Q: How do you pronounce “Skousen?”
A: My surname is often misspelled and mispronounced. Skousen is Danish and is pronounce “Skowson,” where the “Skou” sounds like “cow.” (And that’s no bull!)
Q: What does A.E.I.O.U stand for?
A: A.E.I.O.U. comes from the tombstone of Frederick III, the first Hapsburg emperor. Many believe it’s Latin or German for “Austria will rule the world.” For me, it means, “Austrian Economics Is Overall Universal.” I write about this in my book, “Austrian Economics for Investors” and mention it in my newsletter, Forecasts & Strategies, on occasion.
Q: I followed your recommendation for avoiding an audit by filing a late return. I filed an extension, but a couple of months later I was audited. Obviously, your method doesn’t work!
A: I said that filing a six-month extension on your return will reduce, not eliminate, your chances of an audit. The only way to completely avoid an audit is to file the short form and pay half your income to the government! I got the idea from tax attorney Randy Bruce Blaustein, who publicized the technique in his best-seller, How to Do Business with the IRS. It’s possible the IRS are onto his idea. That’s always the drawback of publicizing good tax ideas.
Q: I would like to buy some stocks anonymously. How can I do this?
A: Most foreign securities are issued in bearer form so you could buy stocks anonymously through a Swiss bank or other foreign brokerage firm. The foreign broker would have your name and address, but you could close out your account after you purchase the stock and take delivery of the certificate. In the U.S., the SEC requires all securities to be registered in some name. But you can obtain registered stock in your company name, a trust or even in “street name.” Street name stock is registered in the name of a major brokerage firm, and all major brokerage firms own street name stock for their own account.
From a tax point of view, purchase only securities with no dividends so no 1099 form is reported to the government.
Q: It does create quite a stir for me to be getting mail from Mark Skousen. How can I live a low-profile lifestyle with a guy like you in my mailbox?
A: Having privacy comes at a cost! Use this plan to control the kind of mail you receive:
1. Make sure all your mail goes to a post office box or to your business address — never to your home.
2. When ordering through the mail, use a company name unrelated to your personal name.
3. Tell companies you order from that you don’t want your name and address rented.
4. Contact Direct Mail Marketing Association, 6 East 43rd St., New York, NY 10017 to request your name to be removed from as many mailing lists as possible.
Q: I have some questions regarding deposits abroad. Would it be possible to consult with you by phone or in person?
A: Writing, researching and speaking occupy my entire time, so I severely restrict the number of personal consultations I do. I do occasionally meet with people when I am at an investment conference, which is the best time to catch me.
I no longer offer personal consultations on financial privacy questions, such as how to transfer large sums of money outside the country. Because of the legal nature of these questions, you’ll have to go elsewhere for answers. I am not a lawyer.
Q: Okay, Dr. Skousen, since you’re so smart, what’s the answer to this one: Buy or lease? My car dealer says that a lease is a much better deal, but I’m still not sure. What’s your view?
A: The answer may surprise you: buy a formerly-leased car!
You have three options: (1) Lease a new car, (2) buy a new car or (3) buy a used car. The first option is clearly the most expensive. Yes, leasing has its advantages. You get a luxury car with nothing down, low monthly payments, hassle-free repairs and a guaranteed buy-back. One out of every four cars is leased today. But there is no free lunch. You pay for this convenience out of your pocketbook. And buying a new car means losing 20% or more of the value of your purchase the day you drive it off the lot.
If you want to save money, check the classifieds and buy a late-model used car, preferably two to three years old with low mileage (25,000 or less). Look especially at used-car lots operated by major dealers. That’s where the bargains will be found over the next few years, as a glut of leased cars come onto the used car market.
Q: I was surprised by your endorsement of the Libertarian Party. Doesn’t a vote for the Libertarians simply take away a vote from the Republicans and the political change this country so desperately needs?
A: In a close race, you have a point. But look at it this way. A large vote for the Libertarian presidential and other political candidates sends a message to Washington: More and more Americans favor less government. The Libertarian Party is much the same as the old American Socialist Party. It was never much of a vote-getter, but it had tremendous influence. Norman Thomas, the perennial Socialist candidate, finally stopped running because he said the Democrats had adopted his platform.
The same could be said about Libertarians — while Republicans are getting votes, it’s the neo-Libertarians who are winning. For example, many present and former congressional representative and senators are neo-Libertarians (like Sen. Rand Paul, Rep. Ron Paul, Rep. Dick Armey) whose intellectual hero is Ludwig von Mises. The Cato Institute, a free-market think tank in Washington, is fast becoming an established player in Washington politics.
Q: After reading how awful Social Security is, is there any way out? I’m willing to give up all the money I’ve already sunk into this rat hole, but can I?
A: A long time ago, I wrote a book called Tax Free: All the Legal Ways to be Exempt from Federal, State and Social Security Taxes. Needless to say, it was a very short book. In a chapter on Social Security, I listed half a dozen ways to get out of Social Security. But then along came Social Security reform in 1983, led by Alan Greenspan, who closed most of the loopholes and sharply raised FICA taxes. (He refused to even consider privatization of the system.)
What’s left? The best way to get out of Social Security, short of renouncing your citizenship and moving to a tax haven, is to create a fortune in stocks, bonds and real estate, and live off “unearned” income. Interest, dividends, and rents are not subject to FICA. At the same time, you’ll still qualify for Social Security when you retire based on previous earnings. A better strategy is to elect real tax reformers.
Q: You often change your investment recommendations according to the investment climate. Are there any investments you would recommend for the long-term, say 20 years, to put in an IRA and forget?
A: My 20-year crystal ball is a bit cloudy. But while there are no guarantees that everything will be rosy in the year 2018, right now I’d recommend a diversified portfolio of growth stocks, plus a “natural resources” hedge. Investing in only a couple of blue-chip stocks such as an AT&T or Pepsi, is extremely dangerous. Given the dynamics of the telecommunications revolution, who knows where AT&T will be in 20 years. And Pepsi may not be able to keep up with Coca Cola. Better to choose a combination of mutual funds, such as Janus Worldwide Fund, Schwab 1000 Index Fund and a natural resources fund.
Q: How do you select your recommended brokers? Do they contact you? Are you or your publisher compensated in any way for their mention in your newsletter?
A: The brokers and dealers I most often recommend have been carefully screened, based on a long-term relationship I’ve established with them. Sometimes these brokers contact me initially with the idea, but I don’t usually recommend stockbrokers unless I’ve seen them in action for at least five years.
Talking with these brokers can help you learn more about my favorite investment recommendations, since my advice often goes contrary to the establishment view. Average stockbrokers will likely argue and try to sell you some alternative investment their brokerage firm is trying to sell.
We have a strict policy at Eagle Publishing, Inc. regarding stockbrokers and recommended investments. Under no circumstances do I receive compensation for a recommendation, nor do I solicit it. Also, Eagle has a strict policy forbidding me or any other member of their staff to purchase shares of a recommended stock or fund until a week after you receive the newsletter. My subscribers always come first!
Q: Do you yourself invest in the investments you recommend?
A: Most of the time. But not every investment is suitable for everyone, including me. For instance, I don’t need as much income as a retired person. I opt for more growth. I have bought the following investments mentioned in my newsletter: Convertible Holding Capital (NYSE: CNV), Janus Fund, Janus Fund Worldwide, Fidelity Select Utilities, Fidelity Select Precious Metals and Minerals, Capiello-Rushmore Emerging Growth, Mutual Shares, 20th Century Ultra, Scudder’s New Asia (NYSE: SAF) and Scudder’s New Europe (NYSE: NEF), among others. I have also purchased a variety of junior gold and diamond stocks, for speculative purposes only.
Q: You’ve urged us to maximize our contributions to IRAs and tax-deferred retirement plans. Now I hear that the Obama administration wants to tax or confiscate these plans. How dangerous is this?
A: The chances of taxing or confiscating pensions and retirement accounts are remote, even under Obama. It would be terribly unpopular. The only trial balloon raised by the current administration is a recommendation to require 30% of pensions to invest in government securities, but I don’t give it much chance unless there is a national emergency. While I do recommend investing in tax-deferred retirement programs to the maximum, I also recommend private investments (coins, collectibles, foreign accounts, etc.) as an independent source of wealth, free from government snooping.
Q: I renewed my subscription to Forecasts & Strategies because I believe your investment advice is sound, but I resent your constant jabbing at President Obama. He’s trying his best to run the country and is saddled with a borrow-and-spend philosophy left over from the G.W. Bush gang, which has sent the national debt to alarming levels. I suggest you follow Barry Goldwater’s advice: “Give the man a break!”
A: Constant jabbing? Forecasts & Strategies has made hardly any references to President Obama.
Ninety percent of my newsletter is pure investment advice — where to invest, what to avoid, how to minimize your taxes, etc. But politics have a lot to do with the financial markets, and my advice wouldn’t be “sound” if I didn’t analyze it. For example, when Obama proposed heavy regulations on the financial services industry, industry stocks fell sharply.
Being a millionaire on a sinking ship is a great tragedy. When a president imposes higher taxes, pushes through socialized medicine, expands the regulatory powers of government and engages in questionable ethical behavior, it can’t help but have an effect on the financial markets, and I have a responsibility to point this out.
I’m not a Bush apologist. The deficits of the 2000s were unacceptable and caused a great deal of damage to economic growth and capital formation. Anyone who has subscribed to my newsletter for the past 20 years knows I was highly critical of Reagan in the 80s, Clinton in the 90s and Bush in the 00s when they raised taxes and promoted deficit spending. But remember, Congress, not just Reagan, Clinton, Bush, or Obama supported high deficits. There’s plenty of blame to pass around.
Q: Several years ago I bought your book, High Finance on a Low Budget, and followed your advice. Today I am 17 years old and have a fairly solid portfolio including certificates of deposit, Twentieth Century family of funds, and precious metals. Now I’m ready to expand a little, but I noticed your book was written over three years ago. Now that the investment climate has changed, what do you recommend?
A: Your letter made my day. I wish there were more young people like you who start early saving and investing. Perhaps if more of us older investors would buy some introductory books on saving and investing (such as George Clason’s classic Richest Man in Babylon) and give them as gifts to young people, the next generation of Americans would bring forth a new age of peace and prosperity.
My wife and I have updated High Finance on a Low Budget and I’ve also written Investing in One Lesson and The Making of Modern Economics. Right now, I suggest you focus on the Twentieth Century family of funds. I would hold onto your precious metals, as they are a great insurance in a weak economy.
Q: Why don’t you start a mutual fund, or at least manage money? That’s what I call a “simplified” investment portfolio!
A: I don’t normally manage money (other than my own), nor have I started a mutual fund. Granted, such a move could simplify your financial life, but I don’t think it would help you in the long run. Managing money is a full-time job, crowding out time available for newsletter research, speaking and meeting investors. It requires heavy concentration every day — selecting stocks, buying and selling, marketing, working with attorneys and government agents (including 50 state agencies), etc. Registration and dealing with the SEC are no picnic. The side effects are 18-hour days, sleepless nights, no vacations and little family life. No wonder Peter Lynch (manager of the Magellan Fund) quit!
I want you to succeed by making your won investment decisions and managing your own money. There are some good money managers out there, and I recommend some through Forecasts & Strategies regularly. But my purpose in writing Forecasts & Strategies is to assist you to become a better investor, to take advantage of changes in investment trends and opportunities, and to avoid the pitfalls. Simply setting up a mutual fund might make you (and me) richer, but would we be any wiser? I hope to make you rich and wise. If you are interested in more specific advice I have several trading alerts to which you can subscribe, including Skousen Hedge Fund Trader, Skousen High-Income Alert, and Hot Commodities Alert.