You see, on my recent trip to Kentucky’s Bourbon Trail, one thing stuck in my mind: TAXES. I was utterly shocked when I heard what the distillery tour guide was saying about a $13.50 per gallon tax on any distilled bourbon. That’s over $700 of taxes per barrel. And that’s before the bourbon even gets to the bottle. For me and you, fellow Whiskey Shooter, there’s another tax when we get to the counter—somewhere around 6%.

So what’s the total bourbon tax?

According to the Kentucky Distillers’ Association, around 53% of the cost of the average-priced bottle goes to local, state, and government taxes.

I guess that’s why the tour guide took the time to tell us about the taxes. That way we wouldn’t be bitter when we paid $30 for a bottle of “corn juice.”

So the tour went on and our group wandered through the rest of the distillery — tasting the freshly distilled 160 proof grain alcohol, feeling the corn mash and playing in the gift shop…

But wait. Isn’t this taxation that same kind that created rebellions?

My tour group, and Americans in general, have been lulled to sleep, as if Uncle Sam slipped us a Mickey. Last I checked, the U.S. isn’t an alcohol supplier. Nor is it a real estate agent. Nor is it a car lot. But it seems like the current administration wants to get its hands on everything.

And the way things are going, who knows what’s next…

The Latest Nickel-and-Dime “Tax”

You gotta give it to ’em: At least Washington came up with an appropriate nickname for its latest cash grenade. It’s called “cash for clunkers,” and last week the House approved the bill — with your money!

It simply amazes me that something this poorly thought up could pass so quickly through the largest legislative body in the U.S. Just think about it: 435 well-paid pairs of eyes took a look at this bill. And a majority OK’d it!

In case you haven’t heard of the latest clunker of a bill, let me give you the rundown…

It’s a $4 billion plan to subsidize sales of new cars with better mpg. Essentially, if you have a car that gets less than 18 miles per gallon and you “upgrade” to a new car that gets at least four more miles per gallon, you’re eligible for at least a $3,500 tax credit.

I love the well-accepted term “tax credit.” Does everyone on the Hill think we’re that easily swayed by bills that contain such positive-sounding phrasing?

Here at the Whiskey Bar, we aren’t that easily fooled. This “tax credit” is a simple euphemism for free money — money that you and I as U.S. taxpayers are providing. Simply put, it’s taking money from our pockets and giving it to new car buyers in an effort to jump-start new car sales.

I don’t know about you, but paying for my neighbor’s car wasn’t on my agenda today.

But let’s dig a little deeper, since we could be footing the bill…

The bill, as it stands, is less likely to be affecting normal car owners — so this is for our SUV/truck-driving neighbor. Because even if you bought a 1990 Chevy Cavalier or Ford Taurus, you’re still probably getting well above 18 mpg.

So obviously, this bill is almost strictly for those non-Peak Oil-thinking, overzealous SUV or truck buyers. These folks have roughly the same restraint and foresight as those who purchased houses that they couldn’t afford.

This bill is almost comical. But frankly, where does the spending stop on Capitol Hill? Combine this with the latest auto bailouts and it’s really starting to look like our nation has turned into a new and used car lot.

Things are getting scary ’round these parts.

Government Spends, You Save…

Those dollars in your pocket aren’t looking as great as they once did. And as I see it, with an overburdened and overspending government, the dollar could be in for a crude awakening.

That’s because one thing is for sure: Over the next few years, the world is going to spin, the U.S. government is going to spend, and all of this will be running on the same fuel: oil.

As I wrote a few months back, the price of gasoline is going to rise. And that mainly stems from the rising price of crude oil.

As you know, the world’s commodities (most notably oil) are priced in U.S. dollars. As the dollar weakens, and as the Earth still spins and demands more energy, the price of oil is going to rise.

In my opinion, over the next three months to five years, oil is going to rocket — even more so than the price of gold. We got a taste of what can happen when oil spiked last year to $147 per barrel. And from my standpoint, it’s inevitably going to be back to those levels, or higher.

My best advice for protecting your hard-earned dollars over the next five years is simply to invest in all facets of the oil industry: oil service companies, oil holding companies, oil technology companies, and the commodity itself (through ETFs or commodity options).

Sure, the Obama administration wants to improve mpg, but one thing is for sure: We’re still going to be burning oil for decades to come — more and more every year. And although we may hit some rough patches for demand, the overall trend line is going to be UP.

By investing in oil, you’ll protect your wealth and profit at the same time.

After all, we all want to be able to afford our next bottle of bourbon.

Stay ahead of the curve,
Matt Insley

Source: Taxing to Better Mileage?

Take the popular ProShares ETFs. ProShares give you the opportunity to buy and sell the Dow, S&P, NASDAQ, Russell and more.  Overall, they mimic the price of these indices, minus a small fee or transaction cost.

And best of all, it’s an easy way to buy and sell trends through your usual broker or online account. No messy futures contracts, no complicated math — just a cheaper way to invest in the NASDAQ.

But what if I told you all ETFs aren’t created equally? And what if I told you that some ETFs might really hurt your overall ability to profit?

Today, I’ve got a word of caution for you: some of the funds you’re holding are destined to fail in certain market conditions. In fact, some are even planned to fail…

Let me explain…

The Double Long Danger

If you have ever invested in a double long or double short ETF, or even a triple long ETF, you might be setting yourself up for long-term disaster.

Here’s what I mean…

All ETF’s are created for a purpose. As I mentioned above, the popular index ETFs are used as a proxy for trading an up or down trend in an index. Using these Index based ETFs, you can speculate in the small-cap markets with Long/Short NASDAQ or Long/Short Russell, for example.

All of those “single long” ETFs are created to give you direct 1 for 1 exposure to your market of choice. And for our purpose today, those single long ETFs aren’t a danger since the risk associated with most broad based ETFs is minimal.

What I want to warn you about is a danger you might be unaware of in leveraged ETFs: double long, double short, ultra long and ultra short investment vehicles…

When most investors look at ETF’s, they look at them as safe bets. Investing in an ETF normally gets the same risk label as investing in a mutual fund. And for single long/short ETFs that may be somewhat true. But for more leveraged ETFs, like double longs/shorts, your long-term risk increases exponentially in certain market conditions.

A Real World Example of Double Long Disaster

Let’s assume that you (along with me) want to take advantage of the coming rise in the price of the NASDAQ. Well as you know there are plenty of ways to do that — but for this article we wont be talking about specific companies or growth opportunities. (If you want a fine list of those just ask my good friends Jim Nelson or Greg Guenthner, the editors of Penny Stock Fortunes.)

One great way to play the rise in NASDAQ prices would be a single long NASDAQ ETF. But with the arrival of double long ETFs wouldn’t making twice the gain on the index be better?

Maybe not.

You see, when it comes to leveraged ETFs, the proof is in the prospectus. These leveraged ETFs weren’t necessarily made for a normal buy and hold investor.

More specifically, these ETFs were made, for the most part, to mimic the leveraged outcome of daily movements. And for a long-term investor this could be a real anchor on your speedboat — especially in an up and down market.

Here’s the simplest example I can think of…

Let’s say you own a single long NASDAQ ETF, a double long NASDAQ ETF and a Double Short NASDAQ ETF. And let’s assume that you have a nice round $100 in each.

On the first day that you hold these ETFs, the NASDAQ rises 10%. Here’s what you’d have:

• The single long ETF would rise to $110
• The double long ETF would rise to $120
• The double short ETF would sink to $80

Pretty standard, right?  Well, here’s where it gets tricky…

Say the market now dips back down 10% the very next day…

• The single long ETF sinks to $99
• The double long ETF sinks to $96
• The double short ETF rises to $96

In an up and down market, leverage works against you. In other words, short-term volatility can eat away at any long-term gains. And if the market were to continue to oscillate, you would constantly lose money on leveraged ETFs. By day ten in the above example, you would have lost 4.9% in the single long ETF — but you would have lost a whopping 18.4% in both leveraged ETFs.

That’s a risk that you might not have known you were taking…all because some leveraged ETFs are planned to use daily movements. And if the market is especially volatile, keeping your money in a leveraged ETF could be financial suicide.

I’ll spare you the math of other examples (including dollar based examples instead of percentage based ones). But take my word for it — if you want to make double the action on the NASDAQ, it’s not as simple as buying the double long ETF.

Unless, of course, the NASDAQ never has a down day ever again…

Sincerely,
Matt Insley

Source: Why Your ETF May Have Hidden Risks