Posts Tagged ‘IRA-LLC’

May Housing Starts And Self Directed IRA Considerations

Sunday, June 24th, 2012

Housing Starts are a key economic indicator as to how well the housing market is performing. It is a indicator of building an the level of building in relation to consumer demand for homes.

The May 2012 Housing Starts numbers remain 69% below the 2006 peak. The housing numbers clearly show that home starts, and sales are bouncing around some bottom. The overall changes from April to May are somewhat statistically insignificant in terms of tell us which direction housing might be headed. the overall change year to year in May 2012 is significant and shows a 28.5% increase, but again that is at the lowest level of activity since housing numbers started being tracking in 1945.

The last 42 months of housing activity really paints a picture of stagnation and not much in the way of forward progress.

Hosuing Starts

When you look at these numbers since 1945, its very clear that we have arrived in uncharted territory. Most likely, 1930s era territory or maybe worse.

However, the one bright spot about these numbers may be that we may actually be at the bottom. This may also mean that we are at the lowest prices for homes that we are going to see. This then begs the question of whether or not you should consider purchasing investment property with your self directed IRA.

We realize that most people are very apprehensive and concerned about what is happening in the economy and the world in general. But remember this basic truth – everyone has to have a place to live in. We’ve shown that renters are increasing. That apartment rental/absorption rates are at all time highs. We recognize that if you purchase a property with your self directed IRA that you may see little to no significant price appreciation for some time. However, with the low prices and distressed sellers, its much easier to find properties that will cash flow. Its not unreasonable to find 6-10% rates of return.

Given that we still see an economic winter brewing on the horizon, and that you are not likely to be able to earn reasonable returns with reasonable safety for the near term, real estate may actually be a very good choice. We firmly believe that if the economic future looks as stark as we have been saying, then hard assets such as metals and real estate are the only things of true value. Therefore, it only makes sense to start evaluating investment properties 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.

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.

The US Outlook And Your Self Directed IRA

Sunday, June 17th, 2012

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:

  1. 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.
  2. 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.
  3. 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.

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 Self Directed IRA Update

Thursday, June 14th, 2012

We hate to continue being such a doom and gloom type with the blog, but here we are half way through June and the economic news is not getting better – its getting worse.

  • Greece – Greece is clearly heading for a breakup and even withdrawal from the European Union. Greece can’t even borrow money. They are starting to see large withdrawal of cash from banks and ATMs. Its happening. They are heading south and its not going to be pretty.
  • Spain – Spain is at 25% unemployment. Spain is providing billions into their major banks to prevent a collapse.
  • Northern Europe  – not doing much better. They have debt that is north of 200% of GDP.
  • China – Just dropped their interest rate. They have seen quarter over quarter declines in GDP – even their highly manipulated and suspect numbers.
  • Major currency trader George Soros is moving more of his portfolio into Gold.
  • The US – The jobs numbers are not improving. Deflation is rearing its head. These are clear signs that QE3 is coming

These are just some of the basic highlights of what is happening nationally and globally. The overall picture that we see is one of a slowing and degrading economy across the globe.

What these events likely mean for you and your self directed IRA:

  • We are likely to see some deflationary effects short term. We are already seeing falling gas, and food prices mostly due to a decrease in demand.
  • The stock market is likely to show a large sell off between now and the end of the year.
  • The Fed is going to step in with the latest version of QE.

What to do with your self directed IRA

  • Make sure that you have some gold and silver as your overall portfolio.
  • Continue looking for those good real estate investment opportunities. Real estate may not be zooming, but it is nearing bottoms, and if the economy really tanks, rental properties will be very hot as people will be losing homes and they will need rental housing.
  • Look for other non wall Street investment opportunities in the energy sector through private placements
  • Look into a peer to peer lending opportunity by finding credible, reliable, credit worthy individuals needing loans

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.

Potential Fed Moves And Your Self Directed IRA

Sunday, June 10th, 2012

This week Ben Bernanke was in front of congress being asked if he was going to be engaging in QE3 or some other form of intervention. In true political avoidance tactics, Bernanke basically replied by stating that the Fed stood at the ready should conditions warrant. He pointed out that the Fed still does have a number of tools at its disposal.

So, the markets clearly saw this as a clear indication that the Fed would not be engaging in its usual money manipulations in the short term. However, how long will this last? There is likely to be pressure from continued government spending and movements into the US dollar.

Government spending – There has been little sign to show that the government will make any drastic changes in their operations, mind set, and therefore spending. Its not likely that the mandatory tax increases and spending cuts that are looming in January will take full effect. It is likely that the government will engage in a lot of political rhetoric and the media will hype the pending fiscal cliff. This in turn will have negative effects on the markets, which may force the Fed’s hand to take action. Additionally, if the government’s spending is not curbed, companies that are buying the treasury bonds, in the absence of the Fed buying these bonds, will reach a point where they won’t continue doing so without bidding up interest rates. At that point, you are likely to see more Fed intervention under whatever program name they decide.

Movement into the dollar – despite the fact that the dollar is very worthless, its still perceived to be better than the alternative currencies out there. This has the effect of strengthening the dollar which will eventually lead to an increase in the dollars value relative to other currencies. The downside to this is that this makes exports more expensive which dampens exports and has a negative impact on the economy. At some point, there is likely to be pressure to cheapen the dollar (currency manipulation) and the Fed is likely to be forced to take action.

So what will the options be?

We believe that the only options will be, ultimately, for the Fed to continue its intervention programs. It has no choice. The government and the Fed have shown time and again that they are committed to protecting the banks and preventing deflation. They have also shown that they have no interest or intention for allowing the former free markets to balance themselves out. So, printing, easing, etc. it is.

Timing

Timing is hard to say. We believe that we will see some type of intervention over the next 6 months. The Europeans are in a very bad place. There are already calls for the US to step in and and assist in some way. The current low interest environment has not had the desired results – meaning no one is borrowing. Jobs are not coming back. Consumer spending is not recovering. Housing is not recovering. There is a presidential election going on. There will be definite pressure building sooner rather than later. It is most likley that the Fed will be foreced to make some move over the next 6 months or less.

What does this mean for my self directed IRA?

It seems likely that more currency manipulation will be forthcoming over the next several months. We should note that gold has held fairly well through all of this especially in comparison to other commodities. Imagine what could happen if all of those treasury investors decided to even put a small percentage of their holdings into metals?

The average baby boomer cannot make a decent rate of return on their earnings. They are being forced to invest in more risky assets just to get some earnings. Many may have to consider metals as a safe haven for wealth preservation. Some are looking at real estate for investment income. This is sometimes in the form of actual property ownership or in other cases deeds of trusts or other lending arrangements.

The point here is that there is nothing new on the horizon that would suggest that the nations and the US specifically, has figured anything out other than to continue manipulating currency. In the end you likely need to have some portion of your retirement portfolio held in a 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.