Guidant Financial Group Blog

TheStreet.com came out with an article today about non-traditional IRA investments (see Control Your Nest Egg, but Watch For Risk). Guidant was highlighted in the article, providing information on the increase in private lending in an IRA.

The article did an excellent job of pointing out some of the benefits for a self-directed IRA, such as the ability to control your investments and to invest in what you believe will make you a better return.

The article also pointed out that there can be some risks involved when investing with a self-directed IRA, if you don’t do your homework first and if you neglect to work with a competent provider. Things to watch out for include investing with disqualified parties and benefiting personally from your IRAs investments.

This is also why our highly trained staff is readily available for you to run your proposed investments by; we’re committed to proactively helping you avoid any trouble-spots.

It should also be mentioned that Guidant is the only company that provides outside legal counsel as a part of its fee. This means that only with Guidant will you get time with a qualified tax attorney to go over your investments, without any additional charge.

We are honored the TheStreet.com took the time to talk to Guidant about these exciting investment options for an IRA, and we hope it helps underscore the reasons why it is important to work with a competent self-directed IRA provider . . . like Guidant!

Happy investing!

You’d be hard pressed to find someone who hasn’t, at one time or another, dreamed of owning a winery and spending their days among grapes ripening on the vine. And, for those with really vivid imaginations, basking in the Tuscan (Napa? Provence? All of the above?) sun while drinking their own full-bodied creation completes the vision.

While the stereotypical vineyard in Northern Italy or the Loire Valley is not likely to become a reality for most, several of Guidant’s 401(k) small business financing clients have invested their way into the winery business.

Entrepreneur.com addresses some of the ways entrepreneurs have entered the wine industry through unique avenues (see Winning with Wine). You no longer have to own a vineyard to be a part of the wine business. Entrepreneurs can start a wine importing business, a boutique shop or even a distributorship for a local winery. (Keep in mind, however, that due to the “collectibles” caveat in self-directed IRA investments, you cannot invest in wine futures.)

There are even franchises that can help you achieve some part of your vino-soaked dreams. WineStyles and Vino100 are franchised wine shops, which Guidant has had clients purchase through our 401(k) financing strategy.

So, even if you don’t have the millions you would need for a Tuscan villa, you can still get a full-bodied taste of the winery business!

An article posted today on Bloomberg.com addressed the idea of investing retirement money in a Hollywood movie (see Investors Finance Hollywood Movies Using Retirement Money).

We have actually had several prospects inquire about the possibility of investing IRA money in a movie production and have even had a few move forward on the investment.

What we do want to address about the article, though, is the stance that the two financial planners take on the idea of a self-directed IRA.

One thing that the article should have addressed is how most financial planners get paid, and how that factor affects the financial planner’s advice. Most financial planners obtain their fees based on Assets Under Management (AUM). As a consequence some financial planners either advise against alternative investments for a client’s IRA, or don't even mention the option to clients. That’s because they do not receive any fees from investments outside the securities market. This could be a disservice as there are many people out there who could benefit from diversifying their retirement funds into non-traditional assets as well as the stock market.

We are, in no way, saying that all financial advisors who are paid based on AUM are going to provide biased advice; In fact, we highly encourage investors to obtain the advice of a financial planner or advisor when considering investments. We do recommend, though, that retirement-account holders keep in mind how a planner is paid when deciding who best to work with and whether or not they will get the best advice for their investment needs.

I did see that the article quoted John Deyeso who is a fee-based advisor. This is great because he is obviously not basing his opinions on whether or not he will receive commission on the investments.

We do disagree with his statement, though, that the IRA was not intended for alternative investments. This is simply not true. There is no support for that proposition in either the Internal Revenue Code or the legislative history regarding IRAs.

The IRA was intended to move the responsibility of retirement savings from the employer (as in pension plans and defined benefit plans) to the employee (today’s 401(k) and IRA). The IRS left investment choices up to the discretion of the account holder, excepting life insurance and collectibles.

They did specify prohibited transaction rules under IRC § 4975 that taxpayers must observe when investing their retirement funds. The statutory exemptions under § 4975(d) list a host of activities that are exempt from the prohibited transaction rules, including providing office space and other services. The Treasury Regulations go into great detail about acceptable arrangements for real estate leases, for example. If it were intended just for securities – this language would be irrelevant. If the IRS truly intended to narrow the individual retirement accounts investment options to solely include securities, it would have made that clear in the Internal Revenue Code or the Employee Retirement Income Security Act (if you have ever looked at either of these, you can see that they are definitely not at a loss for restrictions and regulations where they see fit!).

Not to put too fine a legal point on it, but the IRS issued a Field Service Advisory back in 2001 that is enlightening. IRS FSA 2001128011 addressed a situation where a taxpayer and his children set up separate IRAs that then invested into the stock of a foreign sales corporation (FSC). In analyzing the prohibited transaction rules, the IRS stated:

There is no specific Code provision or regulation prohibiting an IRA from owning the stock of a FSC. The type of investment that may be held in an IRA is limited only with respect to insurance contracts, under section 408(e), and with respect to certain collectibles, under section 408(m)(1).

There you have it from the mouth of the IRS.

Some commentators would have you to believe that IRAs were not intended to hold non-traditional investments. The IRS, the agency charged with the administration of the tax laws pertaining to IRAs, disagrees.

In addition, some self-directed IRA companies have been in business for more than 25 years – if the IRS had decided that self-directed investments were not consistent with the intended purpose of IRAs, they would have made a ruling against these alternative investments some time ago.

We love seeing any article on self-directed IRAs and this one did a great job of letting people know that there are more options out there for their retirement funds. We just wish that they had called us for a rebuttal!

We can tell that you like the blog postings on foreclosures (creepy how we know these things, isn’t it?), so we found another great guide on investing in foreclosures on Forbes.com and thought it would be a disservice not to post it.

So, here it is: Smart Ways to Profit from Foreclosures.

The best part, we think, is the slide show, which goes into detail on several, often overlooked, investment opportunities associated with foreclosures.

Go forth, invest. (With your self-directed IRA, of course.)

Inc.com reported last week that due to high gas prices and rising food costs, Americans are tapping into their retirement plans and investment funds (see Higher Prices Cutting into Savings).

Stop. It. Now.

The report comes from a survey by Edward Jones of more than 800 households across the country. Those hardest hit were the young, aged 18-24, and those earning between $35,000 and $50,000 annually.

Believe us when we say, we understand. Several of our employees have started carpooling, the refrigerators in the break rooms are stuffed with food brought from home and we are hearing less and less about weekends spent golfing and road trips with the kids (usually mainstays during the summer!).

However, one thing that we are definitely not hearing is that our coworkers are dipping into their retirement savings to make ends meet, or reducing their contribution levels to the company 401(k). Simply by being in the business we are in, we understand the importance of saving for a happy retirement.

And you should too.

Clif Helbert, a retirement planning principal at Edward Jones, said it best when he told Inc.com that “Gas prices are unpredictable, but the need to save for retirement isn't.”

I have retirement funds in a TIAA-CREF account from my former employer. My trust company advisor suggested that I roll the money into an IRA; however, I need the funds to purchase some real estate and my advisor told me that I would not be able to access the money for that purpose until I reach a certain age.

How can I work this? Right now my money is doing nothing for me and a real estate investment is what I would like to do. It would also qualify as a first home purchase.

-- MG

If you roll the funds into a self-directed IRA with Guidant, you can use that money to purchase real estate as an investment. You will not be able to purchase a home that you would use, or live in, personally, however. Any investment made with IRA money must be for investment purposes only – not for your personal benefit. Self-directed IRAs give you the option of investing your retirement funds in secured assets, such as real estate, not just securities.

If you do need the funds to purchase your first home, which you would use personally, you may be able to take the funds as a distribution without penalty. If this is the route you would like to go, we highly recommend you speak with a qualified tax attorney to get all the specifics on this exemption, as not all plans qualify. You can also find more information on the IRS website.

Do you have an Ask the Expert question? Email your questions to asktheexpert@guidantfinancial.com.

We knew that private lending had increased among our clients during the last couple of years, but even we’ve been surprised by recent stats. By comparing past and present surveys of our self-directed IRA LLC clients, we’ve discovered that loan investments inside IRAs have increased by 131.1% since 2005.

A 2007 Guidant survey indicated that 23.8% of self-directed IRA LLC holders were investing their retirement funds into notes and/or loans, while a 2005 survey indicated that only 10.3% of Guidant clients were directing their investments into notes and/or loans.

Why the increase? Investments in private loans, like foreclosures, have actually benefited from the current credit crisis. Because most traditional loans are either based on a borrower’s home equity (as in HELOCs) or secured by it (as in SBA loans), consumers are having a tough time securing the same levels of financing they once did. With lending institutions wary of providing leverage for purchases of nearly every sort, private lenders are stepping in to fill the void.

Self-directed IRA investors are providing much-needed capital for individuals and businesses through primary home loans, second mortgages, bridge loans, hard money loans and so on. Most of these loans are secured by real property and, even if that property isn’t worth quite what it used to be, it can still provide a level of security superior to stock market investments. Many individuals chose self-directed IRAs in the first place because of the ability to invest in secured property versus securities.

Making this sort of investment can be pretty exciting. And realizing you can profit during an economic downturn can bring you some welcome relief during uncertain times.

Guidant employees joined 14,500 participants at this year’s Race for the Cure event in downtown Seattle. With the help of Guidant’s Social Commitment Committee, the employees raised $5,000 for the Susan G. Komen for the Cure fund.

It was truly an awe-inspiring experience for all attendees. Most of downtown Seattle was at a standstill while thousands of men, women, children and pets walked in support of breast cancer awareness. According to the Susan G. Komen Foundation, this year’s run celebrated the 25th anniversary of the Race for the Cure, the largest series of 5K runs/fitness walks in the world, with well over 1 million participants since 2005.

As have many of you, the Guidant family has been directly affected by breast cancer, and this cause is one very dear to the hearts of many Guidant employees.

The official event in Seattle raised more than $1.65 million, with 14 to 18 percent going toward costs.

Interested in helping out? Visit the Susan G. Komen for the Cure website.

At the last few conventions Guidant has attended, I kept hearing the same question over and over again from our partners and prospects about one of our competitors: “Did you know they allow you to put up to $250,000 into their retirement plan?” It is not uncommon in this industry that smaller companies look for a way to differentiate themselves from the larger players and I’m proud to say we are the leader in innovative small business financing! So , when I started hearing that one of our competitors was advertising large contribution limits for their retirement plans, I thought I should take some time to give a simple analysis of the situation for both partners and prospective clients to review and understand.

The basic strategy this company is using is not unlike our 401(k) small business financing product whereas an individual can redirect a portion of their retirement funds into a small business venture. To properly execute this strategy one must utilize a corporation and a profit-sharing plan -- such as a 401(k) -- that specifically allows for such a transaction to take place. There are many benefits to financing a business venture in this way, one of which is the fact that the business owner can make ongoing contributions to their company’s profit sharing plan, which, in Guidant’s case, is a 401(k). A 401(k) allows an individual to contribute up to $46,000 annually (including company matching) to the plan.

This company, however, is touting that its clients can contribute up to $250,000 annually into their plans. How do they do it? Frankly, I am not sure.

What we do know is that they are layering a defined benefit (DB) plan on top of the existing defined contribution (DC) plan (i.e., 401(k)). Even so, this figure does not crunch. Somebody is exaggerating, somewhere. In essence, it’s marketing fluff. It is significant to note that at the time this posting goes live, the deferral figure promoted on this company’s website is $200,000, not $250,000 (as they promoted at the last convention). The defined benefit plan’s contribution limit is $185,000. The DC limit for contributions (employer + employee combined) is $46,000. If the employee is aged 50 or over, then an additional $5,000 catch-up is allowed. So if I do that math -- $185,000 + $46,000 + $5,000 (age 50 or over) = $236,000 max. The $236,000 is $14,000 short of the $250,000 figure.

It is possible that they are adding $14,000 of 401(k) employee elective deferrals to the $46,000 maximum additions figure mentioned above. If so, that’s a mistake. The $46,000 maximum figure includes the employee deferrals already. The $14,000 figure was the 2005 limit for employee elective deferrals anyway; the current figure for 2008 is $15,500.

No matter how you calculate it, and which year’s figures you use, it does not add up to $250,000.

I met a prospect at the International Franchise Expo who asked me about this and I chuckled. I told him that in theory (maybe not as much as the marketing fluff would lead you to believe) it’s possible. I asked him if he expected the business opportunity he was looking at to make him enough to defer $250,000 a year, still pay his bills, and not bleed the company of money. He laughed too. Five minutes later he mentioned he’d call our representative (whom he already was working with) to move forward with Guidant’s services. He said the $250,000 figure sounded fishy. Most small businesses will not generate anywhere near as much cash as would be necessary to defer this kind of money. Perhaps as the business grows or multiple locations are opened it is possible, but it’s only going to apply to the top 5% ... if that. If that is the case – why would a company promote something that really wasn’t useful to a majority of their clients? Read on …

Administrative and Operational Costs of DB Plan. Here are a couple of fun facts about defined benefit plans:

• DB plans require complicated actuarial valuations and funding calculations that DC plans do not need;
• DB plans are subject to Pension Benefit Guarantee Corporation (PBGC) premiums, as well as burdensome notice and spousal consent requirements on benefit distributions. The cost of PBGC premiums is something that a DC plan does not have to pay;
• A DB plan requires mandatory employer contributions to make the required funding level. If those mandatory payments are not made, then the employer gets hit with interest + penalty payments under IRC § 4971.

In follow-up to the issue of this company’s “$250,000” deferral plan, I took a moment to do a quick web search for typical actuarial fees for a small defined benefit plan. I came across this website: http://www.pensionsite.org/DefBenefitPlans.html. If you click on that link, scroll down to the bottom. It shows that this firm’s basic annual pension administration fee for a DB plan is $2,250 + $50 per participant.

As you know, our pension recordkeeping fee for our 401(k) clients is $800 + $45 per employee. I assume that the majority of the difference between our recordkeeping fees vs. the DB fees listed above is attributable to the actuarial fees. Hence, using the rough estimate of the annual actuarial fees for a small DB plan, it will cost the client $1,450 more per year ($2,250 - $800) when they use a smaller competitor. Mostly – it’s more confusing, more expensive and more work. I hope our competitor is disclosing the additional actuarial fees to their prospects if they go this route because there is about a 1% chance this will benefit the client.

It is for this sole purpose that Guidant will only provide this option to clients who truly could benefit from such a product.

The New York Times released a story last week on peer lending citing a dramatic increase in both interest and participation (see Person-to-Person Loans).

Duh.

Private loans have increased dramatically in the last six months due to the mortgage crisis and rise in foreclosures, but, we believe, one of the main factors in its growing popularity is the ease of which investors can now make loans.

Websites like Prosper.com and Zopa.com make peer lending so easy, even a four-year-old could do it.

Even better, you can start out small: the minimum loan on prosper.com is $50.

The websites do all the heavy lifting for you, providing credit scores, financial information and transaction details for each borrower. Additionally, the community lending model allows you to diversify your portfolio (something we are strong proponents of).

Whereas less than two years ago Guidant’s clients saw rehabs and flips as a means to balance out their volatile stock portfolio, today foreclosures are the investment-du-jour.

Our self-directed IRA clients have always had an interest in foreclosures; however, with the credit crisis and the plethora of foreclosed homes on the market, it is now a rare day when we do not hear from someone who is considering investing in foreclosures.

TheStreet.com came out with an article last week outlining the three ways one can invest in foreclosures (see Offset Your Investment Portfolio With Foreclosures). While there are advantages and disadvantages to each approach; it is quite apparent that the author prefers pre-foreclosures.

Pre-foreclosures appear to give the investor the most amount of leverage when negotiating a price and any repairs that may need to be made to the property.

Whichever way you choose to invest in foreclosures, it appears that this investment trend is here to stay for a while – so study up!

On Friday, June 13, Guidant’s CEO David Nilssen had the honor of attending the Ernst & Young Entrepreneur Of The Year 2008 Pacific Northwest awards as a finalist.

Although David did not win in his category (we’re blaming it on Friday the 13th), he was among some of the top entrepreneurs in the Northwest, let alone the nation!

Past Ernst & Young Entrepreneur Of The Year award winners have been founder and CEO of Cirque du Soleil Guy Laliberté, David A. Brandon of Domino’s Pizza, and the entrepreneurial minds behind such elite companies as 1-800-Flowers, Southwest Airlines and Enterprise Rent-A-Car.

David was nice enough to invite several Guidant employees to attend the black tie awards dinner with him, and we have included some photos of the event in this blog posting.

The winners at this year’s Ernst & Young Entrepreneur Of The Year 2008 Pacific Northwest awards were:

Financial Services and Real Estate: Duncan Campbell; The Campbell Group, LLC

Food and Beverage: Douglas Schmick; McCormick & Schmick’s Seafood Restaurants, Inc.
To give you some perspective, not only has McCormick & Schmick’s been in business for more than 36 years, but when people think of the Northwest, they think of seafood. When people in the Northwest think of seafood, they think of McCormick & Schmick’s. David had some pretty prestigious company!

Health Services and Life Sciences: Eric Meier; Calypso Medical Description

Manufacturing, Distribution and Construction: Steve Bell; Pacific Crest Industries, Inc.

Professional Services and Construction: John Tobin; Slalom Consulting

Retail and Consumer Products: David Holcomb; Chef’n Corporation

Services: Peter Findley; Giant Campus, Inc.

Software and Technology: Dave Hersh; Jive Software

After seeing the picture of the baby duck we put on our 6.13.08 blog, Guidant’s president and COO, Stephan Roche, was inspired to share some photos with us that he had taken at his home. The photo you see here is of a mother duck and her babies, who were having a swimming lesson in Stephan’s swimming pool. (Yes, we also think it’s weird that he has a pool in Seattle.)

These photos did get us thinking, though. Not that Guidant should find some sort of mascot (a dancing lighthouse, maybe?), but that it is never too soon to teach your children the key skills they will need to be successful – like swimming, or investing their money intelligently.

There are several retirement accounts available to minors, the most popular being educational IRAs called Coverdell Educational Savings Accounts. Traditional, Roth and self-directed IRAs can also be set up for minors, as long as is there a guardian co-signee.

Once your children are old enough, you can start getting them involved in investing those funds to generate a return.

Doug Miller, one of Guidant’s senior consultants, has two boys, aged four and seven (see photo, left). Doug already has his kids investing their money in micro-loans through prosper.com. He says that, even though they have a tendency to want to lend to the borrower with the coolest photos, he has taught them to look at the borrower’s debt-to-income ratio, whether they are homeowners or not, and how much they have in savings before deciding to loan money.

"Our kids get $5 a week in allowance and, at the end of the month, they get to decide if they want to put the money in their checking account, savings account or to use the money for their investments,” he says. “Right now, my oldest is making a 17% return on his Prosper investments, and my youngest is making a 15% return.”

Not too shabby for a four- and seven-year-old!

The debate has begun over which presidential candidate has the best plan for overhauling the U.S. retirement system. It is apparent that Americans are not saving enough to get them through retirement.

There is no promise of ever-dwindling Social Security being available when the current workforce retires, and companies are steering away from pensions and are moving toward employee-managed retirement accounts. These two factors alone mean that saving ample funds for retirement should be a priority for most, if not all, Americans.

The presidential candidates see it that way, too. Barak Obama proposed his ideas for retirement reform on Friday, suggesting that the government enforce automatic enrollment for employees in corporate-sponsored 401(k) plans. He further recommended a government annual match of up to $500 to participants who meet certain income qualifications (see Uncle Sam Can Fund Retirement – Obama).

John McCain has yet to release his ideas on reforming the way Americans save for retirement; but, considering the threat of inflation and the apparent lack of retirement savings among U.S. citizens, one can venture to guess that McCain, too, will make retirement reform a staple of his campaign.

We hear all the time about “Mompreneurs,” women who have decided to juggle both raising children and starting a business (and, sometimes, keeping a full-time job, at that!).

But now, move over Mommy, the Dadpreneur is here.

As more men start staying home with their kids fulltime or becoming a more of a “participatory dad,” as is now the norm, fathers are starting to get into the baby business (and no, we are not talking about the pregnant man on Oprah).

This week Entrepreneur highlighted three Dadpreneur’s banking on the new “participatory dad” market (see Father Knows Business).

These dads have come up with such products as daddy-to-be classes, a missile-proof burp-up blanket, and, for those fashionista daddies who want to be the hippest pop on the playground, guy-friendly diaper bags.

It is always great to see fathers being involved in their children’s lives; but for them to find ways to make money off it, that’s just stellar!

Ooh! Maybe this will lead to a Dadpreneur vs. Mompreneur “Apprentice”-like reality series. We can already imagine the first challenge: write a business plan while on the phone with financiers (preferably Guidant) and changing a dirty diaper. It’s a winner!

Money Magazine had a great article today that explored the basis behind the inflation index, also known as the Consumer Price Index (CPI) (see Inflation: 3 Big Questions).

Apparently, the Bureau of Labor Statistics (BLS), which keeps the inflation scores, is not familiar with circumstantial evidence or inductive reasoning (i.e., the duck test). If it was, it might have concluded long ago that the country was exhibiting all the debilitating symptoms of acute inflation and early-stage recession.

The article explains how the CPI takes into account such things as “quality improvements.” Money Magazine illustrates this as “today's $2,000 laptop is faster and lighter than a $2,000 system from 1998 and can double as a TV, stereo and videoconferencing system.”

Quality improvement? It’s still a lap top, and it still costs $2,000. Based on the above example, many could argue that BLS’s calculations are so subjective they miss the objective reality of today’s economy.

Inflation can be particularly damaging long term – so all the more reason to recognize it early and adjust for it. For those saving for retirement (and that should be all of us), more money will have to be saved to account for the increase in prices in coming years.

For example, Money illustrates, “assuming today's inflation rate of about 4%, a private pension or annuity payment of $5,000 a month will buy only $2,300 worth of goods and services in 20 years' time. If inflation jumps to 6%, the purchasing power of that retirement income will fall to $1,600 over that same period.”

This is why it is important to start thinking seriously about your retirement now – especially those with a self-directed IRA. With all the options available to you, there can be few excuses not to move your retirement money into a portfolio or asset allocation that you believe is more secure and will give you the greatest return . . . whether the BLS thinks the country’s suffering from full-blown recession or not!

Can I roll my IRA over to a Guidant self-directed IRA and then, once I retire, roll my company 401(k) into the same account?

-- Tina (Brooklyn, N.Y.)

Absolutely! You can continue to make contributions, or rollovers, to the self-directed IRA LLC that Guidant will set up for you. As soon as you are ready to put more funds into your self-directed IRA, get in touch with your Guidant representative and he/she will walk you through the process.

Do you have an Ask the Expert Question? If so, email your question to asktheexpert@guidantfinancial.com.

Despite the “economic slowdown,” according to a recent study by Intuit, small business owners are optimistic (see Optimism Knows No Slowdown).

"The entrepreneur is still thriving," Rick Jensen, senior vice president of small business for Intuit, told Entrepreneur. "It goes back to the roots of who these small business owners are. They've faced adversity and they play offense. This isn't news to them."

The study of more than 750 business owners found that 90 percent saw opportunity in the current business climate, and 75 percent said they expect their business to grow.
What helps keep these businesses going? Customer retention.

63 percent of those surveyed said their focus was customer retention that, according to Entrepreneur, is “something Jensen says is a big part of what drives small business owners and allows them to do well under any economic conditions.”

There’s an extra bonus in this article: a bum cushion that looks like … well, just go to the site. If that isn’t a testament to the creativity flowing from new entrepreneurs, we don’t know what is!

You gotta’ hand it to those Baby Boomers. The children of the age of experimentation are still actively bucking the traditional system. Guidant survey data indicates that nearly one-third of new business owners using the alternative financing route of IRA or 401(k) funding are aged 45-50. We gleaned this stat from a survey of business owners who used our 401(k) small business financing vehicle to launch their enterprise as a retirement account investment.

There could be many reasons for this statistical result. The most obvious is that the retirement-fund equity needed for financing a private business usually isn’t available until people have worked for several years. The skills required over those years may also add to the confidence necessary for venturing out on one’s own.

Considering that a 2006 study by Merrill Lynch showed that 71 percent of Baby Boomers intend to keep working after retirement age, there are some who want to get a jumpstart on their future self-employment by investing in a business before they leave their current “regular” jobs.

Others included in this age group are those who, due to current job insecurity or unexpected lay-offs, have taken the leap into self-employment earlier than they originally intended.

Maybe it was all the badmouthing of the real estate industry that finally got a rise out of the housing market! (Sorry, that was a really bad joke.) But, whatever the reason, the pending home sales index has finally risen!

According to the National Association of Realtors seasonally adjusted index of pending sales for existing homes, existing home sales rose to 88.2 in April from a March reading of 83.0, the lowest reading since the index’s inception in 2001 (see Pending Home Sales Higher in April).

Although this is far from the April 2007 index of 101.5, this unexpected increase could mean that the housing market is slowly recovering.

Global Insight economist Patrick Newport, however, warns that the rise may be misleading.

''It's good news, but I'm not jumping for joy because I'm not convinced that it's telling us things are picking up,'' he told the Associated Press. ''It's telling me that banks are dumping properties at fire sale prices, spurring home sales.''

Either way, if home sales are increasing, it means that real estate investments may start to see a turnaround earlier than originally thought. And if not, at least self-directed IRA investors can still pick up those properties being dumped by banks at “fire sale prices”!

While all entrepreneurs have exciting stories about how they got started, it is always fun to hear about the beginnings for those who have made it really big.

In an article on Forbes.com last week, entitled How Self-Made Titans Got Their Starts, reporter Melanie Linder chronicles how several bigwigs got the financing and backing to start their own venture – or buy into an existing one.

Surprisingly, many young business owners get their starts by tapping into the International Bank of Mom and Pop – or deep into their own pockets. According to a 2002 U.S. Census Bureau Survey, 55% of business owners got their start with personal and family capital.

As this statistic shows, many new business owners see the benefits of starting a business debt-free. Just think of what some of these major moguls could have done had they realized that they could invest their retirement funds into their own business!

If you ever think about what using Guidant’s 401(k) small business financing solution could do for you, just take a moment to think about what it could have done for them!

Many of our self-directed IRA clients invest in farmland, but we had never thought it would become the investment-du-jour. Lo and behold, we were wrong.

The new, hip investment trend seems to be investing in all things agricultural. In addition to the oil crisis (or whatever it really is), food shortages are springing up across the globe, and institutional investors see money to be made (see Food is Gold, So Billions Invested in Farming).

Although these large investment firms and hedge funds will, presumably, start offering investment options to the global marketplace, a self-directed IRA lets investors get down and dirty (literally) with all the investment options agriculture offers.

Because of rising food costs and rising demand for produce from developing countries, many investors see potential profits in investing in farmland, fertilizer, grain elevators, farming and all sorts of related things.

We have had self-directed IRA clients purchase farmland for lease, shares in operational farms and even (no, we’re not kidding) a cow insemination business.

With all the investment options out there, the beauty of having a self-directed IRA truly becomes evident when mainstream investors start catching on to investments already being pursued by individual, “self-directing” investors. If you’re among this latter group, give yourself a pat on the back for leading the pack!

Every day it becomes more and more apparent that no one is immune to the skyrocketing number of foreclosures sweeping the country. Johnny Carson’s sidekick, Ed McMahon, is now the latest victim felled by the tumultuous housing market (see Ed McMahon May Lose Beverly Hills Home).

Although Mr. McMahon is the most prominent celebrity to face foreclosure during the recent credit crisis, he is not alone. According to The Wall Street Journal, U.S. Rep. Laura Richardson, a California Democrat, recently lost a home in Sacramento to foreclosure.

For Guidant self-directed IRA clients investing (or thinking of investing) in foreclosures, this news reinforces the fact that not only poorly maintained homes in low-income neighborhoods are being placed on the auction block.

Some self-directed IRA holders choose to invest in properties faced with foreclosure by offering a lease option to struggling homeowners. While the investor does own the title of the home, this type of agreement gives the previous homeowners time to develop equity and strengthen their borrowing power.

For Ed McMahon, only time will tell. McMahon and his wife are currently talking with their lender to see if they can avoid foreclosure.

No, really! A developer in San Diego has apparently decided that they only way to get rid of surplus homes is to give them away – literally.

When a buyer purchases a $1.6 million luxury home in the upscale city of Escondido, Calif., Michael Crews Development will give away a $400,000 row home in San Diego with purchase (see In San Diego, Buy One Home, Get One Free).

The idea behind the giveaway is that people will buy the upscale home for themselves and use the row home as a rental property to generate extra income. Not too shabby an idea given the jump in rental fees due to tightening lending standards and foreclosures.

For those considering the offer, here’s an even better idea if you have a self-directed IRA: Not only do you have a luxury home to rent out or hold for appreciation, but you have a second home to add to your portfolio in addition to an instant $400,000 profit!

Unfortunately, lay-offs.

Financial professionals now have some new drinking buddies in GM auto workers. The auto giant announced today that it will be closing four North American plants that manufacture SUVs in the next two years (see GM Shifts Focus to Small Cars in Sign of Sport Utility Demise).

Just as the financial industry was wounded by the mortgage crisis, the auto industry is starting to nurse the bruises caused by escalating gas prices. GM’s chairman and chief executive announced that the motor manufacturer is going to shift its focus to more fuel-efficient vehicles, thus eliminating the need for plants dedicated to building the brontosauruses of the road.

While GM has not yet indicated whether workers at the plants marked for shut-down will be transferred to other locations, the air smells of lay-offs.

As many of our clients know, being laid off can be both an end and a beginning. Many may find themselves considering self-employment as opposed to the often tumultuous life of an on-again off-again manufacturing worker.

Fortunately, many auto workers will leave GM with 401(k) plans and pensions that can be used to finance a new business. Guidant’s 401(k) small business financing solution can help anyone with money in a tax-deferred retirement account use those funds, without taking a taxable distribution, to start or purchase a business!

Although the instinct during a recession is to hunker down on spending for new business owners, a new story in Entrepreneur cautions against entrepreneurs tightening their wallets too much (see Less is More).

Apparently, there is a thin line that business owners need to walk – a line between spending too much and fatally injuring the bottom line, and spending too little and cutting the legs out from under the business’s growth.

The Entrepreneur article suggests that, instead of drastically cutting spending, to search for new profit potentials. Some businesses may discover they have growth opportunities available to them that they were oblivious to during more stable economic times.

Some things that Entrepreneur suggests are:
• Take a look at any freebies you are giving away and see if you could charge for them (i.e., charging for delivery services or moving to an a la carte pricing model)
• Re-evaluate your pricing structure
• Consider how to sell more to existing customers

Fortunately for our 401(k) small business financing clients, they may have a little more financial leeway during today’s tight economy. Because Guidant’s 401(k) small business financing solution enables people to access their own funds to finance their business, new business owners do not have to worry about loan payments.

No matter what financing methods business owners use, figuring out innovative ways to increase profits is never a bad idea!