Posts Tagged ‘self directed 401k’

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.

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.

Q2 2012 GDP And Your Self Directed IRA

Monday, July 30th, 2012

The reported, headline, GDP numbers just came in at 1.5% in the second quarter. This is a major revision downward from 2% in the first quarter of 2012. This brings the overall annual growth rate in at 2.2% versus the previous 2.4% in Q1 2012.

Overall these numbers are not statistically significant. In fact, it could be argued that we’ve actually seen negative GDP given the governments margin of error. What is significant and important about these recent numbers is that the supposed recovery which occurred in Q3 2011 actually has now shifted to Q4 2011 — a full quarter later. The significance of this is that the figures being reported are not reliable, accurate and maybe even not credible. If this line of logic hold true, then the fact that we are seeing a continued degradation and and downward pattern in key economic indicators means that the economy is likely already in recession.

What does this mean for my self directed IRA

We will continue to maintain that a self directed IRA, invested in non-traditional assets such as real estate, private placements, precious metals, etc. is a critical part of everyone’s retirement portfolio. The overall economic picture is not improving as evidenced by the recent GDP numbers. We are still advocating that investors allocate portions of their self directed IRA portfolio to precious metals. We also encourage investors to look at other non-traditional investments in real estate, small businesses and other non-publicly traded assets.

What Dr. Copper Is Telling Us About Self Directed IRAs

Tuesday, July 24th, 2012

Background

Historically, copper foreshadows what is and will be happening in our economy. It is often stated that copper is the metal with a Ph.D. in economics, and the data for the most part bears this out. When copper is down, the US economy is in recession; when the indicator is up, the US economy is expanding. As can be appreciated, copper does better during economic expansions. The metal typically peaks during recessions before heading into a down trend. Its because of this correlation to economic activity that copper has earned the name Dr Copper – meaning how healthy is the economy.

Current Analysis Of Copper Prices

  • Copper generally peaks during recessions. At present copper is currently putting in a lower high and is trading below its 40 week moving average; copper peaked over 1 year ago.
  • Investor sentiment not only tracks price but it often precedes it by a couple of weeks. The current price structure for the Bullish Consensus is bearish.
  • Recent bearish patterns in the price structure of the Bullish Consensus have been bullish owing to central bank intervention. In essence, central banks have prevented a recession from unfolding.
  • It should noted that each central bank intervention has provided less and less benefit to the markets. When looking at copper, we see that Operation Twist did not produce gains that were seen during QE2. It’s as though the markets have become resistant to the effects of monetary stimulation.
  • The breakdown in the price structure of the Bullish Consensus for copper strongly suggests lower prices for copper, which in all likelihood implies a recession. Central bankers have been timely in their implementation of recent quantitative easing, and we could easily make the case that their interventions have thwarted the onset of a recession on more than one occasion. Copper will need to reverse from the current levels and investors will need to embrace that risk. This will be heralded by a reversal in the Bullish Consensus.

Self Directed IRA Action Plan

The current analysis and forecast for copper is that demand or consumption is dropping. Dropping demand suggest dropping prices. These trends are currently present and evident in copper prices. The forecast for demand and consumption is flat to down. This means recession.

Recessionary conditions would suggest that precious metals or real estate will be counter to the prices of copper. We are looking are hedging against uncertainty with hard, tangible and in-demand assets. We continue to support precious metals and real estate in self directed IRAs.

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.

What Obamacare Means To Your Self Directed IRA

Saturday, July 14th, 2012

As most of you probably know by now the US Supreme court ruled that Obamacare was constitutional as a TAX!

Now as some of may recall, the administration portrayed this entire program as something that could and should be regulated under the commerce clause of the constitution, but it clearly, was not, definitely was not a TAX.

Well the White house solicitor argued to the Chief justices that it was a tax and the Supreme Court ruled that as a tax it was totally acceptable.

What are the numbers behind Obamacare

  • While the new law will increase the number of Americans with insurance coverage, it falls significantly short of universal coverage. By 2019, roughly 21 million Americans will still be uninsured.
  • The legislation will cost far more than advertised, more than $2.7 trillion over 10 years of full implementation, and will add more than $823 billion to the national debt over the program’s first 10 years.
  • Most American workers and businesses will see little or no change in their skyrocketing insurance costs, while millions of others, including younger and healthier workers and those who buy insurance on their own through the nongroup market will actually see their premiums go up faster as a result of this legislation.
  • The new law will increase taxes by more than $569 billion between now and 2019, and the burdens it places on business will significantly reduce economic growth and employment.
  • While the law contains few direct provisions for rationing care, it nonetheless sets the stage for government rationing and interference with how doctors practice medicine.
  • Millions of Americans who are happy with their current health insurance will not be able to keep it.

The list goes on, but suffice it to say that we as the American people were mislead and this legislation and decision will NOT address our current economic problems with deficits and jobs. In fact this legislation negatively impacts the economy.

Under what scenario would the government arrive at a conclusion that implementing the largest tax increase in the history of the US be a good, economic stimulus? The answer is that it is not. It’s the opposite.

Regardless of your political views and your preference for president, you have to reconcile the fact that the government has just agreed to implement a new social program, for which it does not have the money to pay for. This is clearly more evidence to support that the government and the president are not interested in helping the average American, and that they are not willing to make the tough decisions as it relates to spending and budget deficits.

What Does This Mean For Self Directed IRAs

This new decision is a clear sign that the government will be incurring more debt and spending in the future. This coupled with the Fed’s recent comments about jobs not materializing and that they stand at the ready to print paints a picture or more printing, more debts and potentially hyperinflation.

We continue to support the idea that you should be positioning your self directed IRA into precious metals and possibly other hard assets such as 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.