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 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 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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