jump to navigation

Audit The FED, Why Not? – Thomas Woods Author of Meltdown Interviewed About Ron Paul's Bill HR 1207 October 29, 2009

Posted by Jeff Nabers in : Money , add a comment

We recently caught up with Thomas Woods the author of the best selling book Meltdown. Learn what he has to say about auditing the Federal Reserve (FED).

Currently, over 300 (more…)

How you just lost money in a stock market that's up 40% August 5, 2009

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

stocksup

Headlines abound, the stock market is up 40% from its March lows!!! Let’s all celebrate. Those who spoke badly of Obama, Bernanke, and Geithner have their foots in their mouths, right?

Not even close. These types of misleading headlines are the very weaponry of a financial system that tricks you, lures you, spikes your drink, robs you blind while you’re partying, and then nurses you back to sobriety in the morning by giving you another spiked drink.

Imagine you have $100 in the stock market. You experience a 40% loss. You now have $60. And, abracadabra, the economic rescuers have juiced the market back up 40%. You now have $84. Wait a tick, how exactly do I get back to $100? Well to recover from a 40% loss, you would need a 67% gain. You see, 40% of $60 is much less than 40% of $100, so the initial 40% loss was much larger than the 40% gain that followed. For those whose livelihood involves serious math, this is very obvious. For the rest of us, it should be an “ah ha” moment that exposes the red arrow, green arrow game.

Watching and listening to the financial news networks report about the stock market is like watching a sports game. And it entertains just like a sports game. In the midst of entertaining, it lulls us into watching the red and green arrows. Oh, it’s down today a few points. Hey look, it came back up. It feels very much like watching a basketball team surrender and regain the lead in a basketball game. If they are down by 40 points, and then they score 41 uncontested points, they have the lead and they win the game!

But it doesn’t work the same in percentage points. But just wait, over the long term the losses will be recovered and there will be profit, say the “experts” whose payroll checks are signed by Wall Street. If you buy that line of baloney, you will be further tricked. Because over the long term those losses will be recovered and there will be profits… but only as measured in dollars. If you factor in how over the long term those dollars buy less stuff, you will not find a substantial long-term profit.

Today the Dow closed at $9,320. But the dollar has lost over 96% of its purchasing power since 1913. Take 96% out of today’s Dow price and you get $372. In 1913, the Dow was at about $62. So the Dow Jones Industrial Average grew from $62 to $372 (in constant 1913 dollars) over a period of 96 years. That’s an annualized rate of return of 1.88%.

This bears repeating…

The Dow Jones has returned 1.88% per year for the past 96 years

Can you still get excited about a stock market that’s up 40% since its March lows when it is still a stock market that hasn’t even been able to produce an actual 2.00% return over the long run?

Or even more important questions: Is it worth the risk of losing a big chunk of the money you worked for just to “get some action” in a market that produces less than a 2.00% return over the long run? When you are down, can you wait decades without touching your money just to get back to your break-even point?

—-

Jeff Nabers is author of 5 STEPS TO FREEDOM: How to Cut Your Dependence on Institutions and Escape Financial Slavery

The Fragility of a Consumer Economy August 4, 2009

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

fragile

When an economy is based on healthy, sustainable activity with a balance of production and consumption, the type of depression we are in can’t happen. In our consumption-based economy, on the other hand, nothing can “stimulate” things back on track. This is because the track we were on is unsustainable. There’s no going back on it. American consumers can’t spend & consume more today in an effort to “save” the economy because we already spent and consumed the goods of today.

Despite the “green shoots” talk that all the economists and politicians are spreading on TV and in magazines and newspapers (pay no mind that these are the very people who didn’t see the crash coming–we are expected to now value their opinion about what’s going to happen next), what’s next isn’t good for the general economy. As illustrated by Ian Mathis of at Daily Reckoning, by the end of the year about 1.5 million jobless Americans will exhaust their unemployment benefits.

We know that unemployment is sky high right now (10% official figures and 20% as figured by shadowstats.com), but millions of those jobless Americans are receiving checks from the government that are continuing to pay for their rent, groceries, Venti 7 Pump White Mochas, etc. By year’s end, about 1.5 million Americans will no longer have a source of income. In other words, the further reduced consumption affiliated with unemployment hasn’t even come home to roost yet.

Waiting for the “general economy” to be brought back to life will turn out to be a disappointing plan. Your personal economy is what matters, and thriving is a matter of what you make for yourself. Just as the Soviet Union taught us that central planning doesn’t work, we will relearn that lesson as central planning continues to fail in the United States. Don’t wait around for stock markets to go into a long term rebound (as opposed to the bear market rally or “bounce back” that comes before the next leg down in every stock market crash) or for the government to get your job back for you. If anyone’s going to bring your prosperity, it’s going to be you!

A No Nonsense Guide To Investing For Liberty Lovers July 31, 2009

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

lm4-logo

The Liberty Maven blog just posted a review of my book, 5 Steps To Freedom: How to Cut Your Dependence on Institutions and Escape Financial Slavery. Here’s an excerpt:

One of the key ingredients in attaining some semblance of freedom is to become financially independent. A new book, “5 Steps To Freedom“, by Jeff Nabers and Phoebe Chongchua supplies us with some extremely effective tools to escape financial slavery. Take elements of Tom Wood’s “Meltdown“, Ron Paul’s “Manifesto“, and Peter Schiff’s “Crash Proof” all rolled into one and you come very close to describing “5 Steps To Freedom”.

The five high level… [see the whole review here]

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…)

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…)