Archive for July, 2012

Q2 2012 GDP And Your Self Directed IRA

Monday, July 30th, 2012

The reported, headline, GDP numbers just came in at 1.5% in the second quarter. This is a major revision downward from 2% in the first quarter of 2012. This brings the overall annual growth rate in at 2.2% versus the previous 2.4% in Q1 2012.

Overall these numbers are not statistically significant. In fact, it could be argued that we’ve actually seen negative GDP given the governments margin of error. What is significant and important about these recent numbers is that the supposed recovery which occurred in Q3 2011 actually has now shifted to Q4 2011 — a full quarter later. The significance of this is that the figures being reported are not reliable, accurate and maybe even not credible. If this line of logic hold true, then the fact that we are seeing a continued degradation and and downward pattern in key economic indicators means that the economy is likely already in recession.

What does this mean for my self directed IRA

We will continue to maintain that a self directed IRA, invested in non-traditional assets such as real estate, private placements, precious metals, etc. is a critical part of everyone’s retirement portfolio. The overall economic picture is not improving as evidenced by the recent GDP numbers. We are still advocating that investors allocate portions of their self directed IRA portfolio to precious metals. We also encourage investors to look at other non-traditional investments in real estate, small businesses and other non-publicly traded assets.

The Storm Is Coming – Check Your Self Directed IRA

Friday, July 27th, 2012

We wanted to show you a couple of simple graphs to tell a simple, but scary story. The first chart shows the federal debt since 1965. We would like to point out a simple inflection point of 1971. It was in 1971 that we moved off of the gold standard (thanks a lot President Nixon). Removal of a gold standard removed all constraints on government spending. Notice how in a few years passed 1971 that the debt starts increasing.

Chart 1 – Federal Debt Of The US Government

Graph of Federal Government Debt: Total Public Debt

The next chart we want to draw your attention to is the value of the US Dollar. Notice the interesting reverse or negative correlation between chart 1 and chart 2. As you can see as the government continues to tax and spend, our purchasing power has continued to degrade. You should take special note of the significant decline that starts – guess when? 1971!!

Chart 2 – Value of the US Dollar

Us Dollar Value In Gold

What does this mean for self directed IRAs?

First lesson is that unrestrained government spending is hurting all Americans. We know that the government and the governments of the world are fully committed to printing their way out of any problem. In fact we saw more clear signaling of that commitment this week from the ECB and our own Fed.

These charts paint a picture of failed central planning. Central planning is the current economic system that we now live under and have so for some time now. Central planning is not going away. Because of this, we know that there will be a point at which there is too much money in circulation, planning cannot restore the basic free market mechanisms that are needed to create a healthy economy. This will ultimately lead to that storm arriving in the form of some significant economic events internationally and here at home.

Its our continued belief that you should be out of paper based assets as much as possible. You need to continue to look for and hold tangible, productive valued assets. Such assets are things like real estate, precious metals, your own business, patents, etc.

You need to be looking at your self directed IRA and position it to hold these tangible assets.

Disclaimer: The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

June Housing Numbers (Corrected) and Your Self Directed IRA

Friday, July 27th, 2012

Monthly changes in June home sales showed a decline of 8.4% for new homes, a decline of 5.4% for existing homes. Though large on a monthly basis, in the big scheme of things there numbers were not meaningful.  Both numbers continue to show a developed and established pattern of low-level stagnation.

Weakness in homes sales has been blamed on too-low inventories of houses for sale.  The low inventories are part of the issue, but there is something a self-fulfilling cycle at play, due to low prices likely keeping some houses off the market.  Also throttling down activity for both purchasers and sellers is the continued consumer liquidity and credit issues.

Inventories of homes for sale are relatively low at 6.6 months supply in June for existing home sales was up by 3.1% from May and was at its highest since December 2011.  For new home sales, June inventories reflected a 4.9 months supply, up by 8.9% from May, and at the same levels seen in March and April, which last were exceeded in January 2012.

How does this effect your self directed IRA?

Its clear that home sales are not recovering and really have not improved significantly for the last 5 years. Home sales are a key driver of the economy in the form of consumer spending. Until home sales become less volatile with a significant pattern of improvement, the economy is not going to recover. This spells opportunity for holding investment property in your self directed IRA.

This also presents the case where the Fed and the government will continue to interfere in the inner workings of the economy which ultimately leads to printing. This will drive inflation and more instability. This means that you should be considering having a proper allocation of precious metals in your self directed IRA.

Disclaimer: The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

Taxes, Spending, Politics And Your Self Directed IRA

Tuesday, July 24th, 2012

In prior postings we touched on what is referred to as the Fiscal Cliff. That so called cliff is a perfect storm of events coming together at years end.

What are these events:

1. Bush era tax cuts will be rolled back thereby increasing the effective tax rate on top earners from 36% to 39%

2. Estate tax exemptions will fall back from $5M to $1M

3. Obamacare will kick in thereby increasing the taxation or collection of taxes from US citizens

4. There are spending that will be coming in an effort to reduce the budget deficit

All of these events are coming to a head at years end. There are solutions to many of these problems, but we still have not seen any political will from anyone in Washington. You will also notice that you are not hearing anyone from the mainstream media talking about the problem or what efforts are being made in Washington.

What is likely to happen

Our prediction is that we won’t actually fall off a cliff per se. There will be last minute scrambling, proposals, bill passage that will address some of the issues and not others. There will be a lot of uncertainty and the markets will likely roil as a result. The overall confidence in government and the markets will go down, as if that were possible. In the end, the average person, consumer, business person, and investor will be hurt.

What to do with your self directed IRA

Firstly, we believe that precious metals will be a must have in your portfolio. We strongly advocate holding physical metal in your self directed IRA.

Secondly we encourage you to look for investment properties that can generate cash flow. Don’t worry about price appreciation. If the economy really tanks, at the end of the day people still need a place to live.

Third, look for other non-traditional investments that invest in real projects, real commodities provide real jobs. Get away from paper assets and anything directly controlled by the stock market or the government.

Disclaimer: The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.

What Dr. Copper Is Telling Us About Self Directed IRAs

Tuesday, July 24th, 2012

Background

Historically, copper foreshadows what is and will be happening in our economy. It is often stated that copper is the metal with a Ph.D. in economics, and the data for the most part bears this out. When copper is down, the US economy is in recession; when the indicator is up, the US economy is expanding. As can be appreciated, copper does better during economic expansions. The metal typically peaks during recessions before heading into a down trend. Its because of this correlation to economic activity that copper has earned the name Dr Copper – meaning how healthy is the economy.

Current Analysis Of Copper Prices

  • Copper generally peaks during recessions. At present copper is currently putting in a lower high and is trading below its 40 week moving average; copper peaked over 1 year ago.
  • Investor sentiment not only tracks price but it often precedes it by a couple of weeks. The current price structure for the Bullish Consensus is bearish.
  • Recent bearish patterns in the price structure of the Bullish Consensus have been bullish owing to central bank intervention. In essence, central banks have prevented a recession from unfolding.
  • It should noted that each central bank intervention has provided less and less benefit to the markets. When looking at copper, we see that Operation Twist did not produce gains that were seen during QE2. It’s as though the markets have become resistant to the effects of monetary stimulation.
  • The breakdown in the price structure of the Bullish Consensus for copper strongly suggests lower prices for copper, which in all likelihood implies a recession. Central bankers have been timely in their implementation of recent quantitative easing, and we could easily make the case that their interventions have thwarted the onset of a recession on more than one occasion. Copper will need to reverse from the current levels and investors will need to embrace that risk. This will be heralded by a reversal in the Bullish Consensus.

Self Directed IRA Action Plan

The current analysis and forecast for copper is that demand or consumption is dropping. Dropping demand suggest dropping prices. These trends are currently present and evident in copper prices. The forecast for demand and consumption is flat to down. This means recession.

Recessionary conditions would suggest that precious metals or real estate will be counter to the prices of copper. We are looking are hedging against uncertainty with hard, tangible and in-demand assets. We continue to support precious metals and real estate in self directed IRAs.

Disclaimer: The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.