Posts Tagged ‘IRA custodian’

Inflation Outlook Update & Its Impact on Self Directed IRAs

Sunday, September 30th, 2012

The Fed just recently announced that it will continue investing/printing $40B per month until the jobs picture improves. Two points about this :

1. This is confirmation that the programs and policies of the Fed and the current administration have not worked.

2. The basic prescription is that we should all continue to be punished for not spending more and therefore, the government is going to make us all take on more debt per person, via government printing, until our attitudes improve.

We believe that this approach falls into the the old adage of the definition of insanity is doing the same thing over and over again expecting a different result. That’s what the Fed and the administration are doing. They are going to continue to engage in the same practices of printing money and deficit spending thinking that at some point its going to work, even though it has not worked to date. For those of you who would argue that there has been improvement, I will contend that the improvement is in spite of government intervention and the fact that the Fed is engaging in a new, more aggressive program because of their actual statement of a very poor jobs market it evidence and an admission that it is not working.

What this means for inflation

To date, the Fed continues to report that inflation is in check and well within reasonable boundaries. We contend that inflation is not in check and is not within reasonable boundaries. Our reasoning is that the Fed continues to incorrectly factor the cost of energy into their equation. Secondly, they are ignoring the fact that many people are now working for lesser salaries than they were in 2008. Thirdly, most families net worth has shrunk by 10-20% of the pre-2008 levels. Fourthly, most peoples incomes are not even growing at the rate of inflation, and lastly, most people cannot invest and make 1-2% of of savings per year.

This all boils down to the fact that inflation is higher than the Fed tells us and peoples incomes are shrinking or not growing. This all has the affect of making goods and services more expensive for the average consumer. Therefore, we do have real inflation.

The coming flood and potential for hyperinflation

The Government has created $16T of debt. The government wants to spend another $40B per month. The government wants to continue printing and forcing money into the economy because things are not improving. At some point this money will start working its way into the economy and there is a lot of it. Once that starts happening, people will start holding that money in the form of debt and spending. This will lead us to think that happy days are here again. That spending activity will translate into price inflation for goods and services as all of these excess Fed dollars start chasing fewer goods and services. Its simple math and economics to see that prices could and will likely result in hyper inflationary levels.

Self Directed IRA recommendation

We foresee continued inflationary pressure on prices in the near and long term. Most of this price inflation will likely take hold mid 2013 and into 2014. We are already seeing the spike in gold and silver in response to the latest fed actions.

We see the prices for real estate to continue to stabilize. As the excess Fed dollars and low interest rates start to finally take effect, we think you will see more price stability and maybe higher than expected price increases in real estate.

We continue to see sluggishness in the job market, despite the Fed printing. 25% of the work force is not working. They have aged. They have not developed new skills. These structural disconnects will make it difficult to get people back to work and the ones that do, will not necessarily be coming back into high paying jobs like the pre-2008 levels. This will continue to make these people more oriented towards being savers and renters as there has been a permanent mind shift in the American public as a result of this recession.

Our recommendations

1. Continue to invest and hold precious metals in your Self Directed IRA.

2. Real estate will continue to look attractive for rental income and price appreciation may take hold. Its not clear to what extent price appreciation could materialize. You should be looking for real estate investment opportunities with your Self Directed IRA.

3. Private lending will continue to be a good opportunity for Self Directed IRAs. Despite the flood of Fed dollars, price inflation will be problematic for people, and they will continue to be under financial pressure due to be held in lower paying jobs with higher inflation. They will struggle to get lending from institutions. However, these same people will be more conservative than pre-2008. There will be good lending opportunities if you look, and qualify the right candidates.

Overall inflation risk is high. Hard asset investing in Self Directed IRAs is still critical to your overall portfolio strategy.

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.

Why Gold Went Up Now With The Feds QE3 – What This Means For Self Directed IRAs

Sunday, September 23rd, 2012

This past week the Fed announced that it would engaged in a continuous stimulus program from now through 2015 due to the continued weak and anemic labor market. The Fed committed to a monthly outlay of $40B to purchase mortgage backed securities. the theory here being that this will help stimulate housing and subsequently the labor market.

We’ve been hearing and talking about QE3 all summer. Despite the fact that we all knew and understood that QE3 was coming, gold moved sideways in the $1500 to $1600 territory, for weeks. Now, just before QE3 is announced, gold spikes up past $1700 and into the $1750 range.

What’s going on here?

Not to be one to engage in conspiracy theories, buts its almost as if there is insider information being passed around. We’ve known for weeks there would be some sort of Fed action. We did not have any really significant economic news, yet, gold is up suddenly.

Its our theory that there are insiders that do get a glimpse as to what is coming. More specifically, such inside information clearly bodes well for metals.

Self Directed IRA Actions

Metals have definitely shown the next new bull leg. QE is here to stay. The government has not fixed one single problem in our country. The American electorate can’t clearly see that their current president has not delivered, yet the think that they may still want to vote for him despite his inability to deliver tangible results. Based upon this the risk is on. We see nothing positive coming from the government and maybe not the presidential election. Dr. Ben is printing like mad. the dollar will continue to be debased and lose value. Inflation will continue to creep into our lives.

We still have a buy and hold action for gold and silver in your self directed IRA. We recommend holding physical gold and silver for the ultimate hedge and protection with your self directed IRA.

Revisions downward for GNP – What This Means For Self Directed IRAs

Wednesday, July 4th, 2012

What is GNP

This is the broadest measure of the U.S. economy published by the BEA. Once the headline number, now it rarely is followed by the popular media. GDP is the GNP net of trade in factor income (interest and dividend payments). GNP growth usually is weaker than GDP growth for net-debtor nations. Games played with money flows between the United States and the rest of the world tend to mute that impact on the reporting of U.S. GDP growth.

The Current GNP Numbers

GNP was revised downward from 1.3% to 0.5%. This is a massive and significant decline given the basic nature and definition of GNP.

The recent relative weakness in U.S. GNP versus GDP reflects an accelerating surge in interest and dividend payments to the rest of the world from the United States, which holds net-debtor status. At the same time U.S. receipts from the rest of the world have been plummeting since second-quarter 2011.

What Does This Mean

The slowing or decline in GNP reflects the fact that GDP is not good and depending on the person you ask, may acutally be shrinking. This factor coupled with new or increased interest and dividend payments shows that the US is not growing at a fast enough rate to overcome our debt payments to the rest of the world. To put this in perspective, imagine that you were paying out more for expenses and bills than you earned in income or from your paycheck. This value reflects a very telling sign. That sign is that we have ran up the US’s credit card and we have to pay out more than we are earning or growing. This is definitely not the situation that any person or country wants to be in.

What Does This Mean For Self Directed IRAs

The GNP values show that we are not growing fast enough to overcome our debt obligations. A continued and protracted period of such deficits would spells a shrinking economy and a more heavily indebted nation. The long term implications are that we would see weakening in the US dollar. This will lead to more printing and you can guess it — inflation or hyperinflation.

The best strategy to employ in these circumstances are investing in precious metals and real estate.

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.

Hyperinflation Around The Corner – Look At Your Self Directed IRA

Friday, June 22nd, 2012

We’ve recently seen the data that supports that the economy is not recovering, and in fact appears to be sinking back into recession. We’ve also seen that the Fed is going to continue to engage in operation twist, but as we’ve pointed out that’s likely to have little to no impact.

There is a confluence of factors that are coming into play that are pointing to potential hyperinflation in the near future. In fact that near future could be in the 2014 time frame. If this is the case, then you will want to re-evaluate all of your investments and look at how you should be best utilizing your self directed IRA in order to weather this coming storm.

The following are some of these factors or drivers that may be leading to hyperinflation:

Economic Deterioration – The economy is far weaker than the politician know or will tell you. The US economy has never recovered from the 2006/2007-to-2009 crashes.

Deterioration of the budget deficit – The US budget deficit is not getting better and in fact, the unfunded liabilities are clearing getting worse and the the government has not done one, single positive thing in three to four years to even stop the bleeding. The ObamaCare program could drive $10 Trillion in unfunded debt. That may not come about. That, plus consideration of accounting for Freddie Mac and Fannie Mae and otherwise normal annual transactions, could push the reporting of total  U.S. obligations from $80 trillion in 2011, into the $120 trillion range for 2012, which would be roughly eight-times the level of U.S. GDP.

Renewed printing and support of the financial system – Operation twist will continue. The real concern is that if the system continues teetering, the Fed will be forced to monetize more debt in order to prop up the banking system. This is more fuel for the fire, and this will have the effect of pushing people/countries away from the US dollar. This would lead to a much weaker dollar.

The loss of the US Dollar as the reserve currency for the world – Despite the recent influx of countries grabbing US Dollars, the long term movement has and is away from using the dollar as the worlds reserve currency. This will continue to erode the dollar over time and depending on other events that can come sooner rather than later.

The actions  taken by the Fed and the  government in 2007 and after, and the impact from the economic downturn, the movement away from dollar selling along dollar debasement have created the perfect storm. We were already facing inflation in the future, but our circumstances have likely moved timing for a U.S. hyperinflation to 2014 from 2018.

For those living in a U.S. dollar-denominated world, physical gold remains the primary hedge against the ultimate dollar crisis, along with physical silver and assets outside the U.S. dollar and in stronger major currencies such as the Swiss franc, Australian dollar and Canadian dollar.

With this in mind, you should consider reviewing your self directed IRA investments and making sure that you position yourself accordingly.

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.

The End Of Cheap Oil And The Self Directed IRA

Tuesday, June 19th, 2012

We’ve recently seen a significant decline in the price of oil. This has brought gas prices from north of $4 per gallon to the mid to high $3 per gallon range. This has people cheering as it saves them a few bucks each month. However, if you step back from the forest you will notice that oil (and gas for that matter) are 4 times more expensive than they were 10 years ago.

So, when you look at oil through this prism of  time, its not looking so cheap. The real crux of the issue is that all of the current, cheap oil has been found. Any oil that is going to be extracted from now on will come at a premium. A very good case in point is Shell Oil’s recent step forward to drill in the Arctic. Recent is a misstatement given that they started the process to secure rights back in 2002 (10 years ago).

Shell has gone through numerous regulatory approvals which by themselves took several years. Then they had to battle with lawsuits from environmental groups that wanted to prevent them from drilling. Then they had to file a suit against the environmental groups to prevent them from filing more suits. So, here were are 10 years later and not one single hole has been drilled.

Now Shell is confronted with several more years of testing and proving in very technically complex drilling environments. They expect to inucr $7 Billion in costs to bring production online. That is huge and unthinkable 10 years ago, but here we are in 2012 and it seems like a good investment.

This is just one case of what oil companies are doing to bring new resources online. Oil is now four times more expensive than 10 years ago. The regulatory environment is probably 10 time more tasking and complex. The access to resources is becoming more challenging from a logistical perspective not to mention the legal attacks.The point here is that the days of cheap oil are gone. It will only get more expensive. That being said, the opportunities for oil companies to make money are now better.

So, what does this mean for your self directed IRA? This appears to be an opportunity to invest in oil and gas exploration companies. The future for energy looks promising. We are going to see the worlds population expand. We are going to see the third world countries grow, develop and mature. That necessitates increases in energy consumption. We are a much more technologically based people and world which requires energy so support or technology habits. This means that there will be good, small, companies to invest in with your self directed IRA. These opportunities will come in the form of private placements or direct ownership in some of these companies. We recommend that you start researching and looking for these up and coming companies for self directed IRA investing.

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.