If you’re relatively young or not yet 50, earning more than enough income at work, and living the lifestyle you more or less prefer, cash flow ain’t yer problem. Think about it from a practical viewpoint.

You’re paying taxes, saving money, going on vacations, and educating your kids. You have retirement plans at work, (please stop it) and have some other capital you’d like to invest in real estate. You’ve always been told cash flow is the way to go, so that’s what you set your sight on. That’s also why thousands of couples reach retirement with far less retirement income than was easily within their grasp when they started 15-30 years earlier. How much is far less you ask? If we’re talkin’ about 30 years of chasing cash flow over capital growth it could easily mean a 5-figure reduction in monthly income at retirement. Really.

Here’s the deal.

All cash flow is, is a yield on a pile of cash or equity. The bigger the pile, the bigger the cash flow. The idea in the early years is to build the original pile into multiple BIG piles. The yield (interest rate as an example) is gonna be roughly the same for a million dollar pile as it is for the 5 million dollar piles. The difference is the amount of dollars the yield generates. It’s the same X% yield in both scenarios — only the size of the piles of cash are different. The central theme of retirement is for income, especially after tax income to be as large as possible. To the extent you opt for cash flow over capital growth in the years preceding your actual, you know, need for cash flow, you are purposefully guaranteeing your retirement income will be far less than it easily could’ve been.

Debating this principle is akin to debating gravity.

If you call 619 889-7100 there’s a 90% probability you’ll hear me say, ‘This is Jeff. Have a good one.

BawldGuy Axiom: Lenders lend. When they begin to see the lender ’stamp’ on their forehead fading away, they realize it’s lend or die. They’d rather lend.

The most recent example of this has been in Texas, and not even with owner occupied properties. A institution totally new to investment property lending saw the opportunity to make a killing. They made it known they’d lend 80% LTV on small residential income props. They charged just a smidge over normal points, and a slightly higher, but acceptable interest rate.

What happened?

They found out quickly they were unprepared for the pent-up demand for reasonable loans on income property. 30 day loans took 45 days, then 60 days, but they eventually got done. Borrowers showed up from all points on the map wanting loans for their Texas purchases. They didn’t even make it to the 4th quarter much less to the end of the year as I’m sure they’d planned. They were swamped from Day 1.

Lenders are now dealing with an investment market sporting handcuffs designed by Fannie Mae and friends. The changes they’ve implemented have been good, bad, and just downright silly. The net effect they’ve had on the market is to retard it, not help it.

One of the helpful changes has been the way appraisers are assigned. It’s much more random now. I say helpful, but in the case of new construction or new mostly undeveloped areas of a region, this can backfire on the purpose intended. An analogy would be who you choose to maintain your car. If you owned a Mercedes, taking it to your local Ford dealer for its 50,000 mile service is risky at best. Reasonable folks can agree that even a highly experienced Ford-trained mechanic will simply not be prepared for what he finds under the hood of a Mercedes.

Appraisers unaccustomed to a neighborhood a few miles from where they usually work, don’t know the ins and outs of that one compared to the ones they’ve been appraising for years. This isn’t complicated, is it?

Then there are the underwriting changes. Upping the credit score requirement makes sense, though I strongly suspect folks with less than a 720-740+ score aren’t moles sent by Satan to sink the economy. But seriously people, some of them defy explanation, even by the lenders themselves. Here’s an example.

Last year you bought a duplex. Since ya haven’t owned it for two years, they force you to count the mortgage payment on your application, but NOT the income. Let that set in a bit. This results many times in superb borrowers appearing to be way in over their heads. Yet it presents an artificial (nice way of saying BS) i.e., false picture of the borrower’s true financial position. Imagine having cash flow from your various investment properties half as much as your job income — and you make almost six figures annually! This new ‘accounting’ makes you appear to be almost struggling financially.

How does that help?

When a real estate investor puts 20-30% down plus closing costs, they don’t do it on a whim. They’ve thought long and hard about putting $50-80,000 of their hard earned money into an income property. How motivated do ya think they’ll be to make that investment a long term success? Duh. The arguments made for this 1984 approach to underwriting language are laughable at best, and fraudulent at worst. That’s a discussion for another day, but suffice to say the next lender who gives me a plausible explanation without stuttering, while avoiding eye contact, will be the first.

Then there’s the now infamous four property limit. Gimme a break. My Grandma thinks this one is stoopid, and she’s been dead for over a decade. I’ve railed about this before, but it’s so counterproductive, one can’t wonder what the real intention was. Ya get four props — this includes your residence too which is another rip. You want more, but now the underwriting, gulp, gets even dumber. Of course, this is if ya can even find a lender who’ll make the dang loans. Currently there are only two lenders, B of A (Save us, Lord) and Wells — that’s according to the word I’ve gotten from several lenders who don’t do them.

Lenders don’t like living in a world in which they’re not lending. I have colleagues and personal friends who’re both mortgage brokers and employees of direct lenders. The stories they tell me are literally so dumb sometimes I almost make ‘em swear on their kids they’re not makin’ them up. These guys, for the most part can make loans in the majority of the states — and still their companies’ leadership has made life so tough at times, two of them are considering changes.

At some point some board of directors meeting is gonna explode at the nonsense with which they’re forced to live. It’ll be at that point we’ll begin to see some cracks in the dam. They’ll become relatively proactive in changing the status quo. Even the investors buying these loans are beginning to grumble. The siren song of higher yields generated by highly experienced borrowers, with significant skin in the game is beginning to keep them up at night.

Watch for the grumbling to become audible — sooner rather than later.

To contact me — call 619 889-7100. Have a good one.

Why, you ask? Well, two rare Super Chart events occurred last Friday. First, after we crossed up the Super Chart Keyline only several weeks ago, we crossed below it again as of last Friday (see red box on the Super Chart below). That has only happened three times since 1965 (when the Super Chart data begins), once in 1968, 1972 and 1975. In each case, the close stayed below the Keyline for 3-4 weeks and then crossed back up to continue its rally move and generate a profit for the system.

But, my many years experience with the Super Chart tells me that this time we are looking at a very unusual event here. In all the other three instances, prices held above the Keyline for much longer periods before crossing down. In 1965 and 1968 they held above for over a year. The 1975 event held above 4 months before it crossed down. This cross down took just two weeks. Am I concerned? Yes. Will I be watching like a hawk? You bet!

The Keyline closed yesterday (11-2) at 1061.12. It’s reading is blocked by the Monday night close price indicator at about 1043, so I wanted you to know the exact Monday night Keyline reading. To generate a Super Chart sell signal, closing prices must (1) stay below the Keyline 6 weeks consecutively or (2) cross below the 5% loss level on a close –- the Super Chart is designed to help keep losses to this area if some unusual major market reversal occurs. Now, if either event occurs, we go to cash for all funds that are in stocks. And remember, the Super Chart is a weekly chart, so only Friday night closes are used to make a dot on the chart that triggers any action.

If we do generate a Sell signal by being below the Keyline six consecutive weeks before the 5% loss signal occurs, it will be the first time such an event has occurred so quickly after the Buy signal, measuring from a true Buy signal to a true Sell signal. The shortest such period for the 45 year history of my Super Chart data was 23 months in 1975-1977.

The second important event, also occurring last Friday, was the crossing down of the “neckline” on the Super Chart. I told you that if this occurs AND we see a continuation of the down move to support in the low 1000 S&P area, the news would likely not be good. But, we have not yet seen that occur, so far. So, while this remains a very serious test of the rally since March’s lows and a serious matter in terms of portfolio risk, let us watch and see what the Super Chart tells us.

For the record, we entered 50% of our stock allocated portfolio funds back on July 25th at S&P 970 and the balance three weeks ago, at S&P 1070. The July entries are still well above water, but some of your recent additions may be under water. Currently, the 5% loss level is in the S&P 1000 area. Thus, if you see the 1010 area on a Friday close, expect that I will be posting a special alert for you to read. When the subscription web site is up and running, you will not need to check the site, I will send you a Direct Alert e-mail. For now, check this web site for any special alerts.

Some of you may want me to comment on what fundamentals are putting this market to the test. Well, as I so often say, fundamentals are not how I arrive at my analysis, but I do observe them. So, I would say there are a number of important ones with much influence right now; (1) the off-year election today (if heavily against the Dems, it could bring big money into this market); (2) many banks continue to struggle with balanced sheet problems; (3) real estate continues to weigh on the markets, residential and commercial now; (4) what the consumer will do is not all that clear to most business investors; (5) and some of the technical market internals are weak – i. e. many stocks are falling below their 50 day moving averages and on sell days, volume has been high (bearish indicators). I am sure there are other points lending their weight, but these are the ones that stand out to my thought for now. Again, for me the summation of all of them shows on the Super Chart as weakness that needs our close attention.

In closing, with all this information to draw upon for analysis, I believe that I can say this with a reasonable level of certainty — that if a Sell signal is generated by the six week method (not the 5% loss method) the power of this reversal could very likely see us testing the old March lows. Let us hope that will not be the case. I believe that if the power of this down move is strong enough to send us back to cash so soon, the lows we experienced in March will be tested and will, I believe, not hold, putting this market in very serious trouble. But, let us not get ahead of ourselves.

As I am writing this Monday night after returning from a business trip, I do have an added comment advantage that I seldom have, I can write the column with one day of the current week already in the bag. From what it shows, we are still not seeing any strength that would tell me we will quickly resume the rally move. And remember, we should stay above the S&P cash index 1000 area. So, let’s see what the week brings.

These are “times that try men’s souls,” as Thomas Paine said in his writing Common Sense in 1776 (should add women’s souls these days, too). The testing going on right now will have huge implications for our and the world’s economies. Be assured, as I said earlier, I’ll stay right on top of it for you. For now, let’s just sit tight.

And as always, I do hope you have a good investment week (what is left of it). In the meantime you keep in touch. I do! See you next week.

Many of us know men like my Uncle Cork. When their lives are reviewed it’s hard not to classify them as unsung heroes. From early adulthood on they lived their lives steppin’ up to the plate, doin’ what had to be done, never complaining. Cork could be the poster guy for Unsung Hero.

He’s very much alive, though far from well, as he’s recently entered the final stage of Alzheimer’s disease. I can’t bear the thought of visiting him. I’ve wept a few times just thinkin’ about it. The man was such a huge part of my life, an incredible role model.

Things I learned from Uncle Cork

Without him I’d of never had the experience of overcoming my abject fear of being killed by a bigger kid in tackle football. I’d of never played. Mom talked him into taking me to practice on his way home from work, which in fact was hardly ‘on his way’. At first I was excited about playing, as I’d already excelled in baseball, basketball, and flag football. However, once it became close and personal, a 77 pound kid in a 90 pound league met up with reality in a hurry. That’s when Cork told me the harder I hit them, the less it’d hurt me.

It taught me to face my fears head on. That almost always the fear was worse than the reality. That every time a fear was overcome, my confidence in general skyrocketed. Learning those things simply hadn’t been on my menu at that point. Though as a 12 year old I didn’t realize it, my life had changed big time.

Over the years Cork morphed into a sorta second dad, as Dad wasn’t around much after the divorce. (I was 7) But that’s another story altogether.

As a young man just outa the Navy, married to his perfect mate, our Japanese Aunt Shirley, he found himself in the workforce without a college degree, three kids, and one on the way. Mom got him a job at North American Aviation, the home of the X-15 rocket. She was the executive assistant (Secretary in those days) for Scott Crossfield a test pilot/engineer who was the first ever to fly the rocket. Scott’s also a story unto himself, but suffice to say Cork couldn’t have found a better professional mentor.

He told Cork to get his degree or he’d never reach his potential. Raising a family of a wife, four kids, and ultimately a mortgage while workin’ 40-60 hours weekly back in the ’60’s and ’70’s was no ride at Disneyland. 11 years later we all clapped and cheered like crazy folk at his graduation. He’d secured his engineering degree in quality control.

By the time he reached retirement, he’d been head of quality control of Douglas’s DC 10 project, Head Inspector of Ford’s tank division, and a highly respected and well known leader by example.

He also made one of his dreams a reality by becoming a pilot himself.

One day he invited me to fly with him in a rented one engine Cessna. It was so small, a two seater, that I think we got airborne at around 60 mph or so. Anywho, we’re flying around havin’ a great time, especially for a 12 year old, when he asked me if I’d like him to stall the engine. What did I know? I thought he was kiddin’ me — who would stall an engine almost a mile in the air? Um, Cork would.

Suddenly the only sound was the wind, and the only thing I could see was the prop kinda sorta still spinning, as if it was taunting me. I can tell ya it doesn’t take long for a 12 year old’s life to flash in front of him. I think I remember seeing a recent Thanksgiving dinner, and getting a single in a Little League city championship game. A few seconds later, when Cork realized I thought we were both dead, my belief in the Lord became embedded permanently as the engine sprung to life, and I realized I’d live to be a teenager if my crazy uncle ever got us back on the ground safely. I’m still not sure I’ve seen anything so beautiful as that prop as it resumed its proper job of keepin’ us alive.

Then there was the time when I was 17 and visiting my cousins in the summer of my high school graduation. Cork asked if I wanted to hit the clouds with him — sure! Let’s go. We took off from (I think) Long Beach airport and began to head southwest. He said he wanted to see something in San Clemente from the ocean side of the coastline. Cool, worked for me. It was 1969. (Hint)

We got out over the water and hung a left. And that’s when it got um, exciting. Our radio suddenly came alive with a distinctly irritated guy giving Cork the order to immediately change his attitude. Change his attitude? What, smile more? Um, no, not quite. It of course meant we were to change direction, now, and not five seconds later. As if to underline how serious he was, Cork was told this guy was on our ‘6′, which totally confused me. He then instructed us to ‘look at your 3!’ And there it was. A fighter jet telling Cork he had just three more seconds to change course. Again, my life passed in front of me. A freakin’ fighter jet?!!

Seems Uncle Cork had wanted to see our new president’s west coast ‘White House’ in San Clemente. We’d entered restricted air space. Needless to say we instantly veered in the direction indicated by the fighter pilot, who was so close I could see the writing on his helmet. It’s hilarious now, but why I didn’t hafta change clothes later is beyond me. My theory is there’s a level of scared that goes beyond wettin’ your Levi’s.

When we landed, which was after the required buzzing of his Garden Grove neighborhood, I was advised it would bode well for my chances of reachin’ 18 if the exciting part of our day’s flight was omitted from any description I might offer. Cork had the ‘bad boy’ gene for sure, but he was still intelligently afraid of Aunt Shirley finding out about his latest airborne ‘adventure’. To this day she would only know if he’s told her.

The other day Mom told me he still ‘flies’ on the computer. Apparently there’s a website that simulates flying pretty realistically. He can’t remember how to get to the site, but when guided there, he remembers exactly what to do, and he’s in the air before ya know it. How cool is that?

Cork raised four kids, has been married to the same woman for 50 some years, and is loved by legions. His kids would make any parent swell with joy. His only son is now an assistant pastor in the church for which Cork was the Head Deacon for years. All three of his daughters have made him immensely proud. He’s constantly surrounded by them, his grandkids, and great-grandkids.

We’ll never know how many lives he’s positively affected. There must be an army of ‘em out there. He’s the real life definition of unsung hero. Probably the most unassuming ‘hero’ you’d ever wanna meet. His legacy will last literally for generations, as his influence on me and others has profoundly shaped our lives for the better.

One last quick story in parting. A couple weeks ago Mom and one of her sisters went to visit their brother. He kinda sorta remembered them — he goes in and out they say. When reminded of his days with Ford’s tank division, he regaled them about the time he’d called Mom to tell her he was drivin’ a tank. In his mind he was 16 when it happened. Nobody’s told him any different. His birthday recently passed, and he made it abundantly clear he wasn’t to be told how old he was. As far as he’s concerned he’s 24.

So be it.

Without Uncle Cork’s untold influence and example in my life, I wouldn’t have become the man I am today, or learned what it really meant to be a father. How do you ever repay that debt? In reality, you can’t. You simply do your best to emulate him, passing on the lessons he selflessly taught you. Though tears fall as I write this, they come through a smile. It’s not often one gets to know a real hero.

I thought the world should know.

I love you Uncle Cork.

I’ve learned that more often than not, my job is to dissuade folks from either doing what they’ve set out to do, or in doing anything at all.

Professional advice should be just that — professional. The majority of the time either the facts aren’t what the investor seeking advice perceives, or they are, but their conclusion is erroneous. Over half the time it either makes more sense to stand pat or to do something different than planned — sometimes very different.

My policy, as taught to me by several of my mentors, is simple as pie. The decision to either make a change, or add/subtract from a portfolio must be a no-brainer call. It can’t be marginal, as in most cases it clearly won’t make sense once the analysis is objectively viewed. Many times I’ve had to talk folks outa selling/exchanging a particular property cuz my multi-scenario analysis combined with the long view makes it a marginal move at best.

So many times I’ve resorted to my favorite remark in order to finally convince a client or referral that what they want to do isn’t in their best long term interest. My go-to is: “Look, I’ll be happy to do what you want (if it’s not injurious) but seriously, the only guy who’s gonna make money on it is me. Why would ya do that on purpose?”

Whoa! They usually tell me at that point no broker’s ever said anything like that. You can usually see them calculating how much they’d be paying me, knowing I’ve just advised them not to pay me to do what they wish. Very rarely does that not convince them — they realize I’m deadly serious.

The big picture, long view, whatever ya wanna call it, must be the foundation upon which pivotal real estate investment decisions are made. Even short term consequences, good, bad, or ugly, normally shouldn’t take precedence over the long view. The long view in most scenarios is the answer to the question — how will this ultimately affect the investor’s retirement itself, and/or retirement income?

I very often give advice which ends up with my client being referred to a specialist outside my expertise. EIULs are an excellent example of this. I make no commission, fee, even referral from sending my clients to the proper insurance pro — never. Well, they buy dinner and drinks. Then why do I do it? Again, the answer is transparently elementary — it’s the right thing to do, so I do it. Not only do I not make anything, I’m giving up income by not advising them to do something for which I’d be paid.

It’s what being professional is all about. You sift through the facts knowing the ultimate goal, and make your call. You do this knowing that Job #1 isn’t return on the capital, but preservation of the capital — a principle with which many are becoming newly acquainted these days. The concept of getting rich slowly has suddenly become very appealing.

Understand, if you wanna know what to do, my answer may not be what you expected, or wanted to hear. To contact me, call 619 889-7100. Have a good one.

Don’t know for sure, but this might be the first time ever, at least in my lifetime, that the top two home run teams in their leagues are meetin’ in the Series.

The Phils will prevail in 6 or less for two main reasons. First, they’re an NL team — a league which still plays the Lord’s game, not that sissy version girls play at recess with everyone batting for everyone else. Second? They’re NOT the Yankees.

I think Cliff Lee will shut A-Rod and company down, or at least that’s my story ’till it’s not. Also, Ryan Howard is gonna finally figure out how to overcome his last weakness as a hitter, left handers.

Feel free to leave your predictions, as this time of year is always fun for real fans.

Have a good one.

Here’s the problem though, especially as it relates to the garbage in/garbage out principle in the form of an axiom.

BawldGuy Axiom: Using most of the required tools to complete a job well ain’t gonna work — and the proof will show up in the results.

Ever been workin’ out in the gym and seen one of those guys who didn’t get the memo about workin’ the body as a whole? They generally look like Ahnold from the waist up and Olive Oil from the waist down. I’ll bet you’ve seen this before. They’re applying the fundamentals of body building through resistance training — but doing it selectively. FAIL.

This goes double when you invest. Selectively adhering to what you know is fundamentally correct won’t cut it. Curious though, how when a fundamental is contrary to what we wish to believe, or worse, what we really wanna do, we can figure a way around it.

Bad idea.

Leg work in the gym is pretty much universally loathed. In fact, I don’t trust folks who love leg work, as it just isn’t natural. Then there are the comical results described above — the Ahnold/Olive Oil look IMHO will never catch on.

Getting the right property, or the right price, cap rate, region, etc. can’t be approached piecemeal. Also, especially these days when we tend to feel far too comfortable with online research, a false sense of ‘having the data we need’ is the biggest risk. I run into it almost daily.

“We’ve done some real research, even down to the neighborhood level, and we’re convinced the rents should really be such and such.” Long time readers know the value I ascribe to ‘boots on the ground’ (BOG) research. I’ve had folks tell me rents are too high, when in point of fact, those rents are a year old, and now slightly lower than the three down the street, just raised upon lease renewal.

Local boots on the ground knowledge is like gold — it’s value is never zero. When combined with decades of accumulated knowledge and expertise? A lot more than zero.

Online research? Helpful at best, horribly misleading at worst. If not gathered with the intent of BOG follow-up it has dubious value at best. Those who buy or pass on regions, properties, neighborhoods based upon research done in their living rooms are more likely than not future recipients of the law of unintended consequences.

This is why we always, no exceptions, do our own boots on the ground work. When we say a property should rent for $XX, we have the data to back it up. When we come to an opinion of value, we’ve seen the properties and the comps in person — not to mention appraisals from paranoid lenders who believe nothing. We know both personally and empirically how we came to our opinion.

The Father of all investment fundamentals?

They’re called fundamentals for a reason — without them in place, things don’t work as planned. You either miss out on a stellar opportunity, or mistakenly brand an investment as an opportunity. Either way, eschewing the use of all the tools in your toolbox is a mistake which almost never fails to deliver. consequences. The dirty little secret? Most investors simply don’t pack a fully stocked toolbox.

My ‘band’ has at its disposal many instruments available for use with specific real estate music. When ya need cowbell, ya need cowbell. There’s no callin’ out ‘Gimme more cowbell!’ when there isn’t one. Hence, the name of my new band.

Fundamentals Toobox — Backed up by Boots on the Ground.

Wanna talk? You can contact me at 619 889-7100. Have a good one.

As I sit here writing to you, the thought keeps coming “All because we hit Dow 10,000?” Now, understand, hitting the Dow 10,000 level was of great interest to me. After all, just six months ago we were over 3,000, that’s 3,000, Dow points lower and by most all accounts about to fall below the Dow 5,000 very soon. But, from the true economic standpoint Dow 10,000 is no different than Dow 9,000 or any other Dow even thousand number. The truth is that a Dow number is not what will start a selloff anyway. Selloffs occur when the large majority of investors see the expectations that fuel a rally slipping away.

Yes, I do agree with most of the sites that we have come a very long way very fast (creating what they call a “V” bottom on the Dow chart). But, just because we hit the 10,000 mark will not of itself end this rally.

So, what could actually start a selloff? Well, we might continue higher until we hit my Super Chart well-defined S&P 1220-1260 target, the target of the head and shoulders formation I have been chronicling for you. But, not until we get there, can I tell you what the chart looks like and decide if a selloff is then warranted.

Or we might break the key Super Chart supports currently below our present prices on the Dow and S&P and see a sell move begin. Currently, the supports I see are at about S&P 950-960 and Dow 8,800 or so. Additionally, for my part, I would begin to get concerned if we break the head and shoulder formation’s “headline” on the Dow at about 8,800 or on the S&P at about 990-980, as shown on the S&P chart below.

And, as promised last week, here is an update, with comments, on the S&P Super Chart.

First off, note that we are still ABOVE the Keyline on the Super Chart, currently at 1063.69 (Friday’s S&P close was 1079.6). That is as important to me as being above the “headline” just now. If we did break the Keyline just a bit, I would still not be terribly concerned. But, breaking the Keyline AND breaking the supports I mentioned above would most likely have me sending you a warning about this market. But, for now, no such warning.

There is one thing, however, I don’t like too much which occurred on the lower portion of the Super Chart called the Momentum Section. The green (or “fast”) stochastic indicator (see the circle marked “1”) has pulled up to the 80 level from the 55 level and hooked down to 77.24. I am concerned because the previous hook down of the high of the green “fast” stochastic was higher than the hook down point that occurred this week . Then, note on the Super Chart that the last price high hook down, occurring just before it crossed up the thick red Keyline, was lower than this latest high hook down which occurred this week.

This is called a “divergence.” The last low of the Momentum Section green line was lower than the last high before it hooked down and the last high on the price was higher than the last price high before that price high hooked down. Usually this is a signal that leads to a price decline of some sort. Too soon to tell if it will be anything substantial at this point, but I will keep a close eye on it and keep you updated. Odds say a decline is 70% likely. We will see. Other than this, the Super Chart overall remains BULLISH.

As you know, I don’t look to the fundamental factors very much when analyzing the markets, but I do make an effort to keep abreast of what the drift of the financial news is. This week it was earnings, tinged a bit more to the down side than expected by investors and, of course, the talk last week that Paul Volker, a key financial advisor to the President, is actively talking up his proposal that banks be stripped of their investment powers and that this activity be reserved only to investment banking houses like Goldman Sachs, Merrill Lynch etc.

There will be a long fight for this change and it may never come about. But, it would remove a major conflict of interest for the financial industry to separate banks from potentially using depositor funds to finance programs such as sub-prime loans, Collateral Debt Obligations (CDO) and the like.

This separation existed from the 1930’s until 1999, legislated by a law called the Glass-Steagall Act. While as I said, this is not a likely change right now, it is important to keep your eye on this future possibility as it could radically change the financial landscape and how your portfolio might need to be managed.

Mr. Volker’s favorite closing to his speeches about this proposal, one that gets laughs and the nodding of heads is something like this: “The combination of both powers in one bank is why we are in the mess we are in ladies and gentlemen.”

Not much more to add this week, except to tell you I will be on a business trip from this coming Thursday until late Monday (11-2), so my next week’s column will not be posted until Tuesday PM (11-3).

And just to keep you up to date, I hope to have a section on the new web site, which will be up quite soon, so that you can log in weekly and see where each of the Dow stocks are on my Super Chart. This is a first installment of the exploratory program that I told you about several weeks ago to try and make the Super Chart’s great advantages available to you for any stocks that you may own or are considering owning. But, that advanced phase is getting way ahead of myself. For now, the weekly Super Chart update of each of the Dow stocks being available to you on the new web site will be the one to watch for when it opens.

Well, as always, I do hope you have a good investment week. In the meantime you keep in touch. I do! See you next Tuesday.

I’ve known about and dealt with Self Directed IRAs since around the mid-’90’s. Have clients who’ve done pretty well with ‘em — either on the cash flow side or capital growth. Don’t mistake anything I say about IRAs or their 401k cousins as an endorsement of the reason for their existence. Those who’ve read my thoughts on the topic aren’t confused about where I stand — I think they’re a scam, a bait ‘n switch con Uncle Sam thought up to get into Boomers’ Levi’s upon their retirement.

What does that hafta do with Self Directed IRAs and their ability to invest in real estate you ask? Not a dang thing I can think of. I’ve concluded there are those who’re too deeply into their various plans, which when combined with the penalty for exiting now forces them to remain in the plan. My mission has always been to deal with the facts as they are.

So, a Self Directed IRA is one for which you have total control of where your funds are invested, and pretty much whatever you say goes.

Wrong Wrong Wrong. A myth if there ever was one.

Over time I’ve learned the characterization ‘Self Directed’ is in fact more of what one of the experts I use, an with whom I recently spoke, described as a ‘marketing phrase’ more than a reality. But what does that mean to you?

As usual, it’s found in the nitty gritty of the details. Wanna call the IRS and ask them about Self Directed IRAs? Don’t waste your time, cuz there’s literally no answer to which they can refer in the IRC. It’s not an ‘official’ government term.

Then what the Aunt Fanny is it then?!

Well again, as usual, it depends. On what? The administrator you chose. As ‘custodian’ of your Self Directed IRA, they tell you upfront exactly what they’ll ‘let’ you do. Kinda takes the fun outa ‘Self Directed’ doesn’t it?

This is why ya don’t go off all willy-nilly and half cocked settin’ up a Self Directed IRA before all the info is in. It’s not a guarantee for example, that the custodian will allow you to invest your funds into real estate. They may also not like certain other investment vehicles — which brings to mind one of my favorite axioms.

BawldGuy Axiom: It’s not the answers to the questions you ask that will get you into trouble. It’s the answers to the questions you never knew to ask that will almost always bite you on the butt.

Imagine your surprise when you learn your definition of ‘Self Directed’ doesn’t jive with your new plan. Guess who’s gonna win that argument?

Bottom line? Give me a call and let’s look and see if you’re eligible for a Self Directed IRA. Isn’t it time to begin makin’ up for those losses? 619 889-7100 Have a good one.

I remember with a wincing smile the day I arrived at a friendly broker’s office to drop of an offer. It was way back in another life. I hadn’t seen this husband/wife team in over a year, so was lookin’ forward to the visit. When I arrived the wife happily remarked, “We were wondering who the chubby blond guy was.”

Ouch! Not exactly how I perceived myself.

That was the inauspicious beginning of my marathon career, another post altogether. Suffice to say, the next year or so saw a loss of 40-something pounds and over 7 inches on the waistline. Ultimately it was the consequence of merging reality with perception. The whole ‘perception is reality’ concept is true enough, but the so-called reality is often nothin’ but a mirage, as was my laughable ‘lean and mean’ self image.

Warning: Hard, brakeless segue.

The average loss suffered my the vast majority of IRAs and 401Ks has been over 40%. Yet from what I’ve seen first hand, read, and heard second hand, most folks still perceive themselves as having a diversified portfolio, even though 100% of their Qualified Plans are still hogtied to Wall Street.

Furthermore, they perceive a rocky road to the full recovery of their losses, while often not knowing what options they have to get that accomplished. The frustration is almost palpable.

The most effective adversary to long term capital growth is a loss. Duh. Yer smilin’, but let me finish. The consequences of a loss aren’t limited to the present. The bottom line effect is how many years your Plan is essentially on ‘pause’ while it makes up the losses. Only when you’ve regained the losses do you resume your journey on the growth highway. Meanwhile you stubbornly keep havin’ birthdays.

And there’s the rub.

Fact: Your 401K/IRA has suffered a discouraging loss. It’s time to focus on a strategy to get back to where you were, and resume growing.

First — recognize that you’ve not been ‘diversified’ regardless of what you’ve been told. Wall Street’s idea of diversification is akin to puttin’ a governor on a Ferrari, ensuring it can’t exceed 60 mph. Why would you do that on purpose? Don’t get me wrong, I’m not anti-stock market. I offer Max Whitmore as prima facie evidence.

Fact: Once you’ve sustained a significant loss, time is no longer your friend. You keep havin’ birthdays while the losses remain an ongoing reality.

Tick tock.

One option is to take the bull by the horns as it relates to your IRA or 401K. How? First, you must find out if you’re eligible to roll your current plan into a Self Directed IRA — not everyone has that on their menu.

For now, if you have a 401K from a former employer, you can probably roll it to a Self Directed IRA. Many over 59½ can also. More on that later.

The bottom line is, with an IRA whose funds are directly controlled by you — the funds can be invested — leveraged or not — into real estate. It’s not for everyone, but over the long run, your plan’s cash flow and capital growth will improve if a generous portion of your plan’s capital is directed towards real estate. For every 1% of real estate appreciation (leveraged — 1/3 down) your capital grows roughly 3% — which means if your plan’s real estate has a year of 3.5% appreciation, the stocks in your plan will hafta exceed 10% just to stay even.

That doesn’t account for the real estate investment’s cash flow, which will almost universally far outpace any dividends thrown off by stocks. Frankly, it’s an unfair contest from the start. But if you’re gonna begin making measurable headway in the race to regain your lost capital, ’start’ is what you might wanna strongly consider.

I can show you how, and recommend highly experienced pros to guide you in every step of the process. Don’t risk your perception further clouding reality. The one thing none of us can do is put time on pause. Again — tick tock.

Call me, and we’ll figure out what’s possible for you and your circumstances. 619 889-7100 — Have a good one.