Archive for September, 2009
September 28, 2009 ·
A recent article published by Matt Tiabbi in Rolling Stone magazine articulated the role that Goldman Sachs is believed to have played in market manipulations since the Great Depression. The thesis of this article is that Goldman Sachs places itself in the middle of speculative bubbles by selling financial instruments that it knows are of low quality, and then re-purchasing them at depressed prices after the market bubble collapses. In the midst of the populist political rhetoric and conspiracy theories peppered throughout the article, there are some important points that can be taken away by those who are astute enough to see them.
The most important point is that investment banks and financial institutions have an incentive to drive up asset bubbles, and then pick up the pieces after a collapse and repeat the process. The reason why such nefarious activities perpetually persist is because financial companies tend to have very strong lobbying influence with both political parties. As an aside, it is important to divorce ourselves from the foolish notion that “Wall Street” is for or against Republicans or Democrats. Wall Street is in favor of whoever is in power, and politicians are typically in favor of whoever gives them the most money.
Regardless of the inherent morality (or lack thereof) in the actions of financial institutions, it is important to understand that simply complaining about their despised actions will do absolutely nothing to remedy the situation. The only way that corrupt brokerage houses will be held to task is when a market movement away from their financial products dries up their river of capital. The reason for this is because political restrictions will always be laced with loopholes, and even extreme financial malfeasance will be bailed out by the reigning political powers under the notion that said institutions are “too big to fail.”
Thus, it becomes clear that the only way to side step the ”Bubble Machine” of Wall Street is to develop a portfolio of direct investments that you personally control. The reason for this strategy is because direct control allows you to determine when assets are bought, sold, refinanced, etc. For example, if you own a portfolio of rental properties, you can personally make the call when to raise rents, refinance the properties, buy new investments, and sell to trade up to larger deals.
Whenever your investment assets are outsourced to Wall Street, fund managers get placed in control of all these decisions. Thus, it should not come as much of a surprise when these same fund managers funnel your resources into a speculative bubble in the hopes of capturing large bonuses on the returns generated while the bubble is inflating, and then take those returns to the bank after the bubble pops and your investment assets experience a sharp reduction in value. Direct investment allows an individual to select investment areas that are less susceptible to the effect of speculative bubbles through prudent analysis and due diligence.
Over the coming decades, it is likely that many more bubbles will expand and pop as the government attempts to use monetary expansion and market manipulation to mask the fact that it is unable to meet its entitlement promises that have been used by politicians to secure elected office. Unfortunately, many people will be taken along for the ride, and have their wealth systematically destroyed by the bubble machine. As prudent investors, each of us needs to be aware of this market reality and actively step around the manipulations of government and Wall Street so that the bubble machine passes us by while unleashing its path of destruction on the financial world.
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September 24, 2009 ·
In this video, discover the properties investment opportunities available in In this video, you will learn about Dallas, TX. Jason Hartman’s Platinum Properties Investor Network provides analysis of the demographics, real estate market and business climate. http://JasonHartman.com http://CreatingWealthPodcast.com
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September 23, 2009 ·
Whatever happened to personal responsibility? The lack of personal accountability is a problem that has resulted in an outbreak of procrastination, complaining, and blame. An individual or organization cannot achieve goals, compete in the workforce or continue growth and develop without personal accountability. Organizational development expert, John Miller, believes that one of the hallmarks of today’s business culture is this lack of personal accountability. Miller prescribes the cure in his book, The Question Behind the Questions (QBQ!) with a series of short stories and personal observations drawn from his years of experience running his development firm. Visit http://www.jasonhartman.com/radioshows/. The main point of QBQ! is that positive change begins with individuals changing themselves: “Instead of asking, ‘When will others walk their talk?’ Let’s walk our talk first.” Tune in to this episode of The Creating Wealth Show and discover the prosperous lifestyle found when people turn questions around and ask The Question Behind the Question. Upcoming shows will feature: Dan Sullivan, founder of Strategic Coach® and the lucrative Phoenix investment market.
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September 21, 2009 ·
In this video, discover the properties investment opportunities available in Indianapolis, IN. Jason Hartman’s Platinum Properties Investor Network provides analysis of the demographics, real estate market and business climate. http://JasonHartman.com http://CreatingWealthPodcast.com
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September 18, 2009 ·
In this video, discover the properties investment opportunities available in Phoenix, AZ. Jason Hartman’s Platinum Properties Investor Network provides analysis of the demographics, real estate market and business climate. http://JasonHartman.com http://CreatingWealthPodcast.com
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September 17, 2009 ·
In this video, discover the properties investment opportunities available in Indianapolis, IN. Jason Hartman’s Platinum Properties Investor Network provides analysis of the demographics, real estate market and business climate. http://JasonHartman.com http://CreatingWealthPodcast.com
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September 16, 2009 ·
Jason Hartman’s 10 Commandments of Holistic Survival (Part 2)
#6 – Thou Shalt Control What Is Put Into Your Body
#7 – Thou Shalt Defend Yourself
#8 – Thou Shalt Possess and Control Universally Needed Goods And Resources
#9 – Thou Shalt Protect Your Own FIR
Finances, Identity & Records
#10 – Thou Shalt Have A Support Network
http://HolisticSurvival.com
6. Thou shalt control what is put into thy own body
Health and nutrition are an important part of survival in a catastrophe. Thus, it is extremely important that you control what you put into your body so that it can work at top performance and heal itself adequately in a crisis situation. This is doubly important if you have a family to take care of, because crisis situations will require extensive manual labor and may also see you needing to care for small children who do not have the capacity to care for themselves. One thing that can be done as a regular form of practice is to prepare meals without processed or packaged ingredients. Processed food is certainly convenient, but it is not likely to be available in a crisis situation.
7. Thou shalt defend thyself
It is entirely likely that a crisis situation will invoke looting and rioting. It is also likely that these activities will be heavily concentrated in urban areas with large populations of people who will be simultaneously without resources. Desperate people tend to do desperate things. Similarly, desperate measures will create lots of chaos, and this chaos is frequently concentrated in the areas where there is the most desperation. The principal areas expected to be the target of chaos are metropolitan urban areas with high levels of population density. The more remote suburban, exurban, and rural areas are not expected to be in much danger from riots, due to the difficult of organizing a mob sufficient for it to move out into the suburbs. Since it is not practical to move out of the city for the express purpose of being safe from riots, it is highly advisable for people living in dense cities to engage in very careful preparations for the contingency of a descent into chaos.
It is also possible that you will need to defend your family from attackers, even if prudent preparations have been made. Precautions such as security systems, martial arts training, and access to weapons may help to ward off attackers if conditions turn desperate. It is important to note that many items that are not typically considered as “weapons” can be used to defend your family if necessary. Regular household items such as steak knives, tire irons, mop handles, and frying pans can be the difference between keeping your family safe and being looted by rioters.
8. Thou shalt possess and control universally needed goods and resources
The current economy depends upon currency-based exchanges. In practical terms, this means that everybody accepts dollars in exchange for goods and services. Consider what will happen in the event of severe inflation. What if dollars decline in value, and are no longer accepted in exchange for food, gas, or clothing? In the event that commerce regresses back to barter and trade, you will want to control goods and resources that are universally needed so that you can trade them for other things that your family requires. Typical barter items are things like non-perishable food, gasoline, medical supplies, over-the-counter medication, and maybe even gold, silver, cigarettes, alcohol, or ammunition. This strategy can also be extended to your investment portfolio. The most effective way is by shifting your investments away from “paper assets” such as stocks, bonds, or mutual funds, and purchasing items of universal need, such as rental housing. By denominating your investments assets in “things” that everybody needs, it will place you in control of critical resources when they are needed the most. For more information on this strategy, visit www.JasonHartman.com.
9. Thou shalt protect thine own FIR (Finances/Identity/Records)
One of the first things to happen during times of chaos is a drastic rise in crime and theft. Not surprisingly, identity theft is one of the fastest-growing classes of crime. Keeping your identity safe requires that some prudent precautions be taken so that you do not become an easy target.
One of the first things to do is limit your internet footprint to only the providers that you fully trust, and check your credit report regularly to see if anybody is accessing your information. In addition to this, it is important to keep all personal documents and information locked away where it cannot be easily accessed or stolen. Also make sure to shred any documents you are throwing away that contain personal information or account numbers. When safeguarding your identity, consider the fact that times of chaos may be dealt with by the government in a very oppressive fashion. It may become necessary to drop “off the grid” in order to protect your family. Take some time to consider what you will do if this course of action becomes necessary.
10. Thou shalt have a support network
Consider who you will be depending on for support in a time of chaos. Also consider who will be depending on you. If a rapid deterioration of economic and societal norms emerges, it will be very important to have a strong community of people in your local vicinity. Creating and maintaining this community is one of the strongest defenses that you can build against a crisis or catastrophe. By pulling together the skills, resources, and expertise of people in your general vicinity, it will help to organize your efforts, undertake larger tasks, and make you a less attractive target for looters. Make sure to keep networking . . . of all the commandments, this may be the most important for protecting your family.
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September 16, 2009 ·
How could the best and brightest in finance crash the global economy and then get us to bail them out as well? Hmm…This is a great question answered by Les Leopold in this episode of The Creating Wealth Show with your host, Jason Hartman. Visit http://www.jasonhartman.com/radioshows/. Les Leopold co-founded and currently directs two nonprofit organizations, the Labor Institute and the Public Health Institute, and is the author of the award-winning The Man Who Hated Work and Loved Labor: The Life and Times of Tony Mazzocchi. Leopold designs research and educational programs on occupational safety and health, the environment, and economics and helped form an alliance between the United Steel Workers Union and the Sierra Club. Listen in to this entertaining episode as Jason and Les discuss the market that supported the housing bubble during the last decade and the useful recommendations for avoiding the next possible economic bubble and bust. Upcoming shows will feature: Dan Sullivan, founder of Strategic Coach® and the lucrative Phoenix investment market.
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September 15, 2009 ·
Jason Hartman’s 10 Commandments of Holistic Survival, Part 1
#1 – Thou Shalt Think Independently, Understand the Threats And Become Educated
#2 – Thou Shalt Be Prepared To Do Without
#3 – Thou Shalt Maintain Control
#4 – Thou Shalt Be Self-Sufficient
#5 – Thou Shalt Practice The Primitive Annually
http://HolisticSurvival.com
The notion of Holistic Survival is based on the idea that survival in uncertain times requires an all-encompassing or “holistic” approach to be successful. As a way to articulate this principle, we have prepared “The Ten Commandments” of Holistic Survival as a guide for preserving your personal and financial wellbeing in the current volatile environment. The importance of these guidelines is found in the fact that the world is becoming more complex and uncertain at a frighteningly fast pace. Thus, the strategies of yesterday are no longer suited for the environment of tomorrow.
The Ten Commandments:
1. Thou shalt think independently
Being prepared for the unexpected requires people to develop an aptitude for thinking outside the box. It is important to think about the types of disasters that can occur in the area where you live, and what you would do in response. In crafting your plans, it is also important to anticipate the response of other people who are not prepared. It is very likely that people who have not adequately prepared for disruptions or problems will resort to rather drastic measures such as looting or rioting. Thinking independently includes adequate preparation to provide for your family, along with proactively avoiding the likely focal points of increased chaos. Another important part of being prepared is to learn the emergency plans that have been established for your community. This will enable you to gain a preview of how events are likely to unfold in response to a state of chaos.
2. Thou shalt be prepared to do without
This commandment revolves around having an emergency plan for your family. This emergency plan should be inclusive of planning for going without supplies such as food and water, along with going without information or direction from the political authorities. It is also important to understand that your family may not be at the same place when a chaotic situation unfolds. Furthermore, contemporary means of communication like the internet and cell phones may not be available. In this kind of a situation, communication through Citizens Band (CB) radio and ham radio may become the only reliable means of communication. Of these options, ham radio is the only broad-reach communication option that is outside of the traditional communication grid. Each family should develop a holistic emergency plan and be prepared for the chaos that frequently results from crisis situations.
3. Thou shalt maintain control
The crux of this commandment is to stay cool and calm in a crisis situation . . . similar to our Creating Wealth commandment to maintain control of your investments. Stay positive and avoid excessive stress or panic. Panic only places extra stress on top of a highly stressful situation. Controlling your emotions will allow you to keep a level perspective, and place yourself in a position of strength. Staying positive is doubly important because of the high likelihood for panic to spread out to other people in crisis. Many social problems can result when panic becomes a pandemic and people make rash, emotional decisions out of fear. Many downcast people eat, spend money excessively or become addicted to abusive substances during difficult times. These kinds of self-destructive behaviors need to be proactively avoided so that you will be able to maintain a cool head and clear mind.
4. Thou shalt be self-sufficient
Self-sufficiency is primarily about having the ability to provide for your own food, clothing, water, shelter, medicine, transportation, communication, power and plumbing over an extended period of time.
ost families prepare for this contingency by assembling an emergency kit. You should seek to have sufficient supplies for you and your family to survive for up to 3 months on your own without doctors, grocery stores, or other modern amenities. Consider what you will do if there is no medical care available in your area, or if all of the hospitals are swamped. In the event that a disaster occurs, it is likely that all of the local grocery stores will be out of stock within a few hours. It is important to ensure that your family is prepared for this contingency.
5. Thou shalt practice the primitive
Every year you should prepare by drill or practice to return to the primitive. This means intentionally depriving yourself of the conveniences that we have become accustomed to. The easiest way to practice this is to go on a yearly camping trip and live in the wilderness. Other ways to practice are turning off your power or water for an extended period of time. The importance of these drills is to help your family to develop the skills of rapid adaptation to abrupt changes in the amount of contemporary comforts available.
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September 14, 2009 ·
In today’s video from http://JasonHartman.com, we discuss how Platinum Properties Investor Network works, and why we give away so much properties investment information. http://CreatingWealthPodcast.com
What we do at Platinum Properties is not brain surgery. There’s nothing in here that the average investor with an average head on his or her shoulders can’t comprehend. The real trick, and the part where most people fail miserably, is to recognize what an amazing opportunity real estate ownership offers, especially in these tough economic times.
To be honest, we can’t stand the thieves on Wall Street, but there is one thing we learned – the real estate industry needs a good brokerage firm. That’s where we come in. We aren’t self-anointed ‘gurus’ on an eternal mission to upsell you to the next product. We sell education. We don’t have a series of ever-more expensive seminars. There’s only one and, while you might want to attend more than once to truly internalize the material, it’s not necessary.
We’re going to take you by the brain and show you step-by-step our Complete Solution For Real Estate Investors™. This is our comprehensive guide to income property investing. We’re going to show you a tried and true method to purchase property from the best builders in thriving local markets around the country. How do we know it works? We know because our own portfolios are built using this method. It’s how company founder and CEO, Jason Hartman, made himself a millionaire while still in his twenties.
What’s the best way to become a millionaire? A couple possibilities are to start with a billion dollars and start an airline, or start with two million dollars and buy stocks. Another option is to use real estate to take advantage of leverage, cash flow, and appreciation as tools for steadily building wealth. Let us teach you the investing secret that isn’t a secret – real estate. It really works.
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September 11, 2009 ·
In today’s video from http://JasonHartman.com, we will compare Madoff’s ponzi scheme with the ultimate pyramid scheme we are experiencing with the government’s spending and the treasury de-valuing our currency. http://CreatingWealthPodcast.com
In the wake of the recent $50B Madoff ponzi-scandal that has left many affluent people absorbing massive investment losses, there has been a lot of attention paid to fraudulent pyramid schemes by the media. However, this focus has been in exclusion of an astronomically larger pyramid scheme that is hurtling toward a dramatic collapse.
There are two very large forces that are pushing this ‘pyramid scheme’ toward collapse. The first force to reckon with is the perpetually increasing amount of debt-financed consumption. The second looming specter is the dramatic liability from government entitlement programs that will be revealed in the coming decades.
Let’s begin by discussing the trend of debt-financed consumption. In and of itself, debt is not inherently good or bad . . . it is all a matter of what the debt is used to finance. When money is borrowed at a fixed rate of interest for investment in long-term projects with a higher rate of return, it produces very good results. When long-term money is borrowed to finance short-term consumption, it requires that future production be sacrificed to repay the obligation. The intense problems come when the amount owed to finance short-term consumption grows so large that the interest cannot be paid from current income. (This is true for both individuals and governments.)
The second large force in this pyramid scheme is the government entitlement liabilities from programs such as Social Security, Medicare, Medicaid, and subsidizing financial institutions. The Department of the Treasury currently estimates the aggregate net entitlement liability at approximately $57 trillion dollars. (This amount grows to $61T when state and local government liabilities are added-in, which represents over $500k per household.)
The most likely result of this pyramid scheme is that the treasury will ‘print money’ or de-value the currency by increasing the amount of dollars in circulation to finance the nominal obligations. (Politicians have a noted tendency to terminally avoid decisions that involve dramatically raising taxes or dramatically cutting benefits.) This will have a net effect of destroying the purchasing power for income and savings, while diminishing the net impact of outstanding debt obligations.
Best Wishes,
Doug
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following the link below:
http://www.BusinessOfLifeLlc.com
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September 10, 2009 ·
This http://JasonHartman.com video as you to “take stock” of the stock market during this economy. It explains how the stock market works, what it was intended to be, and how it has changed into a gambling casino. http://CreatingWealthPodcast.com.
Conventional wisdom has long held that the way to become wealthy over the long term is by compounded investment in the stock market. The reason for this was quite clear when one looked at the chart of historical returns. By making very modest investments at regular intervals over a long period of time, small investors could create very large amounts of wealth. This line of thinking is what has prompted most employers to source their 401k retirement plans with mutual funds that invest in the stock market.
Unfortunately, the movement of stock market investment into the ‘main stream’ of America has caused it to become less of an investment vehicle and more of a gambling casino. The primary purpose of the stock market is to provide companies with a means to raise capital for business investment by selling a partial ownership stake (also known as a ‘share’ of ownership). Typically, investors were rewarded for their investment by the payment of dividends from the company profits. Thus, stock market investing was originally based on the notion of finding a company that was likely to make sufficient profits to pay healthy dividends.
This sentiment changed as the secondary market for trading stocks became more popular. A ‘primary’ issue of stock happens when a company issues more ownership shares.
A ‘secondary’ stock transaction happens when one investor exchanges an existing ownership share with another investor. This is where the stock market turns into a casino. When the focus of investment shifts away from the ability of the company to viably pay dividends on a consistent basis toward the probability that the secondary market will pay more for the company stock at a future date, stock investment becomes much more akin to gambling. When returns are primarily based on price appreciation, continued growth in market value requires a perpetual stream of new buyers. This phenomenon is true for both stocks and real estate, and explains the recent booms/busts very thoroughly.
The only factor that can push up the entire stock market is if there is an aggregate increase in investment capital (similar to how increases in the money supply from the Federal Reserve drive price inflation). When corporate profits grow, it is natural to assume that more capital will be attracted to the market. However, when market values rise faster than corporate profits, the only cause can be a net influx of investment capital.
In the United States, there were two ‘Sledge Hammer’ events that sparked a colossal 25-year bull market for stocks. The first was the passage of the Employee Retirement Income Security Act (ERISA) in 1974, which created standards and stability for company-sponsored stock market investment plans that dramatically increased the supply of equity capital. The second was the pairing of tax cuts in the 1980s and a significant reduction in the cost of debt capital that spurred a rapid growth in corporate profitability. These two events combined to generate a massive increase in stock market investment that pushed values sky-high.
However, these massive gains came with a bit of a shadow. This problem has been created as investors stopped directly buying stocks of individual companies and started investing in funds where a manager buys and sells the stocks. Now these brokers and managers have control over incredible amounts of other people’s capital. This control gives them the power to create or destroy tremendous amounts of value based on the decisions that they make. It also channels market activity more and more toward ‘gambling’ as managers seek to maximize value appreciation. (This set of incentives is very adverse to investor interests, as managers have incentives to take insane risks, since big gains mean tremendous bonuses and losses only mean that they get fired.) Furthermore, most managers charge very hefty fees for their services, which cut into the net investor returns. (Thus far, we have assumed that the fund managers are honest . . . when the ‘crook’ dynamic is factored in, the risks increase significantly.)
Fundamentally, there are four principal risks implicit in this kind of stock market investing:
1) Your broker may be a crook.
2) Your broker may be incompetent.
3) Even if your broker is honest and competent, he will take a big slice of your profits in the form of fees and commissions.
4) These problems are not limited to your brokers . . . all of the middlemen like stock promoters, CEOs, bankers, and all other flavors of hucksters or salesmen.
On top of all these risks, there is a bigger dynamic to consider. Currently, corporate profits are taking a very steep tumble relative to their prior levels. In addition to this, most of the working population is already invested in the stock market, so there is no large pool of capital to attract so that valuation can continue to inflate. Finally, the current market Price/Earnings ratio is well above its historical average. This means that the market is discounting-in a future increase in corporate earnings. If that increase does not come, or takes longer than expected, it will most likely result in market values decreasing.
Finally, there is a longer-term risk of very average performance. Even if the anticipated recovery happens as expected, there is no looming influx of capital to push the market up at explosive growth rates. This means that future market appreciation will look very average by historical standards. (Granted, nominal values will be pushed up by inflation, but real returns will still be very much in the ‘average’ category.)
Ultimately, the stock market is in the midst of a ‘return to reality’ from the large rates of return in prior years. The fundamentals are pointing toward difficulty in maintaining prior growth rates out into the future, including the risk of more near-term price compression if the forecasted economic recovery does not materialize as expected. Granted, there is a probability that the stock market will recover better than expected and produce favorable returns. However, prudent investors should seek to diversify their investment activities into other emerging areas of opportunity to limit exposure to the stock market.
Situations such as prudent real estate investing with a small to negligible downside and significant to infinite upside are what economists call a ‘free option’ . . .principally because the investment volatility runs mostly in the ‘up’ direction because of the downside risk mitigation. Needless to say, these are the investments that we would like to create.
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September 9, 2009 ·
In today’s video from http://JasonHartman.com, learn how to continually make NON-TAXABLE money from properties investment. http://CreatingWealthPodcast.com
Platinum Properties Investor Network has a series of core concepts that we communicate to our investors. One of these is to ‘Refi ‘Til Ya Die’ with your rental property portfolio. While this description may sound a bit snarky, it is a very powerful strategy for multiplying your wealth over the long term.
The most unique part of this strategy is that it stands in stark contrast to the popular strategy of ‘flipping’ properties by buying and quickly re-selling them for quick profits. The strategy that we recommend is the exact opposite of this. At Platinum Properties, we advocate buying and holding prudent rental properties over a long period of time. This enables investors to build real wealth, instead of constantly churning properties (and creating taxable gains).
There is another very powerful force behind our strategy of buy and hold investing. That power comes when the rents and value of your property increase over time. Typically, an investment property will start with low cash flow, and will grow in profitability as tenant rents are increased. This increase in revenues carries with it a tremendous tool for growing your wealth.
The way that you employ this tool is to refinance your property for more than your original purchase price, based on the increased cash flow. This will allow you to re-invest the amount of your loan that exceeds the original purchase price. And here comes the kicker . . . these net proceeds are not taxed!!!
The reason that you will not owe taxes on the re-financing of your properties is because loans are not taxed. Since you are taking out a loan instead of selling the property, no taxable transaction is triggered. Granted, capital gains can be deferred via 1031 exchange, but you will still lose 5% to 6% of the property value off the top from realtor fees. Thus, investors can ‘Refi ‘Til Ya Die’ and legally avoid paying taxes on the increased loan amount of their properties. (In addition to this, the increased interest payments from your new loan will reduce the tax burden of your regular cash flow.)
These strategies can super-charge wealth creation by allowing investors to capture their equity growth for re-investment. These perpetual re-investments accelerate the natural compounding of your investment portfolio. It also carries the benefit of consistently increasing your use of fixed-rate debt as a shield against inflation. Prudent investors realize the incredible power of this strategy, and should seek to capitalize on it to build their wealth during these increasingly difficult times.
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September 8, 2009 ·
As a show focused on prudent financial strategies, it is always a pleasure of ours at The Creating Wealth Show to further relationships with those who share our same philosophies of wealth creation. Andrew Waite, publisher of Personal Real Estate Investor Magazine, America’s best selling real estate investment business and finance magazine title for individual investors, is a great example of these valued relationships. Visit http://www.jasonhartman.com/radioshows/. According to Personal Real Estate Investor Magazine, over 89 percent of today’s home buyers look at real estate as a housing utility and an investment opportunity. Both as a family and an investment shelter, real estate investments are stable and profitable despite current market conditions. Listen in as Jason Hartman talks about taking advantage of sensible income property investments. Next, this two-part show focuses on the latest Dallas market investment analysis and the information needed to profit from transactions today. Upcoming shows will include: Dan Blacharski, author of several technology, finance, business and entrepreneurial concept books including The Part-Time Real Estate Investor: How to Generate Huge Profits While Keeping Your Day Job and Dan Sullivan, founder and president of The Strategic Coach Inc.
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September 8, 2009 ·
In this article by Mark MacVay for http://JasonHartman.com, you will see exactly how inflation acts like a termite on your investments, and how to use the power of inflation to create wealth instead. http://CreatingWealthPodcast.com
Do your investments have termites? It may sound like an odd question. But if you’re like many Americans with the typical savings accounts and mutual fund/stock portfolios, then you are subjecting yourself to the ravages of a specific type of termite which is slowly, and clandestinely devouring away at your financial portfolio, taking away the prospects of a secure retirement with it.
What type of termite could do such a dastardly thing, you ask? This termite is called inflation and it is both the scourge of financial security and the product of our current monetary system.
Allow me to explain. Most of us have been brought up to believe that saving and investing are good and getting into debt is bad. While I certainly agree with this general sentiment, it contains one important fallacy – it presumes that the money supply in our economy is static. The reality could not be further from the truth; the money supply is increasing at an ever-faster pace. You see, every dollar added into the economy cheapens those already in existence, and the Federal Reserve in conjunction with the government are increasing the supply of dollars and credit at an alarming rate. This means that your savings and portfolio accounts are being reduced in value as the dollars they convert into buy progressively less and less. Sadly, this termite assault on your wealth is ongoing and relentless.
But, you ask, I heard on the radio that inflation was under control, that the CPI (Consumer Price Index) was relatively low… what gives? Suffice it to say that the CPI is sufficiently manipulated by the government to give the public a much more benign view of inflation than actually exists. To see just how ravaging this inflation termite is, simply look around you – oil, commodities, health care, education, housing, food and now even postage have been going up substantially in the last few years. These increases far eclipse the relatively modest gains in the stock market over the same time period.
Now, at this point, I presume you’re scratching your head and asking… well, how do I eliminate this termite? How can I secure my financial house from this destructive insect? The truth is that there is no Orkin man, no Terminix for this type of pest – that would require a major overhaul of our monetary system. Alas, we are stuck with this troublesome termite for the foreseeable future.
However – and this is where it gets interesting – while you can’t eliminate this pestilence, you can use it to your own advantage to maintain and grow your wealth rather than have your wealth eaten away. How, you say? By properly turning the tables on our financial system and becoming a debtor.
Heretical, no? If you recoiled in disgust, I understand as it runs counter to the way many of us have been brought up. But allow me to elaborate. By debt, of course, I don’t mean going out and indulging yourself on fancy meals, cars and vacations. There is no long-term benefit of purchasing those items using debt. In contrast, by selectively purchasing tangible assets which throw off cash flow, and by buying these assets with the bank’s dollars in the form of a mortgage/loan, you achieve the financial equivalent of a double play. Long term, your asset most likely increases in price as more and more dollars flood the economy, and, just as importantly, you are paying for that asset year after year in progressively worthless dollars thanks to the inflation termite eating away at the dollars you’re now repaying to the bank. Not only is this a shining example of leverage, it can also be thought of as a form of financial martial arts – you are harnessing the energy of your opponent (inflation) and using it against him.
Of course, one of the best asset classes with which to follow this path is investment real estate, a proven path to wealth for many and a good hedge against inflation. In the interim, your tenant helps pay your debt obligations while you allow the aforementioned economic forces to work their magic. Of course, you have to do your due diligence and choose your properties and loans carefully. Nevertheless, this is a powerful technique to build long-term financial wealth.
How ironic that the best defense against the termite of inflation is an investment property with a big mortgage!
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September 7, 2009 ·
In today’s video from http://JasonHartman.com, we will look at the different types of investor personalities. Some people are better suited for riskier investments, while others need slow and sure investments. http://CreatingWealthPodcast.com
When engaged in the business of living our lives, it is critically important to ‘know yourself’ in all things that you do. In the context of personal relationships, we must learn about ourselves to develop healthy relationships with others. Harmony requires that we be up-front and honest. In an ideal situation, the strengths of one person in a relationship will compensate for the weaknesses of the other.
In the world of investing, knowledge of yourself is no less important. The most important thing that investors can know about themselves is the degree of risk and volatility that they are willing to accept. Similarly, they must be honest about their willingness to take action and close a deal. This principle is doubly important since most investment ‘systems’ focus exclusively on the academic side of deal analysis. It is certainly important to find good deals, and analyze them quickly, but all of this can be for naught if the investor lacks the willingness to take action at the critical moment. Things can also fall apart if the investor does not follow through sufficiently to see the deals through closure and into implementation.
The truth is that there are two types of investor. One type is suited for assembling ‘deals’ that can generate tremendous returns. The other is either uncomfortable with the risk and uncertainty implicit in assembling deals or is unwilling to take action at the critical moment. This type of investor is typically better suited to steady compounding of investment returns over a long period of time to create wealth. It is important to note that both investors can be very successful. The path of the deal maker tends to achieve wealth more quickly than the ‘slow and steady’ investor, but either of them can realize tremendous amounts of success with the proper balance of analysis, discipline, and the willingness to act.
In the end, it is much more important that you know yourself than that you know how to execute a particular system or strategy. Systems come and go . . . strategies constantly change with the business environment. But knowledge of yourself is a priceless asset that will serve faithfully throughout the tenure of your life.
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September 4, 2009 ·
In this video from http://JasonHartman.com, you’ll find out why the illiquidity of real estate makes properties investment an excellent investment choice, and how some “great deals” can turn into fiscal nightmares. http://CreatingWealthPodcast.com
At times you hear people talk about the volatility of the real estate market. If you want volatility, try the Wall Street conspiracy. They’ve got volatility. Why? Because they also have liquidity. . . instant liquidity. Anyone can log onto their account and buy or sell a stock with the click of a mouse.
Real estate is a cat of a different color.
It is an illiquid asset. Even if you woke up one morning determined to sell a piece of property and there was a buyer equally set on the purchase, chances are it would still take two weeks or, more likely, a month before the deal could be closed. It’s a much more complicated process. An offer must be made and accepted, financing arranged, third party inspections made, title search, etc., before an official transaction can ever be made.
This lack of liquidity is a good thing when it comes to investing. It’s what makes real estate such a stable, appreciating asset. It’s also why, if you’re living paycheck to paycheck, you shouldn’t use your lunch money to buy income property. If the time comes that you need to get out of it quick, you might not be able to. Investing in real estate should be done for the long term with money you don’t need for day-to-day survival. Then you can leave it alone and watch it grow.
Why the Best Deal Isn’t Always (From the JasonHartman.com blog)
I came across an article recently that illuminated exactly why we believe our strategy of having local property managers in various areas around the country saves Platinum Properties Investor Network clients from similar tales of woe. It’s all about micro-targeting location before you EVER pull the trigger on a real estate deal. Is micro-targeting important? Only if you want to avoid having a great $1,000 positive cash flow deal turn into a $30,000 legal hassle.
Gather ‘round the campfire kids, and learn why you have to look further into the ‘great’ deal before you buy it. In this example, the buyers were in the early days of their income property career and got starry-eyed over the prospect of a no-money-down deal. Who wouldn’t want terms like that? Talk about leverage! Problem was, in their haste to not miss out on this ‘deal of the year’, they didn’t check out the local area thoroughly.
What sorts of problems? To start out, the entire block was occupied by an army of drug users and dealers, plus a host of other nefarious characters. No matter how nicely that property was fixed up, think a stable renter is going to want to move his or her family into that war zone? With crumbling ruins flanking it? Next, our intrepid investors were enmeshed in court with fire code violations and a property manager up for manslaughter. Gulp.
Bet they wish they had been getting their real estate recommendations from Platinum Properties! That’s why we have local managers with feet on the ground and an intimate knowledge of the neighborhood.
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September 3, 2009 ·
Economic collapse is a real possibility in this financial climate. Are you prepared for the worst should society implode from the financial stress? This video from http://JasonHartman.com introduces you to viable survival strategies in today’s economy.
In the midst of financial collapse, massive government deficits, high unemployment, bailouts, and inflationary spending, there is a rising tide of people who are becoming skeptical about the prospects for continued economic growth in the near future. There are many people who are sounding the alarms of doom, but there are precious few who are offering viable strategies for individuals to prosper in such an environment. One of the places where these strategies live is Holistic Survival.
Holistic Survival is an initiative created by Jason Hartman to address the needs of people to protect their wealth, family, and property from the economic turmoil that is expected to come. As the castle of debt created by the government through fiat currency and runaway spending begins to collapse, there will be tremendous disruptions to the lifestyle that people have come to expect. This ‘prosperity collapse’ is expected to have many repercussions throughout the economy.
As inflation comes about from the massive monetary expansion of world governments, sharp price increases are expected to hit the poor dramatically. Some people expect that these price spikes will spur riots and looting, which in turn could result in martial law and government price controls or rationing. In this case, people will need to know how to survive in a world where the supermarket is not always open for business. Extended periods of time with no food available may become normal.
As the currency continues to collapse, it is also likely that barter and trade will begin to replace traditional monetary commerce. It is also likely that many of the products that are currently purchased at the grocery store may need to be acquired through the ‘black market’ in goods that are price-controlled or rationed. This will require people to adapt very quickly in order to avoid very dire circumstances. These are not pleasant thoughts to have, but there is a chance that they will become a part of normal life for many millions of people throughout the world.
There is a famous saying that luck favors the prepared. At Holistic Survival, we couldn’t agree more. We desperately hope that the expected economic catastrophe does not transpire. We remain hopeful that the free market will eventually prevail and return the country back to a path of growth. Nonetheless, it is prudent to be aware of the possibilities and prepared to exist in the world that may exist after the prosperity collapse. Find out more at www.HolisticSurvival.com.
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September 2, 2009 ·
In this video from http://JasonHartman.com, you will learn how properties investment can actually help you get paid to borrow money. http://CreatingWealthPodcast.com
The cacophony of advice about where to put your money coming at you from all sides can sometimes be deafening. We know that. That’s why we try to be the Joe Friday of investing. Remember the character from Dragnet? ‘Just the facts, ma’am.’
At Platinum Properties, we’re big on facts and when it comes to investing, the facts tell us there is no better place to be than real estate. One of the multitude of reasons we believe this relates to the title of this entry. When you buy a piece of income property, taking out a mortgage in the process, you actually DO get paid to borrow money. At least, that has been the case historically and there seems to be no reason for it to change.
The reason we say you get paid to borrow rests in the reality of inflation, pure and simple. In inflationary times, your best shield against the declining value of the dollar is high-quality, long-term, investment-grade, fixed-rate debt tied to a piece of rental property.
If you muddled your way through that last convoluted, hyphenated sentence, the payoff is this simple statement – the right kind of debt is good. Here’s why and how it works. Let’s assume a dollar was worth a dollar and you bought a house in 1972. Over the next 30 years, continuing inflation driven by near-imbecilic government economic policy drove the value of a dollar down to $0.24 when compared to the 1972 version. It’s all about purchasing power. By taking out a loan that doesn’t come due for those 30 years, you have effectively saved yourself money by paying off the note in cheaper dollars than what you borrowed with.
You just got paid to borrow money, bubs.
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September 1, 2009 ·
In today’s video from http://www.JasonHartman.com, review the Financial Market Update and Monetary Update for the United States. Learn the best types of properties investment during financial Armageddon. http://CreatingWealthPodcast.com
The recent stock market rally has inspired a rising tide of hope and optimism within the investor community. Evidence of this is seen in the gentle step-up in market values from the floor of their recent decline.
This optimism seems to be discounted into the Price to Earnings ratio of the S&P 500 Index as well, since the current price of $921.23 represents a P/E ratio of 31.2 times the next four quarters of forecasted earnings per share for the index. Since the historical valuation for this index is significantly below the current level, it stands to reason that the investor community collectively believes that the government initiatives will create a market recovery in the near term.
At the Financial Freedom Report, we are not yet convinced that the fundamentals of the market justify such an optimistic valuation.
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September 1, 2009 ·
“For far too long, too many people have regarded home ownership as ‘a good thing.’ It is certainly true that home ownership has its benefits. But, like everything else, it also has its costs and its risks.” This statement by Creating Wealth Show guest, American economist Thomas Sowell has been regretfully muttered by many homeowners in various forms over the past two years. Visit http://www.jasonhartman.com/radioshows/. Sowell is currently a senior fellow with The Hoover Institution at Stanford University. In 1990, he won the Francis Boyer Award, presented by the American Enterprise Institute. In 2002 he was awarded the National Humanities Medal for prolific scholarship melding history, economics, and political science. Known for his economically laissez-faire perspective style while writing, Sowell’s latest book, The Housing Boom and Bust, shows how Democrats and Republicans ruined both the housing and financial markets. Tune in as your host, Jason Hartman and Thomas Sowell discuss how “the current economic crisis grew out of policies based on good intentions and mushy thinking.” Upcoming Shows will feature: Andrew Waite, Publisher of Personal Real Estate Investor Magazine and Dan Blacharski, author of The Part-Time Real Estate Investor: How to Generate Huge Profits While Keeping Your Day Job.
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