muses of the moment

January 15, 2015

What has groovygirl been reading?

totallygroovygirlfriday has been super busy with real estate the last few years. Things are going well so far.

Groovygirl came across an interesting book by Tony Robbins. It’s called Money, you may have seen it. Tony has been making the rounds on TV/internet.

This is a heavy book, very dense (600 pages). It doesn’t focus on gold or silver. But gg likes it because it gives an overall education regarding investing , especially 401ks. (You know how gg feels about 401ks.) This goes beyond debt reduction and teaches you about investing and what to look out for.

If you are an advanced investor, don’t worry about it. But if you have a friend that is out of debt and looking for the next lessons to learn, suggest this book. Tony’s cheer-leading way of writing may help give a boost where you fail with a friend. Investing and markets can so confusing and depressing sometimes, that people just give up.

600 pages….skip around for the info you need, if you find that overwhelming.

August 29, 2014

Short-term gold bottom?

Filed under: Gold and Silver Investing, Precious metals, Real Estate Investments — totallygroovygirlfriday @ 11:59 am

Jesse over at Cafe Americain suggests that the short-term gold bottom is in. gg agrees. Click here. Please read the explanation of the chart in the link to understand what it is saying.

Just to review where gg is coming from: after Martin Armstrong’s October 2015 turning point, long-term high for gold is 2017-2018. However, Martin is reserving a possible high well into 2023. gg is not disagreeing with Martin, but gold tends to run in 15-20 year cycles (those are complete cycles from low to high to return to “normal” pricing). Our current cycle began in 2000. It is possible that 2032 is the high of another cycle.

Click here for a normal bubble cycle chart. Bubble charts are for any market, as all markets go thru these cycles. If you look at the long-term chart here from Trader Dan. (It’s not up-t0-date, but you all know the price trend the last 18 months.) Notice that we are still holding to the 50% retracement (around $1300) of the new $1900 high. This is absolutely normal in the long-term cycle.

Side musing: Stocks tend to move opposite of gold in an inflation-adjusted chart of each market. That is happening right now. DOW in inflation-adjusted numbers is up and gold in inflation-adjusted number is down. That short-term trend started in 2012 (not 2009 as the stock market talking heads would have you believe). Up until that point, gold was still the better buy accounting for inflation. groovygirl always runs the calculations for inflation and taxes in any investment. If you don’t, you will not know if you are making a profit or not. But even in light of this short-term dip, gg bought more gold, she did not sell. She is in this for the long-term.

In this make-fast-money now, especially for our seniors on fixed incomes, long-term cycles can be frustrating. If you want fast money, do not buy gold. If you want to hold your purchasing power and protect a portion of your capital or estate against a complete breakdown in the global economy, buy some physical gold and hold long-term.

groovygirl’s only question is when will the high come and should she sell in 2015, 2017, 2018, or 2032. gg is looking very closely at the change in the USdollar that is surely coming. That will impact investment trends and profits. It is very possible that a change in the USdollar will happen in the 2017-2018 time frame requiring a quick fix that doesn’t hold. And another more long-term fix will be required 2032, effecting gold prices each time.

Side musing: sorry gg has been inconsistent in posting. She is working on another real estate deal. Not much happening in the gold market, just building for that next long-term move to the high in the midst of the chaos of the collapsing world economy and all the reactions to it. Heaven forbid someone should be proactive 🙂

May 14, 2014

Some good articles

Filed under: Housing Market, Real Estate Investments — totallygroovygirlfriday @ 12:26 pm

groovygirl found some interesting news reports. Good info to keep in mind as we move along this overall decline.

Click here for where the non-students are getting their consumption money since the housing crash.

Americans withdrew about $57 billion from 401(k)s and IRAs in 2011, paying about $5.7 billion in early-withdrawal penalties to the Internal Revenue Service—an increase of 37% over the previous decade.

$57 billion in one year! There are some troubling truths and consequences from this revelation. Some people have probably taken early retirement money, they lost their jobs and are close to retirement age. Some people are maxed out on credit cards, debt availability, and their house as a ATM; retirement money is their only option. Not only are there penalties for early withdrawal, that money will not earn any returns for the real retirement years. We are going to have a lot of homeless, sick, and poor old people in the coming years. This will be a huge socialital problem. Either they will be forgotten or the younger generation will have to pay for them and will not have any extra money of their own to spend on consumer products. The less money in 401ks, the less money for money managers, banks, hedge funds, insurance companies, stocks, and bonds to play with.

Click here for the stress on the US housing market.

All-cash deals hit a record 43% of home sales during the first three months of 2014, according to RealtyTrac. That’s up from 19% a year earlier and the highest level reported since RealtyTrac began tracking the deals in early 2011.

Groovygirl can personally attest to this new trend. Cash will only last so long (even money from coming in from abroad), then there will be no buyers, cash or otherwise, forcing prices down like we saw in 2008-2011. This is a confirmation of Martin Armstrong’s long-term Real Estate Cycle for a further decline from 2015 thru 2032. This is what a debt collapse looks like in the US housing market. Periodic fire sales coming for the next two decades.

Click here for things that make you go, hmm….

Following are the names and circumstances of the five young men in their 30s employed by JPMorgan who experienced sudden deaths since December along with the one former employee. (See link above).

April 28, 2014

Brace yourself

Filed under: Housing Market, Martin Armstrong, Precious metals, Real Estate Investments, The Banking Crisis — totallygroovygirlfriday @ 1:39 am

As totallygroovygirlfriday has mentioned before, she is not going to hold all her gold/silver forever. The next investment class that groovygirl will pursue is real estate, specifically residential home rentals and leases and then later, if luck is on her side, commercial real estate. This is just what gg is doing; there are lots of other investments out there. You are responsible for your own financial decisions.

Just to be clear, totallygroovygirl is NOT selling precious metals right now. GG is just dipping her toe into a new investment class to see what happens and learn.

Although the main investment move will be later, when gold/silver are closer to their highs in the long-term cycle (sometime between 2015-2020). But in preparation to that move, groovygirl has been researching and studying different types of real estate investing since 2003. Reading and researching are fine, but actual experience in an investment is a quick and excellent teacher.

GG always does a lot of research before she moves to action. She studied gold, silver and dollar cycles for four years, before she bought her first gold investment. And even after that, she moved slowly into the position she is in now.

Groovygirl has a long-term, life-time investing plan and is very patient. You may not be this way. That’s Ok. This transition from precious metals to real estate over the next 10 years is part of that life time plan.

Financial education and preparation equals financial freedom, which in turn, create nights full of restful sleep, and not worried-induced insomnia.

Now, as we know from Martin Armstrong’s Real Estate Cycle, the US housing market is in a long-term cycle and we are now on the downside of that 2007 peak, with the ongoing banking crisis/mortgage derivative crisis being the main driver of this long-term decline through 2032. There are ways of making money in any market condition, the important thing is to know which way the market is going.

Groovygirl has decided to make her first real estate investment now and not later for several different reasons. But she is only making one real estate investment right now.

Groovygirl’s real estate investment forecast chart is based on cash flow, not capital gains. In fact gg is expecting a tax loss, and will (hopefully) time that loss to offset other income. This is part of the exit strategy. Always know when you are getting out of an investment BEFORE you get in. If Martin is completely wrong and housing goes up, gg will have a gain, which will be nice. And if it moves sideways, gg will break even, and get the depreciation write off in the mean time. And if the government should change real estate tax laws in the meantime, she has some flexibility there too.

Groovygirl is making this move now for several reasons:

  •  To find out if her cashflow projections really work. Any investment can look great on paper.
  • Find out if she really likes this type of investing. She thinks she is passionate about it, as much as she likes precious metals, but is that really the case? You really have to be passionate about the investments you are in. Making money only goes so far, when you are knee deep in details and drama. (That is the main reason gg doesn’t have a large position in stocks. She just isn’t that excited about them. That can always change.)
  • There are a lot of foreclosures and REOs out there right now, and therefore, cheap houses are on the market. The current pricing fits in with gg’s cash flow projections and creates a good ROI. After 2015, gg is sure it will be much better, that is why she is only purchasing one investment right now.
  • Real estate investing has great tax advantages, which would benefit gg’s circumstances now and later.
  • If it fails miserably, she will probably be able to get out before 2015 (the next downturn according to Martin Armstrong) with no or very little capital loss.

Groovygirl will expand on this move in future posts, but the main focus of the muses of the moment blog will still be precious metals and the financial crisis. She will share her experiences in this investment class and her overall plan after gold/silver. This is what groovygirl is doing with her money. You are responsible with what you do with your money.

Very important points:

She is not selling any gold or silver.

The real estate investment has NO debt attached to it. If it did, she would lose the options to get out of the investment with the capital input intact.

side musing: if we are facing the long-term collapse in real estate as Martin says, cash is king. Having 80-90% debt on a real estate investment will quickly turn into a capital loss on paper and will require more cash input to get out of.  Example: let’s say you have an 80% mortgage loan on a rental creating  monthly cash flow of $200. That is not a lot of breathing room. What if your house loses 30% in value, property taxes skyrocket, there is a new tax or fee for landlords in your area, or heaven forbid, the government takes away all the tax savings you get with real estate. These are scenarios where your cash flow would be impacted and your ability to sell the asset without putting in more cash to cover the mortgage obligation. You could very easily be stuck with an asset that creates negative cash flow and that’s not an asset. groovygirl would suggest no more than a 50% mortgage on a real estate investment in this environment, ideally no debt.

March 26, 2014

The Loophole

Groovygirl has been searching for the loophole. The loophole that will keep the real estate market going (in the face of the complete fall off of mortgage apps in the last six months along with higher rates) through 2015, Martin Armstrong’s date; and the loophole that will trigger the next, and according to Martin, extended decline in the US real estate market thru 2032.

Click here for Martin’s paper and chart on the US real estate 78-yr cycle.

gg thinks she found the loophole.

Here is an article that groovygirl disagrees with, but it has some interesting information about the new Qualified Lending rules. From the linked article:

With the dislocations in mortgage lending since the housing bubble popped, Fannie Mae and Freddie Mac have increased their share of the mortgage market significantly. When combined with lending from the Federal Housing Administration and the Veteran’s Administration, the government or government-sponsored share of mortgage lending has climbed to more than 90 percent in recent years. That is an untenable situation in the long run, but is unlikely to change much this year.

The good news is that new Qualified Mortgage lending rules from the Consumer Financial Protection Bureau exempt home mortgages that qualify for purchase or securitization from Fannie and Freddie. As a result, mortgage lenders won’t have to tighten their mortgage-underwriting requirements in response to QM as long as they sell their loans to the GSEs.

Side musing: groovygirl is feeling the same way she felt in 2005 and 2006: who in the world is left to get a mortgage? Haven’t we maxed out all plausable applicants? , no, some deceased people were left to carry on the housing market boom until 2007. Groovygirl just did not think dead people could get a loan and did not factor that in. Again, gg is thinking, with unemployment at a real rate of 23%, who else can possibly qualify for a mortgage, especially with all these new rules? Aren’t we maxed out. Apparently, it’s the GSEs to the rescue to help this thing along for another year or so.

Click here, looks like even the corporate buyers are slowing. But, they are saving their capital for the big transfer from Freddie and Fannie? Read on.

And here is the loophole for the next trigger….

Replacing Fannie and Freddie with private insurance (but with government bailout, if necessary). Be careful, groovygirl actually threw up when she read this. Click here. A quote from the link at Forbes:

Our political leadership is proposing that we abolish Fannie and Freddie for the sins of the banks and the mortgage lenders, and then hand over the keys to these same architects of the mortgage disaster that brought us to the brink of financial collapse.  We are still healing and these are serious people proposing that we again legislate our way to mortgage prosperity, using no more common sense than that which got us into this mess.  What could go wrong?

gg says: yes, what could go wrong? It looks like on the surface that getting rid of GSEs and “selling” them to private underwriting companies is a good thing. It will get the government off the hook for future collapses, right? Wrong!

But, the real reason for this extremely unwise decision. The transfer of wealth.

Here is a little tidbit from Catherine Austin-Fitts. She clearly knows the possibilities. It is a repeat of the same game as 1980’s.

Click here.
gg says: But this time is totally different, we are in a global debt deflation, global currency crisis (Japanese currency trades can’t get us out of this one), and an aging population and debt-ridden younger population.

From Catherine’s link above. You pay for the detail. Bold is gg’s.

The current proposal to phase out Fannie Mae and Freddie Mac has the potential for ever greater back door shenanigans. Lot’s of money that can go out through the back door when the federal government turns huge amounts of federal credit over to private insurance companies. For example, when FHA engaged in coinsurance with private mortgage insurance providers in the 1980’s, the FHA General Fund lost 50% of the $9 billion underwritten in 3 1/2 years. They were paid a mortgage insurance premium of .50%

Given AIG’s traditional role in these and related areas, and Berkshire Hathaway’s relatively new activities in municipal bonds and local realtors, is this part of the work up to the ultimate in reengineering the federal budget and housing finance system by place? I want to see the players behind the scenes.

gg says: looks like we are right on schedule for the next mortgage/insurance/housing/banking/hedge fund crisis. The good news: fire sale housing prices for those with cash!

March 8, 2014

Thinking about a Reverse Mortgage? Don’t!

Filed under: Housing Market, Real Estate Investments — totallygroovygirlfriday @ 1:47 am

groovygirl had been very interested in these new reserve mortgages. Here is an excellent article that explains exactly what they are and how they work.

groovygirl is especially leery of the securities that these mortgages are wrapped in and sold to investors. Do not invest in those types of securities. Groovygirl believes the reverse mortgage industry will implode as soon as the first mortgages can’t pay their property taxes and insurance.

groovygirl also believes that although these types of mortgages will be a small percentage of over-all mortgages that they will help to intensify the decline in real estate in the US. Remember that Martin Armstrong has a long-term, 72 year cycle in US real estate that began its decline in 2007, with a slight uptick from 2012-2015, and will continue to decline into 2032. This is good news for anyone with cash wanting to buy houses at fire sale prices in the next 15 years or so.

December 28, 2013

Antifragile: gg’s thoughts #2

Filed under: Housing Market, Long term investing, Odds 'n ends, Precious metals, Real Estate Investments — totallygroovygirlfriday @ 1:52 am

As you may know, I am reading Antifragile. So, this book has groovygirl thinking: how can gg make her investments more antifragile, not just robust.

So, looking at real estate investments, which is what gg is studying for her next long-term investment cycle (after or along side gold/silver). This is what gg is thinking about.

Antifragile means that the investment becomes stronger with adversity and stress, not just surviving.

Antifragile is about options. Groovygirl loves options, because it means she doesn’t have to be right about where the market is going.

Analyzing a real estate investment with little or no debt with positive cash flow.

Current advantages:

Tax advantages: depending on company structure, little to no taxes on cashflow income. Real estate is still one of the only investment incomes not touched by the government’s tax increases.

Even a total cash deal, with no debt, can produce returns of 5%-20%, tax-free. (Debt can increase the tax advantages, but reduce actual cash flow and possibly reduce options in the future.)

Past advantages:

Tax free capital gains, with tax-free cash flow, using large amounts of debt (other people’s money). Now we have a stagnant or negative capital gains and possible negative cash flow with the pressures on large debt deals in the US real estate market. What worked well before (since 1950), may not work in the next 15-20 years.

Future options:

Option #1

Real estate market stays the same as it is now. Little to no gains. High pressure on debt when Fed is not flinging free money at banks.

5-20% tax-free return with no to little capital gains. (gg is using a wide range of return percentages because rents tend to go up and down and each market is its own little world.) All gains are related to cash flow and tax-free. If gg needs to sell, she will get original investment back, no loss.

Option #2

Market advances and grows like it is 2004-2007. All gains are tax deductible if gg moves it into a 1030 exchange and buys more cash flow real estate. gg sells outright because she finds out she hates real estate investing 🙂 and pays a capital gains tax. Benefit: had cashflow returns of 5-20%.

Option #3

Government takes away tax advantages on cash flow from rents on residential or commercial property or both and/or capital gains and losses. gg can sell and get out and move cash into another investment class. gg can sell and carry a note to the buyer, creating a higher positive cash flow from the interest on the loan.

Option #4

Real estate market goes down. This is the one that gg is favoring, since Martin Armstrong has written about the long-term decline in the US real estate market from 2015 thru 2032.

gg can sell outright.  Depending on the structure of the business/investment, gg can take an unlimited loss, if she sells and apply that loss to taxes on other income. (For tax questions, consult a professional. gg is not a tax professional.)

gg can sell and finance a loan to the buyer, creating continued, perhaps higher, cash flow.

gg can continue to collect positive cash flow.

With that cash flow, she can continue to buy more cash flow real estate as prices drop. Ideally, gg will have other income to live on, so this investment will be a wealth generator, not a living income, for several years. But if something unforeseeable should happen, it could be a living income.

Since the investment is debt free, rents going up or down may affect cash flow amount, but will not cause her to be in a negative cash flow position and forced to sell when it doesn’t line up with one of her exit plans (i.e. not profitable).

Since this investment has little or no debt, gg will not be “upside down” on it and have to put cash in just to get out.

gg will never have to worry about the banking system folding. She is her own bank for now. If it does fold, people will either want/have to to rent or need to be financed by someone other than banks (i.e. seller). The government may even create more incentives for real estate investors to pick up slack for a failing banking system and falling real estate market. Although, gg doesn’t count on the government doing things that would make sense 🙂

If and when markets stabilize near the end of the cycle, gg can sell for a tax-advantaged loss and get out or move into another investment cycle. She can finance the investment with low-interest debt (if that is possible) and get cash out, but still have the positive cash flow, without the risk of further falling prices. She can keep everything status quo and let the investment go up (as it will be a new real estate cycle) in value while creating positive cash flow.

Warning: gg is not a financial professional nor does she play one on television. This is not financial advice. She is just writing about what she might do with her own money in an area that interests her. You are responsible for your own money, education, research, and interests. Groovygirl has been studying real estate and real estate investing since 2006. Do not invest in anything without education. And always have several exit plans. Always consult a tax professional, as everyone’s tax liability is personal to their own circumstances. groovygirl is a long-term investor and extremely patience. So her plans reflect that mindset, you may not have that same mindset. That’s fine, it is not for everyone.

December 6, 2013

Friday Update

Everyone is very happy about the unemployment data. Groovygirl awaits the revision next year 🙂

The financial talking head today said that the “real stat” could be lower (at least he said it), but it doesn’t matter. Buy stocks and sell gold……is the mantra of the day. This could go on for a while.

Groovygirl is keeping an eye on that 30 year bond. It’s been flirting relentlessly with 4%. Many, many private and public loans (including commercial real estate) that need to be rolled over in the next 3 years are based on that number. Higher rates could turn a profitable investment into a bankrupt investment in one day. The Fed has spent the last 5 years and many billions keeping that rate down for the last roll-over from 2009-2012. That was only buying time, nothing else.

This rate moving higher will also effect the residential housing market.

If you are looking at a 10-year plan for an investment, real estate investment, or company assume this rate goes up. Make sure the forecasted profit will work (or not go negative) in an environment with an interest rate of 6, 8, or even 10%.

December 2, 2013

Latest Blog Post from Martin Armstrong dated November 30, 2013

Filed under: Bailout Nation, Housing Market, Martin Armstrong, Real Estate Investments, The Banking Crisis — Tags: — totallygroovygirlfriday @ 8:35 am

Click here for Martin Armstrong’s latest blog post entitled Shadow Banking dated November 30, 2013.

From the post:

The typical shadow banking system includes securitization vehicles,
asset-backed commercial paper (ABCP) conduits, money market mutual
funds, markets for repurchase agreements (repos), investment banks, and
mortgage companies. However, the shadow banking area has grown in
importance to rival traditional depository banking and was a primary
factor in the subprime mortgage crisis of 2007-2008 and global recession
that followed.

November 25, 2013

Another Jim Rogers interview

Boom-Bust on RT interviews Jim Rogers (via zerohedge). Click here. Good interview, Jim starts around 4:30.

Groovygirl just finished Jim Rogers latest book Street Smarts (she got it at the library). She highly recommends it!! Very good. Remember that Jim is a long-term investor. He is always early, and he admits it. There are several fundamental investing practical points worth reading. But pay attention, they are sprinkled throughout the story-telling.

Jim on China’s announcement last week:

10:15 China’s Plenum
“the Chinese are becoming more and more capitalist”… they are
becoming more and more market focused… as opposed to the US where when
there is a problem “the government decides how to fix it… look at
Obamacare” – “the government says “we will figure out the
solution”… “I much prefer the Chinese system of open markets than the
US with the government dictating everything”

Side musing: make sure you watch the entire Boom-Bust show after Jim Rogers. They discuss very important US housing data regarding foreclosures that in gg’s mind supports Martin Armstrong’s real estate cycle (slight uptick through 2015 and then decline). Housing bubble popped in certain areas and then moved toward the center of the US (takes about 18 months to 3 years for that move). The rise in foreclosures in bubble areas lately signal a renewed decline.

They also discuss two important points. The go-between in the housing market doesn’t have the incentive or know-how to do things in the best interested of the homeowner and the investor. Very important! Until this is fixed, we will continue to have long-term problems in housing, regardless of the huge derivative issue that was not covered in this segment. The mortgage forgiveness act is going to expire at the end of the year. That means that homeowners who have their loans reduced (forgiven) must pay regular earned income tax on the forgiven amount. That’s huge. If someone can’t pay their mortgage, they certainly can’t pay the tax. They will have to walk away. Walking away means empty houses, no income for investors, and continued overall depressed housing prices once the banks put them up for sale. More negative feedback loops in US housing and real estate markets. 

Also, pay close attention to that regular earned income tax on debt forgiveness. It will come up again when the student debt bubble pops. First of all, debt is NOT income, so it should not have a regular earned income tax on it. And since the debt is not paid and will never be paid, I don’t know how anyone can call it income in the first place. The IRS is trying to get some money as they are losing money hand over fist because businesses, banks, and investors can write off their losses (the debt they loaned out for housing) as tax deductible. It is another example of corporations (since they are considered people now) having more “individual rights” than actual individuals.

Government policy determines what people and business will do, either by carrot, stick, or indifference. Jim’s interview was a great illustration about how that works well (in China) and is not working well in, say, the US.

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