Posts Tagged ‘real estate ira’

Inflation Shows Its Taking Hold And What This Means For Self Directed IRAs

Sunday, October 14th, 2012

Wholesale inflation shows that prices increased by 4.7% for energy related goods and 0.2% for food. That is a total of 4.9% annual increase in the price of energy and foods. Core inflation (what the good ‘ol Fed and government uses) shows around 2.3%.

What does this mean?

What these numbers reflect is:

1. Inflation that the average Joe lunch bucket experiences is much higher than what the government tells us.

2. Inflation is quite large and significant

The Fed and the President continue to attempt to tell us that they are implementing policies that are going to fix the economy (a/k/a jobs, employment). Yet, they report false, misleading numbers that do not match what we see and experience when we engage in the economy (buying goods and services – getting stuff).

The numbers show that inflation is running at something like 6-7% per year when you factor energy and food. For some inexplicable reason, the government does not think those things count when measuring inflation. However, consumers are experiencing these levels of inflation. Additionally, incomes are not anywhere near these annual levels of increases. Compound this with the fact that savers (low risk investors, retired people,, etc) cannot even make 1/2% of interest in their savings due to the government’s low interest policies.

Self Directed IRA investment recommendations

Despite what many on Wall Street and the government tell you, precious metals continue to be a must have in your self directed IRA account. Metals are the ultimate inflation hedge.

Hard assets in your self directed IRA are also critical. We continue to recommend that people hold tangible investments such as loans, real estate, tax liens, deeds of trust, or small business ownership. These assets will be held away from the direct manipulation of Wall Street and the government. These are investments that you know and understand.

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.

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.

US Trade Policy And Its Impact On Self Directed IRAs

Sunday, September 9th, 2012

As you listen to the political theater that came from both political party campaigns, these last two weeks, you can’t help but ask the question “where are your real solutions?”.

We hear both candidates talking about jobs. But really? You, the government can create jobs in the private sector? We never heard one single solution or set of tasks or activities that either candidate would implement that they could tangibly demonstrate could or would create jobs and prosperity. In fact, if we look to the current administrations track record, their attempts at creating jobs have failed miserably.

Now, lets consider US trade policy by this administration as well as those of Bush and Clinton. We now have what we consider a free trade policy. The argument put forth by the Clinton administration was that we need to have a policy that opens doors to foreign markets. This allows US manufacturers to sell their goods into those markets. This also provides cheaper goods back to the US consumer. The theory being that the US companies will hire more US workers to support their operations in foreign markets, as well as dropping the costs of goods in the US markets. Sounds like a win-win scenario.

However, the reality does not seem to support the theory. What we have actually seen happen is that the US has, since the Clinton era, ran massive trade deficits. The American worker’s wages have not kept pace with inflation. We saw a major economic bust right at the end of the Clinton administration. We’ve seen American manufacturing move offshore, and we have not created net new jobs.

Why is this happening?

We’re not here to beat the drum for American jobs, protectionism, or some socialistic economy. What we are pointing out is that what our government’s trade policy has accomplished or failed to accomplish. What we managed to accomplish is that we opened up our doors to cheap goods from from foreign countries. Foreign countries have the access to the same technology, education, information, and capital as we do in America. The only variable between us and the foreign country is the cost of labor. That clearly gives them a competitive advantage that we do not have here.

We hear the President proclaiming that we are going to bring back American manufacturing, and American jobs, but the reality is that those jobs are never going to come back with our current policies. We have deliberately implemented a trade policy that puts us on an unequal footing with 3rd world countries. How would you ever expect us to be competitive with someone that make less than 10% of what an American worker makes? the short answer is you won’t. My personal experience from a prior life in manufacturing management and consulting is that America has moved manufacturing offshore, closed US plants all in an effort to reduce cost. American companies were and are in a competitive dog fight with foreign goods. The US based companies more often than not have shareholders and are driven to earn a profit for their shareholders. That’s their reason for existing. So, its only natural that these companies look for lower labor costs in order to keep their goods price competitive with the foreign goods being imported.

The heart of the problem

The crux of the issue lies in how we define the purpose of an economy. Are we here to serve the economy, or does it serve our society? The second part of the issue is are economies suppose to serve their society or country or nation, or do nations, and societies not matter and its just one big global pot?

Let’s deal with the second question, first. If we value the concept of nations, countries, regions as being the highest level of our society or community, then the economy would be defined relative to that construct. If, however, you really say that we live in a global community, then the country is out the window, and there really is no economy or purpose for it. What we have is a free for all, and policy, borders, and countries do not matter. Therefore, you have to compete directly with the person making $2 per day living in a dirt floor hut.

The answer to the first question is that the economy is designed to deliver wealth and prosperity to its participants. Therefore, if you live in the US, then the US economy is designed to improve the lives and prosperity of Americans, not the Chinese, or Indians.

So, if you buy into the precept that the United States economy is here to serve the people of the United States and the objective is to improve the overall wealth and prosperity of American, then you have to have trade policies designed to do just that. Today, we do not have such policies and we are not going to see jobs and economic prosperity and improvement with the current policies of our government.

What does this mean for self directed IRAs

Ok, so we may have gone the long way around the barn, but the issue is clear. The political theater that you see come from the President or Mitt Romney are just that — theater. There are not any solutions being put forth, and there is no indication that either party or candidate will implement anything that will address our economic woes. This is why you have seen massive QE from the Fed and why the price of metals will continue to increase. The printing of money is the only way that the government can deal with our problems. Its because of this that we still recommend that people maintain a good, healthy position in precious metals held in their self directed IRA.

We are also advocating that you continue to look for self directed IRA investments that get you away from the markets and into hard tangible assets such as real estate or investing in small businesses that you know and understand or have some control over.

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.

Dr Copper Update And Your Self Directed IRA

Saturday, August 25th, 2012

As we have mentioned before copper prices reflects the future expectation of of consumer demand. Consumer demand comprises 2/3rd of the GDP. Copper is a major metal used in numerous consumer goods and related services.

The current price pattern for copper is showing a head and shoulders pattern. Without getting too technical, this basically is a critical juncture in which price support needs to be established or else, we are looking a a drop in demand. A drop in demand predicts more dire economic circumstances for our future. As you will see below, we are in a head and should pattern.

What does this mean for self directed IRAs

If the prices for copper fall through support levels, then demand is clearly going down. Decreased demand means lower GDP. Lower GDP means less hiring and stagnant or increased unemployment. Worse unemployment means more printing by the Fed.

At the end of the day this means that we are looking at inflation and security issues for our investments.

Actions for your self directed IRA

Our recommendations is to continue holding metals in your self directed IRA. We believe that we are not going to see an appreciable increases in demand in the next few quarters. Therefore metals accumulation is recommended.

Real estate should be considered for your self directed IRA portfolio.

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 ISM Report And Your Self Directed IRA

Wednesday, August 1st, 2012

The July 2012 ISM report just came out and the the number came in at 49.8 versus the June number of 49.7.

The ISM report is a general measure of manufacturing activity and specifically how much manufacturers are planning in procuring for the business. A number below 50 indicates negative or contractionary environments. The ISM numbers were below 50 for the last two months which is a very clear contractionary signal.

What does this mean for Self Directed IRAs?

The contraction of the ISM numbers supports a series of other economic values which shows that the economy is not only slowing, but may actually be entering or have entered into a recession.

Recession is the perfect cover for the Fed to engage in more stimulus via printing. These policies will lead to inflation, weak demand. This is the type of environment in which you need to be holding precious metals and other hard assets such as real estate 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.