Despite the many negative macro economic factors that are negatively impacting the US and the US recovery, the US is in relatively better shape than other countries. This may sound contradictory to some of our prior blog postings, but its not when we compare the US to other countries. So, we thought we would highlight the outlook for the US and how this may impact your investment decisions with your self directed IRA.
Some of the positives are:
- Cheap energy: Natural gas is at $2.30 per MMBtu. The helps make the generation of electricity cheaper. Crude oil running around $82 per barrel. That is relatively cheap and helps keep oil based goods and services cheaper which is good for the economy.
- IRAQ and Afghanistan are dwindling down. The helps reduce government spending and printing.
- Bernanke will keep printing. We believe that there is a great benefit to banks to keep the interest rates low. We also believe that with the falling prices (deflationary), the Fed will continue to print and keep rates low.
- The dollar is stronger than its competition. Despite the fact that the Fed wants a weaker, cheaper dollar, when compared to a weak Europe, unmanageable Japanese government debt and the Chinese money stimulus, the US Dollar is more attractive than most other currencies which has been drawing investors into the Dollar.
- US stocks earnings are still positive. P/E ratios are attractive when compared to the negative real return of government bonds. Predictions are that US corps will continue to show good ratios which will attract investors.
- Weakness in Japan and China makes the US relatively more attractive. This is a complex topic, but China and Japan are seeing significant weakness and they are the kings of central bank planning and control which keeps markets out of balance.
How You Should Position Your Self Directed IRA
The crisis in Europe will cause a loss in confidence in the Euro. The dollar is likely to rise against the Euro (goods become more expensive for the Europeans to purchase from the US) which will be the most of any other currency. This will mean that the Europeans will be consuming less of US goods and services. The dollar will rise less against the Japanese yen and the Chinese renminbi, but rise it will.
Here some some specific ideas for self directed IRA investing:
- Precious Metals In Your Self Directed IRA- A rising dollar is bad for commodities because they become more expensive. This would generally mean that gold would be negatively impacted. However, because of the ongoing printing in the US, Europe and China, we think that this will outweigh the downward pressures on gold from the strengthening dollar. We are still recommending that you continue to hold some precious metals in your self directed IRA. Consult your financial advisor as to an appropriate allocation of metals.
- Real Estate In Your Self Directed IRA – The real estate market looks to continue to stabilize. There are some potential shocks still looming out there. However, a strengthening dollar is likely to have the effect of making real estate hold prices and in some markets, you may see price increases. We believe that we are still in for tough times ahead and that people are not going to see significant increases in their earnings power, nor are they going to be making home purchases due to the banks lending standards. This still bodes well for rental real estate being held in your self directed IRA, and we recommend that people continue to look for good rental opportunities for their self directed IRA.
- Trust Deeds In Your Self Directed IRA – There will continue to be pressure on working people due to their purchasing power degrading. Real estate prices may stabilize, but are not likely to see enough price appreciation to help people under water. There will continue to be private lending opportunities for holding deeds of trust in your self directed IRA. We recommend that you continue to look for the right type of borrower. You will find people under some stress, but have a job with a regular paycheck. These are great opportunities for your self directed IRA.
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.