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The Most Important Financial Question You Must Ask June 19, 2009

Posted by Jeff Nabers in : Money , add a comment

inflsmdl

What is inflation?

I believe this is the most important financial question a person can ask. I am constantly on a trek to better understand money and wealth. Here is some of what I’ve learned thus far:

Per its original meaning:

I have a 1920 Webster’s dictionary that says inflation is a rise in the money supply. I have a 2006 Webster’s dictionary that says inflation is a rise in consumer prices. From this point forward, I will use “inflation” for its original definition (an increase in the money supply) and I will use “price inflation” to refer to a general increase in  prices.

How did this “Newspeak” happen?

Inflation is harmful because it leads to a rise in prices. When everyone’s expenses are rising faster than their incomes as a result of the actions of the government and banking system, it is like a tax on the American people.

With the harm being a rise in prices, the focus on the topic of “inflation” shifted from the cause (inflation) to the effect (rising prices). And so, over a period of decades, everyone (news media included) shifted into speaking about inflation as a rise in prices.

Why don’t inflation and price increases correlate directly anymore?

You can take simple economic examples and draw a direct correlation from increasing the money supply to a rise in prices not complemented by a rise in incomes. These are usually fictional stories of a group of people being stranded on an island and creating their own economy. They will illustrate with great clarity that increasing the money supply takes from the regular person and gives to the banker or his friends (such as the government).

Now apply those concepts to our current economy and you will be so confused, it will be easy to surrender to saying, “Gosh this stuff is for super-geeks to figure out and I’ll just go with whatever is reported to me.” Of course, we’ve learned that following the crowd and getting your information from normal reporting sources is a sure way to (more…)

Could We End The Fed? June 14, 2009

Posted by Jeff Nabers in : Money , add a comment

endthefed

The U.S. House is going to debate the “Audit The Fed” bill. I don’t pay close attention to what’s being debated and passed on the floor of the Senate of House of Representatives because what’s usually written up, sponsored, and voted on isn’t even read by our Congressmen.

This Audit the Fed bill is a different story. It’s sponsored by a Congressman who some call (more…)

Why Does Government Fail? June 3, 2009

Posted by Jeff Nabers in : Money, Self Directed IRA Solo 401k , add a comment

While everyone argues about what the government should be doing, 2 very fundamental factors are ignored.

In this video I discuss those factors. One thing I didn’t include (more…)

Deciphering the Bank Stress Tests May 20, 2009

Posted by Jeff Nabers in : Money , add a comment

Here are a couple highlights for a recent post over at Daily Reckoning regarding the bank stress test results.

NY Times' Meltzer Calls for Fed To Stop Causing Inflation May 14, 2009

Posted by Jeff Nabers in : Money , add a comment

volcker

The Fed’s activities for over a decade have been very focused on creating inflation (an increase in the money supply). Allan Meltzer wrote a great article the other day summarizing how inflation isn’t the solution to our economic problems… it’s the cause.

He revisits how Fed chairman Paul Volcker came on the scene and decided to directly combat the economic problems in the 70s by simply (more…)

Is my home an investment? March 18, 2009

Posted by Jeff Nabers in : Self Directed IRA Solo 401k, real estate , add a comment

re_stupid

Recently I received a question from somebody looking into self-directed IRA/401(k) investment for themselves. They said, “I ran this by my financial planner in New York who said to roll over my IRA to put some of its money into my home is illegal.” This statement is technically correct. Putting IRA money into his primary residence would be a prohibited transaction. The disturbing thing about the situation is that these three people (a person, their realtor, and their financial planner) could all be on the same page about something so fundamentally ridiculous.

The misconception

In the past 10 years, many people think “real estate investing” equals “putting money into my home”. Their home can’t be an investment in the first place because they are paying for it rather than having it paid for by a renter.

When somebody wants to help people rationalize buying the stuff they sell, they often call it an “investment”. Bill Clinton started changing the way people thought about government spending (when he was increasing it) by calling it an investment.

An investment or a consumer product?

Selling a primary residence to a home buyer is selling a consumer product. It’s for their use. They can buy what they really need. Or they could get extravagant and buy the Lexus/Mercedes version of a home and spend more. Either way, it’s a consumer product if they are paying for it and using it themselves.

But realtors followed Clinton’s spin move and started calling home buying an investment. This really caught on once Fannie Mae, Freddie Mac, and the Fed all took actions to artificially inflate home prices in order to defer the recession of 2002. Once you could buy this consumer product (the home) and then have it rapidly increase in value (supposedly) and realize this value by selling it or doing a refinance cash out, then the talk about the home being an investment seemed to make sense.

Today, the bubble is over, and the illusion that your home is an investment should be easy to correct. If it was an investment, then somebody else would be paying the mortgage. If somebody else was paying the mortgage, they’d probably live in it instead of you.

It’s not to say that buying a home is a stupid thing to do. That can only be decided on a case-by-case scenario that depends on the buyer and the home in question. Buying a home can be a financially beneficial thing to do in some cases, but it hardly could be truthfully classified as “real estate investing”.

Back to basics: real estate investing means buying properties that produce income. And, yes, real estate investing can be done inside an IRA or 401(k).   :-D

Tool for Battling Coming Inflation February 19, 2009

Posted by Jeff Nabers in : Money, Personal Enjoyment, Personal Productivity, Self Directed IRA Solo 401k, real estate , add a comment

If you’ve been following my blog, you know that I take great interest in understanding money. Why every single human who uses money on a regular basis doesn’t also share this interest is beyond me.

With trillions of dollars created by actions of Congress, the Federal Reserve, and the Treasury Department, the concern for coming inflation can only spread. This video explains why tax deferred investment vehicles are the best tool for battling inflation and can possibly even (more…)

I.O.U.S.A viewing this weekend on CNN January 9, 2009

Posted by Jeff Nabers in : Health, Money, Personal Enjoyment, Personal Productivity, Self Directed IRA Solo 401k, real estate , add a comment

iousa_slim

CNN to Broadcast I.O.U.S.A. | Obama Foresees Trillion-Dollar
Deficits |
A Bipartisan Plea for Fiscal Responsibility | The Government We
Deserve

CNN to Broadcast I.O.U.S.A.

The public has spoken, and we’ve listened. In response to demand
for information about our country’s financial challenges, CNN/U.S.
will air the broadcast premiere of the acclaimed documentary
I.O.U.S.A. on on Saturday, January 10 at 2:00 p.m. EST and on
Sunday, January 11 at 3:00 p.m. EST. Accompanying the documentary
will be an unscripted panel discussion with policy leaders about
various economic solutions currently under consideration.

This exclusive televised event will air only on CNN, and will be
hosted by Ali Velshi and Christine Romans, co-anchors of CNN’s
Your $$$$$, the network’s weekend business roundtable program.
Throughout I.O.U.S.A.’s broadcast premiere, Velshi and Romans will
engage a distinguished group of panelists, including Pete
Peterson, Chairman of the Peter G. Peterson Foundation and former
U.S. Commerce Secretary; Dave Walker, President and CEO of the
Peter G. Peterson Foundation and former U.S. Comptroller General;
Alice Rivlin, noted economist and former Director of the Office of
Management and Budget; and Bill Bradley, a Managing Director of
Allen & Company and former U.S. Senator and Democratic
presidential candidate, in discussions about issues raised in the
film and their ties to current economic events.

Learn more about the film at www.IOUSAtheMovie.com. And be sure to
spread the word about the U.S. broadcast premiere!

Obama Foresees Trillion-Dollar Deficits

CNNMoney.com reported on Tuesday that when President-elect Barack
Obama takes office on January 20, he’ll inherit an economy deeper
in debt than ever.

Obama commented on the unprecedented deficit, saying, (more…)

Lunch at the Fed August 22, 2008

Posted by Jeff Nabers in : Money, Self Directed IRA Solo 401k, real estate , add a comment

I recently attended a lunch discussion at the Fed building here in Denver hosted by the World Trade Center. The topic of discussion: The outlook for the U.S. Dollar.

First, a Federal Reserve senior economist gave us an overview of what Fed is and how it works. Surprisingly, he was quite direct and open about Fed’s control over increasing & decreasing the money supply by simply deciding to buy or sell “government securities” from or to its member banks. (If everyone would have grasped that statement fully, the “forecasting” of USD activity would have been unnecessary.)

The floor was then passed to Russ Root, ForEx advisor at Amegy Bank. He mentioned PPI (Producer Price Index), aka “pipeline inflation”, being around 9.2%. He made some comments about Fed chairman Bernanke currently asking Congress to consolidate & fortify Fed’s powers. I understand Fed’s job is essentially to attempt to rid America of the economic cycle, thus making all our lives recession/depression-free. Economically speaking, this is impossible when operating a system on fiat currency. So, each time a new Fed chairman gets appointed, he has failed at his task before starting it. For this reason, word of Bernanke asking for “more powers” is alarming. It’s like losing a game of blackjack and doubling your bet after each loss… throwing more money or power after a losing game is a silly thing.

Mr. Root described the situation with the dollar as “the race to the bottom”. To summarize his message, “we win”. We’ve won the race to the bottom, and his bet is on a stronger dollar over the next 18 months. Oddly enough, he didn’t explain why or how the dollar’s rebound will occur beyond the logic of “what goes down must come up”. It’s not a surprising prediction considering the venue.

Beyond my thirst for knowledge relating to fully understanding money, my reason for attending this meeting was to consider joining the World Trade Center. Contrary to common awareness, the WTC is more than just a pair of buildings that toppled in Manhattan. It’s actually an association of individuals and companies involved in international trade. This interests me because I believe there are countless strong investment opportunities outside our borders. Most of the attendees of this lunch meeting were WTC members.

One WTC member posed the question, “The 30 year bond should be at 13%. How long will these other countries keep propping us up?” His concern wasn’t exactly addressed. I mean whoever does know “how long these other countries will keep propping us up” is going to become a rich (or richer) man applying that knowledge and keeping quiet. Of course, this was really more of a comment about his concern that our financial circumstances are currently highly dependent on foreign countries. I haven’t yet decided whether to join WTC. I am primarily looking to connect with international real estate brokers who can facilitate transactions in South America and Asia. Suggestions in comments appreciated.