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Special Report: Back in Business!

October 1, 2000

Since April 1999 I had been investing in the US financial markets, so far with mixed results as reported on my section, The Digging Report. Since I believe that education is a perpetual process that ends with life itself, I am enrolled in a continuing education system. There, I started to learn the secrets of the Big Boys. Of particular use to me was the books "Rich Dad, Poor Dad" and "The Cash Flow Quadrant", both written by Robert Kiyosaki, and his tape about corporations, which introduced me to C.W. Allen and Sage International, and more literature about the advantages of corporations. The book "Inc. and Grow Rich" is specially enlightening about the subject. But the more important thing that I learned from these books and tapes is that these secrets are available to anyone who cares enough to learn them and more important, practice them. It is not something reserved only for the rich (although it seems that only they employ these strategies). One of those secrets is that they use corporations to conduct business. It is the way to go if you are going to build a business that you want to last. It is not the intent of this report to explain the corporate advantage, however if you are curious about it you may want to visit this site: Sage International, Inc. Suffice it to say that corporations brings lots of flexibilities to operate, significant tax savings and the best protection against litigation. Since I decided to make investing a second career (and ultimately my primary source of income) I decided to do it right.

Since early this year I had been mumbling plans to start my own fund and despite the recent stock market downturn I finally took the leap and on late May I gave life to Globe Capital Management, Corp. and shortly thereafter, the corporation started its first investment fund: Globe US Index Fund, Limited Partnership. I had to confess that apparently, the timing could not be worse; after all, on the spring of this year (2000) the NASDAQ crashed 40% from its March top; and leading stocks crashed even harder. However, I take hearth of what William O'Neil (founder of Investor's Business Daily) and most experienced investors say about NOW being the right time to start.Dow Jones Industrial Average Chart This chart of the last 80 years of the Dow Jones Industrial Average clearly shows the long-term upward bias of the market. The historical average return since 1926 has been around 11%. That includes the ominous period of 1929-1932 during which the Dow lost 86% of its value! Thinking of it, an investor who put all his money on the market at the 1929 peak had to wait more than 2 decades to break even. However an investor starting at the 1932 bottom enjoyed tremendous gains. Since my approach is to gradually build the Fund with my hard-earned money (along with my other investor's money), the risk of having to wait long periods of time just to break even is diminished. That's not to say that there is no risk of losses but this is a roller coaster I am willing to ride.

Why incorporate? After all, millions of people around the world invest money in the stock markets and they do it personally; and as a matter of fact I started that way. So, why not continue to do it that way? Well, taxes and litigation, plain and simple. Plus by running the activities as a corporation, a whole world of options opens to me. Corporations have more flexibility moving into and out of countries; while individuals needs visas, difficult-to-obtain foreign working permits, etc. As I said before, this report is not intended to be an explanation of how using corporations could save you taxes and legal troubles but I should say that while some of you may be thinking about double taxation (no deductions for the corporation and taxable income to the individual); I actually see double deductions (deduction for the corporation and no income to the individual). Yes, it is possible to run into the nasty trap of double tax if you don't know how to properly set-up and run your operations. That's why I decided to do it the way the Big Boys do it: The right way with the right advisors.

While I continue to work for my present employer, I am now building my own company that I hope will support me in the not so distant future. The Digging Report, a section of this site, will continue to appear in the same format. Nothing has changed there, as my share on the corporate investments will replace the capital that I took from my personal funds to capitalize the entities.

With this new development, I am opening a new chapter in my life that will change it forever. The ongoing education process continues, this is just the beginning... What about you?