Episode-643- Modern Financial Survival

Financial survival is something that we often hear main stream pay lip service to.   There are countless main stream experts with the formula for a happy retirement and profitable investing on the news and on day time talk shows all the time.  Each claims to have the code cracked yet they all pretty much say the same things.

  1. Save money in the stock market
  2. Put money in tax differed accounts
  3. Debt is okay
  4. Stay away from risky investments like gold
  5. Don’t time markets, invest for the long haul

The problem with such advice is it isn’t actually financial advice, it is well formed marketing to sell a system designed to serve an apathetic society.  A system of passive investing that may or may not pay off and is subject to extensive risk due to its very nature.

Join me today as we discuss…

  • The origin of our current “smart way” to invest
  • Why the autopilot system is dangerous
  • Proof that well know gurus are idiots
  • Why gold or silver are financial insurance
  • Why 100% of long term investing in tax deferred is stupid
  • The current risk for 401K, IRA, etc monies from the greedy hand
  • What is an investment really supposed to do for you

Additional Resources for Today’s Show

Remember to comment, chime in and tell us your thoughts, this podcast is one man’s opinion, not a lecture or sermon. Also please enter our listener appreciation contest and help spread the word about our show. Also remember you can call in your questions and comments to 866-65-THINK and you might hear yourself on the air.

 

23 Responses to Episode-643- Modern Financial Survival

  1. @Jack,

    I was always skeptical about our company’s “financial adviser” but your labeling them as “relationship salesmen” really put it all into perspective for me, when I first heard you talk about this. Basically, it all clicked and the truth of that became evident.

    Now, every time our weasel comes in, it is obvious he knows nothing and he relies completely on platitudes. I was aware of the platitudes and that I was dealing with a salesman, but I didn’t realize how mindless his “advice” was.

    I’ve moved portions of my money into Cash, and he simply cannot comprehend why that might be a good idea. He’s constantly trying to convince me (and my fellow employees that’s a bad idea).

    Twice before, I had the gut feeling I should have moved to cash, and didn’t (largely due to logistics), and I lost big. I’ve been lucky in recovering some of that, but I’m not exposing myself to that again.

    Still–the return on this money is pathetic compared to the return I’ve got on the investments that I direct personally in detail (not in these funds). I’ve tripled my money in less than two years (and I’m not an expert by any means–just using a bit of common sense). These funds never come close to that.

  2. Jack,
    They bumped tax day to April 18th this year due to Emancipation Day being observed in DC. 3 more days to put off paying Uncle Scam!

    http://www.huffingtonpost.com/2011/04/06/tax-day-2011-april-18_n_845588.html

  3. Jack, Why do you use a financial advisor at all? There isn’t much one of those guys can do for you that you can’t do someplace like Etrade or an equivalent.

  4. Modern Survival

    @bluprint, I no longer do, I used to and I tried very hard to find a good one. I found ONE and only one and he is geographically undesirable for me.

  5. TheMidwesterner

    Jack,
    You mention picking up a financial dictionary and learning one new term per day. Is there a certain one that you would recommend?

  6. RationalHusker

    Jack,

    Regarding financial advisors – you did an interview with Jim Puplava of Puplava Financial Services. Actually, I think he interviewed you. I listen to his podcasts and read his site. He seems very solid and very much in line with my thoughts. I don’t mean to “advertise” for him, but for those interested in help managing investments, I believe he’s worth a look.

    I like your interviews with Mike Gasior, too, but he leans a little too much on the deflation side for me. True, gold and other hard assets could take a pretty good hit, but I don’t see how they stay down long given the structure of our economy and debt financing. When you asked him about how to invest $1M if it fell into your lap, he recommended a very small amount in commodities and most of it in cash or CDs drawing next to nothing. While gold bugs can be too fanatical at times, I see nearly as much risk in holding all cash. I know you don’t advocate that, either. Just commenting on Gasior (yes, I know he has more finanical IQ in his little finger than I do…but then again, so does Bernanke).

  7. Chad in San Fran-Sicko

    Great show today.

  8. Right on, Chad. I’m here in the Haight. Good to know there is another “ant” in SF. 🙂

    Anyway, great show, Jack. It is a pretty scary landscape for investing these days. I’ve thought about gold in the last few months but the one thing that scares the crap out of me is that some of the shady guys I know who were into the real-estate game 3 years ago have now moved on to the gold-game.

    They’re constantly looking to profit off of the “it” thing (which is almost always a bubble of some sorts). The new scam (of sorts) is getting into the “medical marijuana” business. We’ll see what happens with that. Hah!

  9. Great podcast Jack, but I do think that everyone should have a financial advisor at some point in time, primarily because they’re fun to play with. A little more than a decade ago I was fortunate enough to get laid off from a company after 16 years of service, and even more fortunate to have a new job in less than 6 weeks. The company that laid us off brought in the entire requisite job search, financial planning people to help us all with the transition. When I told the financial planner that not only was I not going to invest my significant severance check, I was additionally going to liquidate some of my assets and pay off my homestead. He gave me the typical mortgage with interest deduction is only 3% speech, and discussed how the market would make me 8-10% per year, and how that spread was significant. I thought for a second and told him it sounded like a good idea, and if he would guarantee me in writing a minimum return of 8% per year for the next 15 years that I would go with it. Needless to say, it didn’t go especially well from there. BTW, there is no feeling like having your homestead free & clear, which frees up quite a lot of monthly cash flow as aside benefit.
    Since we heat our home, our domestic hot water, and do our cooking all with propane, the next investment was a 1000 gallon propane tank, followed by a second one the following year. My original calculations were for a payoff in 8-10 years, but the year I bought the second tank, the summer fill price was around $0.65 per gallon, and the mid-winter fill prices exceeded $2.00 due to some shortages. In the long run we ended up paying off the tanks, regulators, plumbing, etc. (about $3000.00 total) in a little less than 5 years. One additional benefit is the emotional security of knowing you have 15 months worth of heat and cooking in normal times, and well over 2 years in austerity mode.
    I do own some precious metals, and the typical mix of equities in various retirement accounts, but if you analyze your lifestyle, determine where you spend your money, and think out of the box a bit, there are investments that have more return than you could imagine, and sometimes even a traditional bad event like the loss of a job can be an opportunity.

  10. Modern Survival

    @RationalHusker

    I really like Jim and find him switched on and Gaisor is in the same league. To me both are intelligent with different leanings and bias. I was actually shocked Mike was okay with any gold at all, sort of a move forward for him.

    I don’t consider either a financial adviser in the conventional source. Neither will come to your house and set up your investments for you. They are sources of solid info so you can decide for yourself.

    I am not as conservative with my money as Mike nor as aggressive as Jim but I learn and and utilize information from both of them.

  11. Martin McFly

    Jack,
    You mentioned your father-in-law (I think that is right) is a European WWII survivor. I know a lot of people from that era do not like to speak about that time. If it is possible, an interview with him would make an excellent show.
    The modern survival community is full of ‘What if the SHTF’ people. I think doing some interviews with ‘I was there when the SHTF’ people would be a great interview series. Frankly it is probably something which should be captured before too many of that generation pass on.
    Not only was that generation faced with economic & political instability, they also did not enjoy many of the modern technologies we have. Thus their lessons would apply to ‘grid down’ SHTF scenarios as well.

  12. Chris Harrison

    Jack,

    First off, great show today. What I especially appreciated was the way you talked about using energy efficiency and self-sufficiency as a means of “investment.” I’ve heard that from other sources as well, specifically Cam Mather (on previous episodes of your show) and Chris Martenson.

    In fact, after listening to your interview with Cam Mather a while back, I actually took a bit of his advice regarding investing in renewables for your home. I stopped contributing to my 401k completely, and instead took between 8% and 18% of my take-home pay every 2 weeks (depending on OT, which has been plentiful lately) and just socked it away into a savings account dedicated for renewable energy investment and energy efficiency. My retirement plan has become, first and foremost about increasing my family’s resiliency in the face of an uncertain energy future by eliminating expenses.

    Plus, as both you and Chris Martenson have pointed out, putting solar hot water on your house can give a return of at least 8% on your investment — and after that it’s the equivalent of having a regular dividend because you’re paying so much less in energy costs than you would otherwise. I figure that putting in a PV array, piece-by-piece as I can afford it, will offer a similar return. Not to mention the tax breaks you get on that investment, which tend to make it almost as good as a 401k for income tax purposes!

    I know that this approach may seem like putting all of your eggs in one basket, but for me it’s part of a systemic plan: pay down debt, establish a solid emergency fund and reduce regular expenditures through self-sufficiency measures. The way that I figure it, within about 4 years (so long as everything doesn’t fall completely apart) we should be completely set in all of these areas.

    I know that your show has been a great guide in setting up this roadmap for us. Keep up the great work!

  13. Jack I have a 401 K that after I lost my job 15 Dec 2010 I rolled over into an E*Trade acct. Is there anyway to buy physical gold with that acct?

  14. Oh yea Jack you mentioned the dollar has crashed 5 times since 1913. Could you go further in depth about that or point me to a show where you did please?

  15. @Matthew

    You can talk to the trust department of a bank about a self-managed retirement account. Probably some other financial institutions would do it as well. E*Trade won’t hold physical gold for you (as far as I know) but the trust dept of a bank will hold almost anything. You can’t hold it yourself or it would violate the rules surrounding how assets in a tax-preferential retirement account (like 401k or IRA) are to be treated/managed.

  16. RationalHusker

    @ Matthew:

    Re: physical gold via ETrade account. bluprint is correct – there’s no way to truly buy physical gold. HOWEVER, you can look into a physical gold and/or silver trust such as (ticker symbols) CEF or PHYS. I believe they actually hold the metal, but you buy/sell shares that drive their acquisition, so there’s really metal there. The more popular ETFs such as SLV and GLD do not actually have the metal (at least that’s my understanding). You’ll have to do a bit of research to see what you’re comfortable with.

    Like bluprint said, you can actually buy physical metal and hold it in a trust. It’s a bit more paperwork for you but if you really don’t trust something like CEF or PHYS it will probably be worth it do you.

    Best wishes,
    –RH

  17. Modern Survival

    @Matthew,

    My view is for an IRA buy a Gold ETF and be done with it. So much easier to sell off and buy back etc at times when there is an ability to harvest profit or prevent loss.

    I am NOT a fan of physical metal in an IRA. IRAs are regulated, physical metal is LARGELY not completely but largely anonymous. Putting physical metal in an IRA makes the most anonymous and portable form of money in the world into the most regulated and controlled money.

  18. Russell Barr

    Jack,

    Great show and very wise financial advice. I don’t hold any ill feelings against any particular investment adviser. They are just trying to follow the herd and not look bad compared to their competition (other advisers or the S&P 500 etc.) I am 55 years old, and started an IRA when they were first enacted. For the first ten years I paid an adviser for advice and didn’t make money at all. Really, I lost money. I had funds tied up in a real estate limited partnership for about 15 years. For the past 19 years I have invested for myself, and done way better than I did following the advice of “professionals.”

    I also heartily agree with your idea that spending money now to reduce your future expenses is a great investment. The solar panels you mentioned are a good example. As you said, the goal is to maintain one’s standard of living with less income. When I retire in 12-15 years I hope to be able to live on about 60% of my current income, and live at the same or a higher standard. Income taxes will almost certainly be higher then, while total assets should not be targeted. The federal government might institute some kind of total asset tax, but that would really hit the multimillionaires hard, so it seems doubtful. A value added tax seems much more likely. So a home that is paid for, small and energy efficient as well as low maintenance seems to be the best investment for many people.

    For a future topic I would love to hear a show concerning foreign bank accounts. How to do this legally and above board. The purpose is not for tax evasion, but diversification. Compare and contrast a savings account at a Canadian bank in Canadian dollars vs. a similar account in a bank in Panama using Swiss francs, say.

    Thanks for a great show.

  19. Jack,

    If those financial advisors behaved in the way that you describe that they should and give good advice, I suspect they would be fired. This is an example of one of the many professions in corporate America and how it all works. It’s another reason why I am not sure how anyone can be “passionate” about their work really unless they are brainwashed and believe all the stuff the peddle or have to tolerate.

    If I was too feel angry at these kind of people, I try to realize even though I think it’s all a big scam, they are either brainwashed, have to please their boss, they have a family to support or whatever it may be.

  20. I agree holding physical gold in an IRA doesn’t make much sense. I consider physical to be a long-term monetary manipulation hedge and for that purpose it should definitely be done anonymously. Gold will be confiscated at some point. You should also hold silver if that is your goal.

    If one is interested in shorter term fluctuations in commodities ETF’s or futures are a better choice imo. If one is interested in holding long term, ETF’s are a horrible choice imo. There is a certain amount of leakage that occurs over time, depending on how the ETF is managed.

    If one is interested in holding a long-term inflationary/monetary hedge in an IRA (a totally reasonable goal) I would consider land to be a better option. Gold would be a good option except I believe the risk of confiscation is highest at the time it is most effective as a hedge thereby reducing the real effectiveness of holding gold in the open.

    @Russell Barr

    Good points, all. If you are interested in foreign exchange pairs (or holding non USD currency) you don’t have to open a foreign bank account. I looked into something similar at one point, and you can hold foreign currency at everbank.com. At the time I was researching it, this is the one I settled on, there may be other options.

    Depending on your goals, you can trade FX pairs through something like thinkorswim (thinkorswim.com). Leverage on FX accounts is typically 100:1 so be careful.

    Finally, keep in mind that all fiat currencies devalue over time. It only makes sense to hold another currency if that currency will raise in value relative to other currencies and the currency you normally operate with (i.e. USD). For example, you might hold Brazilian Reals and over time the Real might raise in value comapared to the USD (or at least deflate slower). In terms of USD it might seem like you did well, however, if both the Real and USD were falling compared to all other currencies then you haven’t really done that well, you have only mitigated a little bit of loss due to the falling of the USD (which, is not a bad thing…).

    Central banks are playing serious games now a days…it really is a race to the bottom imo.

  21. You can hold physical silver and gold using Fidelity with their partner FideliTrade. Interactive brokers also uses an IRA that you can demoninate in a foreign currency like the Canadian dollar.

    As for holding metal in a IRA on a personal note, I have been asking my dad for 3 years to buy silver. He kept telling me he couldn’t because he didn’t have money.But he did have an IRA long story short, he has silver now that he probably wouldn’t have bought normally and doubled his money. So in some situations you should do it. But that shouldn’t be the only place you have silver or gold.

    Also during a commodity super cycle you should view commodities as your saving like food storage, precious metals,land.

  22. Modern Survival

    @Charles but your dad could have done the same thing with less trouble by buying a silver ETF in the IRA not to mention having an easier time taking profit if he decides to at some point.

    My issue again is the only real reason to hold real metal is because you can actually put your hands on it. In an IRA, it is in someone else’s hands anyway so why go through all the issues?

    I guess you could make a case about short positions, not fully backed, etc. But I don’t buy into that. ETFs are as safe as any metal at least as safe as any metal in an IRA. Now if you can directly possess it, that changes everything.

  23. Jack, I love these financial shows you do, they’re really eye-opening. Please keep ’em coming.