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Strategies & Market Trends : Lao Ou's Personal Thoughts
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To: Lao Ou who wrote (29)2/13/2005 9:54:15 AM
From: Rarebird   of 42
 
<Gold sector is the best bet right now after two days sharp up>

We live in a Financial Wonderland. Late last year, the Bush Administration legislated a tax break for US companies. About four weeks ago, the US Department of the Treasury issued the guidelines for this new tax break. It allows US companies with foreign earnings to take these earnings back to the US and pay a corporate tax rate of only 5.25 percent. On their US earnings, the normal corporate tax rate is 35.0 percent. Two weeks ago, Morgan Stanley estimated that the top 500 US companies could "repatriate" $US 418 Billion back to the US from their foreign earnings. According to the Australian Westpac Banking Corp, $US 77 Billion has so far rolled across all the world's currency floor as these foreign earnings in foreign currencies are showing up and increasing the demand for US Dollars. No wonder the US Dollar has started to go up. Currency traders and the speculators who held short US Dollar positions have scrambled for their lives. Gold, in a counter-response, has gone down more than the US Dollar has gone up. The problem, for the US Dollar, is that this tax break is only legally valid for a full year.

Inside months, most of the foreign earnings which US corporations want to return to the US will have returned. Then, the effect of this will wear off.
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