you will
actually make 53.8% on your $421 donation, in just 90 days!