Posts Tagged ‘IRA custodian’

What The Purchasing Manager Index Means To Your Self Directed IRA

Thursday, May 31st, 2012

The Chicago PMI dropped to 52.7 in May. This reading has dropped over the last three months. The index is at its lowest level since September 2009.

Readings above 50 suggest the economy is still expanding. However, as a general rule three straight monthly declines directly correspond to the onset of each of the last seven national recessions. This correlation usually translates into a recession within the next six-to-eight months.

This index is one of several indicators that have come out this month that shows a slowdown, predicts recessionary times. A recession will slow demand and cause contractions. This ultimately leads to loss of purchasing power over time, decreased spending. The likely result will be more printing or other government intervention. Meaning they are not going to get the deficit under control and there is a good chance of pushing more cheap money into the system.

Most investors will hedge against inflationary pressures and the market risk with hard assets such as precious metals. So, those of with a self directed IRA should check your allocations of metals. Those of you without a self directed IRA — Get One Today!

Self Directed IRA Real Estate Trends

Monday, May 28th, 2012

Real estate has and continues to be a key holding in a large percentage of self directed IRAs. We saw the activity level high in pre-2008 and now, we see that level coming back, but for different reasons. Below we will look at a couple of key metrics to give you an idea as to what is happening with investment and rental properties.

Apartment Absorption Rates

One of the key trends to watch and follow Apartment Absorption vs. Home ownership. The trend has been and is away from home ownership to apartment living. The following chart from Marcus & Millichap clearly shows this trend.

What we see is that there is a strong trend away from home ownership and into the apartment life. The importance of this trend is that as a current or potential real estate investor with your self directed IRA, the need for rental property is increasing. The psychology of people is shifting from home ownership to being a renter. The financial and economic drivers are pushing people to become renters. The bottom line is holding real estate in your self directed IRA could be profitable and wise.

Vacancy Rates

Vacancy rates across the country were at 5.2% at the end of 2011. That is a 40 basis point (0.40% – 5.6% to 5.2%) decline. That is very significant. Below is another graphic from Marcus & Millichap. Without diving into specifics, what you see are steep declines in vacancy rates across most of the major US Cities. This is just further support for increasing rental demands.

So, what does this tell you about holding rental or investment real estate in your self directed IRA? Our analysis says that the demand for rental property has been increasing and will continue to increase as more foreclosures are disposed. This will be compounded by the fact that the economy is and will continue to grow very slow which puts pressures on wages. This motivates and maintains renters.

Given the predicted slow economy, potential global recession, your portfolio needs to have a good compliment of tangible assets such as real estate and precious metals. This is why we continue to believe that now is still a good time to hold real estate in 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.

Roadblocks That are Preventing a Economic Recovery and how to Position a Self-Directed IRA

Friday, May 18th, 2012

As we continue to see the bogus numbers coming out of Washington, and the political rhetoric that comes from the President’s reelection, we thought we would look at what stands in the way of a solid recovery, and compare that to what the government is actually doing.

Issue 1 – The National Debt

We are currently running a debt rate of 360% of GDP. This means that we are spending way more than we generate in the total economy which also means that we are not saving anything. This debt level is more the 100 points higher than the high water mark of 1928. So, on relative terms we have way more debt than we did prior to the great depression.

We all know that you cannot continue to maintain such massive amounts of debt without some negative impact. The current projections show that the government debt will continue to increase in 2012 and 2013.

Why is this important? Because at some point, the government has to continue printing money and attempting to borrow to pay for this debt. This eventually reaches a point where the government cannot borrow anymore. This in turn leads to a crisis where the government has to cut back drastically, miss payments, tax more, etc. It becomes very severe austerity.

Issue 2 – Worldwide debt

There is a lot of attention and focus on Europe and their financial crisis. This is because their debt situation is worse than the US debt crisis. Currently, we have about $55 trillion in debt and we have $15 trillion of GDP or a debt ratio of about 360. In the 17 countries that are in the euro, they have about $68 trillion of dollar-equivalent debt and only $14 trillion of GDP, so Europe is even more heavily indebted.

Why does this matter? Because the Europeans will and are implementing austerity measures. This is leading to a shrinking economy and social unrest. Countries in this shape of not consumers and great trading partners which means that we are not exchanging our goods and services with them. This leads to economic contraction in the US.

Issue 3 – Printing Money

When the government engages in quantitative easing (a/k/a printing money), it injects more liquidity into the system. One of the effects of this is that its shifts the demand curve for goods and services because there is more money in the system. This causes the price for goods and services to increase. So, the average Joe or Jane Lunch Bucket is seeing a 2% annual increase in wages during QE2, but because of printing, prices went up 4%.

So, in reality the regular person is getting worse off because price increases, due to printing or QE, is eroding their purchasing power. Therefore, people start cutting back on spending. Consumer spending is 2/3 of the spending, so reductions in this component leads to slower economic growth and actual shrinking of GDP.

What’s ironic about this printing of money is that you have the President out running around demonizing the wealthy, saying the he is for the little guy, but the reality is that his economic policies (and Bernake), actually makes the wealth gap larger and hurts the average American. So, the average American is getting worse off due to a loss of purchasing power as a result of money printing. This will only lead to economic slowing or contraction.

Issue 4 – The Required Solution May Be Too Hard

If the money printing is going to be turned off, the government is going to have to:

  1. Get social security and medicare under control
  2. Get the tax system under control

These are two big drivers of the government debt and obligation. The willpower that may be required to correct this may b a very tall order and not feasible. If these two issues do not get addressed, then we are looking at some very difficult economic conditions.

How does this impact my Self Directed IRA?

As we’ve discussed in previous blog posts, we firmly believe that every retirement portfolio needs to be properly balanced with some assets that deal with real estate, precious metals, or other tangible assets that are out of the direct manipulation and control of Wall Street and the Federal government.

With the current national and global debt issues, current and pending austerity, and total lack of political action and willpower, it only makes sense to have a self directed IRA with loans, metals, real estate, private stock, etc. The interesting thing about assets such as real estate, private stock, small business, etc., is that they become desirable in both good and bad times.

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.

False Government numbers and Your Self Directed IRA

Saturday, April 21st, 2012

This week the US Census Bureau put out their monthly numbers for retail sales. Their figures show that March 2012 sales rose by 0.8%.

The non-thinking, media picked up these numbers and put their own spin as to why the numbers were up. The AP reported that the numbers were up because of increased employment. The Wall Street Journal reported that much of this increase was the result of increased auto sales.

However, when you dig down to see how the Census Bureau actually gets their data it raises a big question. In this day and age of technology and readily available data, we find out that the Census Bureau gets their data by sending out hard copy, surveys, via the US Mail, to a sample size of 5000 companies. Now these respondents are suppose to send back their best guess and input on how their retail sales will change. Also keep in mind that a small percentage of these mailers will actually come back.

So, from these relatively small sample that basically has no actual hard numbers, the Government is able to calculate a 0.8% net change in retail sales across all retailers in the US. Really? As noted on the Trim Tabs Money Blog, only 10% of all transactions involve currency. Why would the government not just pay the credit card companies for their transaction data to get a good read on 90% of the retail transactions in the US economy? Seems accurate and logical.

In addition to this, if you look at auto sales over the same period, you actually find that the annualized rate of sales was actually down 6% as reported by industry analysts, but the Census Bureau states that they were up 1.1%. How can this be?

Bottom line is that the Government has and does provide grossly inaccurate data on the economy as evidenced by the employment numbers. So, how can the markets and investors be claiming that we are turning a corner economically, when we know the underlying data is inaccurate.

Its because of these bad facts, bad data, that we know that we have not recovered, yet we are already hearing the market pundits proclaim that precious metals are dead, and people that invest in them are misguided, etc. This sure sounds like a good case for why your continued investing in precious metals with your self directed IRA is a sound and safe bet.

So, you have to ask yourself: Would I rather place my faith in a system of printing money and a government that uses bad data, or go against the Wall Street geniuses and hold metals in my self directed IRA?