Category: Leverage
October 15, 2009 ·
Patrolling the Plastic: Keeping Track of the Consumer 
Credit Market (From the Chart Store Weekly Chart Blog for the week ending July 10, 2009)
Analysis of the total consumer credit outstanding shows that the last 10 years, the total consumer debt outstanding as a percentage of disposable personal income has rounded the hump from its all-time high, and is retreating downward. The recent credit market disruption has left many people deleveraging their debt positions, and is pushing this index down further. Unfortunately, the average amount of consumer credit outstanding is still very high relative to the average of 17.5% from 1959 to 1994. Much of the economic expansion in the late 1990s and early twenty-first century was based on debt-financed consumption.
The resultant debt bubble has compromised the ability of many families to continue with their prior spending habits. In practical terms, this means that a prolonged period of adjustment is very likely as consumers slowly move toward a sustainable equilibrium of credit that is nearer to the historical average. This period of adjustment is very likely to result in a downward shift in spending patterns, as well as the observed level of prosperity for the average consumer. Prudent investors should position their portfolios so that they control assets like entry-level rental housing that will be in demand by people who are adapting to the reality of living more modestly.
Non-Dollar-Based Assets Will Rock Your World (From the JasonHartman.com blog)
We’ve been talking a bit lately about how, in our humble opinion, the dollar is poised for a headfirst plummet off a very high cliff. When it does, get ready for the cloud of dust slowly rising up into the sky, just like in the Roadrunner cartoon when Wile E. Coyote makes yet another serious error in judgment.
It doesn’t take much pondering to arrive at the conclusion that a good place to be when the currency crashes is – drum roll, please – OUT of that currency. You need hard, tangible assets. Like commodities? Yes, but probably not what you think. Running out to buy gold and silver is better than Wall Street stocks and bonds, but you can still do much, much better if you turn to income property investing.
After all, what is a structure on land besides a collection of basic commodities like copper, wood, brick, etc? We call it Packaged Commodity Investing™, and this is one (perhaps the only way) to survive the coming fiat currency implosion with your wealth intact. Can you imagine actually being able to create wealth while others around you, especially those who stayed in stocks, are being turned into paupers overnight?
People will still need a place to sleep at night and you will own the pillows. This is how to position yourself to become wealthy in the future. Own something of real value, like real estate. Companies come and go with frightening regularity off the stock market indices. Terra firma beneath your feet? It’s probably going to stay.
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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 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 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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June 18, 2008 ·
Jason reveals how you can actually profit from prudent borrowing. Then Jason and Ben, a local businessman and caterer, discuss inflation and rising food prices. Visit http://www.jasonhartman.com/radioshows/
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