Guidant Financial Group Blog

Despite housing market woes, most of Guidant’s self-directed IRA investors are making few significant changes to their current lineup of investments. In fact, in a recent survey, 86% indicated they have not made any major changes to their investment portfolio due to the mortgage crisis.

We know from other surveys that the majority of our self-directed IRA clients are involved in long-term investing and broad diversification of assets. So, it’s reasonable to surmise that, when the housing bust hit, they were already in pretty secure positions, especially since their real estate investments were primarily long-term ones.

Another fact that may influence our clients’ tendencies to stay the course is that Guidant’s self-directed IRA lets investors acquire both traditional and alternative investments via checkbook control. This means account holders can move easily from stormy markets into more tranquil ones as the economic climate changes.

Like every other financial institution in the country, we have received many, many phone calls over the last few days from concerned clients about the current economic meltdown and what they should do next. This is a very unique period in the history of the global economy and many, if not most, investors aren’t quite sure exactly what to do.

Case and point: Our concierge department has been bombarded by calls from existing and in-process clients who are concerned about the banking institutions that currently hold their funds. Conversely, our sales team was busily answering urgent phone calls from stock-market investors who want to get their money OUT.

While no one knows with 100% certainty what is going to happen with the financial markets, we want to assure our clients and prospective clients that a self-directed IRA with Guidant is a great option during this tumultuous time.

Our self-directed IRA offers a level of flexibility that no other retirement account can provide. Because of the LLC structure, Guidant clients have the ability to choose what banking institution they want to keep their money with. Additionally, since the funds are held in a business checking account, the LLC (just like any other business) can move its funds to another bank at a moment’s notice.

In addition, Guidant’s real estate IRA clients have the ability to open accounts with multiple banks, so they can keep less than $100,000 in each bank account. This means that, if there were a run on the banks and if they needed to take advantage of FDIC insurance (up to $100,000), they wouldn’t have more than the maximum insured amount in any one account.

The likelihood that a bank should collapse and a person’s funds could be diminished substantially is fairly low. And even if a bank should face the worst, the current trend predicts that most of these institutions will be bought out before they actually go bust – like Washington Mutual. Since JPMorgan Chase has bought out the failing institution, it has also assumed the liability of insuring the remaining balance of any Washington Mutual account over the $100,000 insurance limit.

Furthermore, since the purpose of having a self-directed IRA is to be able to make self-directed investments, most Guidant clients will have their cash in real estate, private loans, tax liens and much more - not in a bank account.

We understand that this is a difficult time, so we encourage everyone to be extra cautious when making their investment decisions. However, with a self-directed account come self-directed investments – meaning you get to decide the amount of risk you choose to take.

Really. Despite the nation’s current economic woes, we’ve found a surprisingly effective way to improve Guidant’s bottom line while helping to protect the environment. It’s a proverbial “killing two birds with one stone” . . . with neither of the birds being an endangered species! Simply put: We’ve increased the number of employees who telecommute. The result: Savings on the costs of leasing office space, savings for our employees who now spend less on gas, and a significantly diminished company-generated carbon footprint. Our CEO David Nilssen reports on this in Inc.com’s great article about environmentally friendly ways to manage a business during economically hard times (see Five Ways to Save Money [Layoffs Not Included]).

Guidant has always been sensitive to the greater community through charity work and ramping up our recycling program, encouraging more carpooling, trading in paper cups for ceramic Guidant mugs, and so forth. So we’re kind of surprised ourselves that we didn’t think of taking this fiscally fabulous telecommuting step earlier. As many investors have probably noticed, you can get so focused on what others are doing for/to your bank account – or what oil companies are doing for/to the health of the world – that you forget to consider what you can do yourself.

Our telecommuting efforts are paying off, and our telecommuting staffers are so tickled “green” that we’re now eagerly searching for other ways to cut expenses while contributing to Mother Nature’s health and wellbeing. In our research, we’ve come across some great ideas for businesses wishing to incorporate more green practices. We encourage you to check these out and think about ways you can save money while saving the Earth:

· September 15 “Driving a Low-Carbon Commute” article on greenbiz.com
· Green business tips and advice on allbusiness.com
· “How to ‘Greenify’ Your Office”
· The Illinois CPA Society looks at the financial impact of going green

The more we learn about green business practices the more we’re convinced that investing in the environment generates a very healthy rate of return!

As reported in our September 13 blog, our CEO David Nilssen was quoted in Market Watch regarding the buying of foreclosed homes with IRA funds. Thanks to the housing crisis, foreclosed homes are available at really good prices for people with self-directed IRAs to scoop up – along with numerous other investment opportunities that appear during economic downturns.

Two days after our blog, the market crashed with a huge, sickening thud (see Bloomberg). Granted, this means that now there are even more foreclosed homes to buy at even better prices. But getting a great deal on a foreclosure while realizing it represents a family’s misfortune is – if you have a soul at all – seriously heartbreaking. Our accounts may be growing, but we just don’t feel like breaking into song about it.

In all honesty, we desperately want to return to a time when we can celebrate our good fortune without feeling, well, guilty about it.

So what do we do? Here at Guidant we are certainly continuing to work hard at helping you secure a sound financial future, even if that means buying foreclosures, making personal loans, offering lease/options and other money-making transactions that take advantage of today’s recession. But we are also stepping up our efforts to preach the gospel of conservative investment practices, the need for due diligence, and the “not-putting-all-your-eggs-in-one-basket” safety net of broad diversification.

This is the ideal time for Guidant and others with self-directed vehicles to educate everyone we know about the advantages of taking personal, hands-on control of one’s IRA, 401(k), and other retirement funds. After all, unless you have gambling in your blood, then you (and not a broker or financial institution) are certainly more inclined to tread carefully when making the decisions about how and where your funds are being invested. And with a keen eye on the markets – and a checkbook tied to your IRA in your hand – you can jump quickly and cautiously from shaky investments into those that are more secure.

These times are frightening for all of us. But if history is any indicator, then even if the market begins to rally (as it did today), it won’t be the last time our economy takes a nasty hit. Could it be that we have the opportunity now to change the marketplace as we know it? If we can help people learn from their mistakes and present a potentially more secure route to financial solvency, then maybe the next hit won’t be quite so hard, and we can at least feel a little less guilty about standing firm while the world around us is shaking.

There is one thing that all American’s have in common: We were pretty darned scared yesterday. Do we know exactly why the market crashed? Not really. Does it matter? Not so much.

The bottom line is our financial market is having its knee caps broken by a big bully named “Greed.” It was the creature with a black hole for a soul that paid senior level executives at Fannie Mae and Freddie Mac tens-of-millions of dollars while they were running their companies into the ground. And now what does it do? It beats down its most loyal followers.

We guess that’s what happens when you play with the greed-eyed monster.

But we haven’t been messing with Greed. We haven’t been lured in by its slick, charismatic ways. So why does it feel like it’s going to fill Nikes with cement and force us to go for a swim in Lake Washington? Perhaps it’s because we’ve learned that when the big guys fall, so do the little people they stand on. At least, that’s usually the case.

A small measure of comfort, however, comes from BloggingStocks.com, which suggests that, in this particular case, most of us may get shaken, but we won’t necessarily fall. While the lending giants may have to drain their Italian-tiled swimming pools of cash, and those working in the crumbling financial institutions may get caught in the collapse, the majority of us will be able to go on living, spending and saving as usual (see What the Financial Meltdown Means to You – If You’re Not in the Financial World).

According to BloggingStocks.com, for those of us who don’t run or work for a multi-billion dollar investment firm, the effects on us could be minimal. The site expects that the stock market will mend, although it may not be until after the first of next year. It also anticipates that struggling banks will find buyers, money may be easier to come by and the housing market will stabilize.

So, although Greed may have won this recent battle, it may not be able to win the war – as long as we aren’t heavily invested in, or earning a living from, large financial institutions. Oh yeah. And for us self-directed IRA investors who, as a rule, are not quite as dependant on the Greedmeisters as other investors, we may be able to steer clear of the battlefield altogether.

The doom and gloom (and subsequent blossoming oportunity) that has been created by the housing crisis has provided yet another oportunity for a major publication to explore the benefits of owning a self-directed IRA.

Most recently, MarketWatch.com has put out a series of articles exploring the foreclosure market and, with it, opportunity to invest in these properties with one's IRA.

Really? You can do that? Yes!

Although we agree that this housing crisis has had a negative impact on almost every community nationwide, it has provided a unique platform for spreading the self-directed IRA doctrine:

"Thee can invest in whatever Thee thinks will make Thy IRA most plentiful."

Okay, a little dorky, we know. But, regardless, we are thrilled to be a part of the mass education that is going on regarding non-traditional investment oportunities for retirement accounts.

Our very own CEO, David Nilssen, was interviewed for the following articles on investing in foreclosures:

• Tips for Investing in Foreclosures
• Build up Your IRA

While the articles do recommend a very cautious approach to investing in foreclosures (we believe any investment should merit a cautious approach), they do introduce to many the option of using an real estate IRA to invest in non-standard assets.

Not since prohibition has alcohol been such a “hot” commodity.

Hehe. Okay, bad joke. And probably not true.

But, according to AOL Money and Finance, Alcohol and Tobacco are two of the few sure bets during this down economy (see In a Recession, Bet on Alcohol, Tobacco). “Sin Stocks,” as they’re called, traditionally fare well during a recession. And, as AOL Money opined, “As a global recession looms, what better way to cope than to eat, drink and be merry?”

Guidant clients are not unfamiliar with the allure of alcohol as an investment. In fact, several of our 401(k) small business financing clients have purchased bars or wineries. Even the owners of the first distillery in Washington State since Prohibition (www.dryflydistilling.com) launched their business with our help.

These clients know that, while a traditional IRA can enable you to purchase sin stocks, only Guidant’s self-directed services can enable you to jump all the way in and enjoy the fruits (with subtle notes of oak and berries?) of your labors.

Today is 401(k) Day, a day set aside to celebrate employer-sponsored profit-sharing plans. Although we wish (really, really wish) we could say it’s an official government holiday that mandates all financial services employees take the day off, the day was actually named by the Profit Sharing/401K Council of America (PSCA).

The non-profit organization chose the Friday after Labor Day for the annual “holiday,” since they figured that a day celebrating eventual retirement should follow a day celebrating labor. Honest. They put that on their website.

Good thinkers, those PSCA folks. It’s actually a great idea to set aside a day to consider your 401(k), 403(b) or whatever profit-sharing program your employer offers. Most of us have a tendency to “set it and forget it” when it comes to these plans, but they deserve our serious attention. Even increasing your contribution by only a couple of percentage points could, over time, make a huge difference in the size of your savings.

Here at Guidant we work with hundreds of people who, despite being much younger than our usual Baby Boomer demographic, have built up significant retirement accounts. And they’ve done this by making maximum contributions to their plan.

So, we recommend you mark this day on your calendar and determine that on each 401(k) Day you check with your employer to see what your maximum contribution can be. Then figure out if there’s any way you can hit that max or at least move closer to it. And finally, ask your friends and family if they know what special day falls on the first Friday after Labor Day . . . and then feel superior when they confess they haven’t a clue!

According to Zillow.com, in the 12 months that ended June 30, nearly a quarter of the homes sold in the nation garnered less than what the seller originally paid for the property (See 25% of Home Sales Result in Loss).

Ouch.

We do know that many of these sellers had no choice in the matter; but what this statistic means is, whereas it may not be the right time to sell, it surely could be the right time to buy!

For those of you with IRA or 401(k) money bobbing up and down in the stock pool, try considering purchasing a rental property. Maybe a flip? Or a tax lien? A self-directed IRA (also known as a real estate IRA) could open up your retirement funds to a whole new world of investment opportunities.

It is pretty obvious that now is not the time to find yourself stuck in the housing market with few options to get out. But it may be time to get into it if you have a long-term investment plan and intelligent exit strategy. According to many financial advisors, it will still be a few years before the housing market recovers; but, for those of you who have several years until retirement, this may not matter.

Contact your financial advisor, tell them you are considering real estate, and see what they have to say. You might be surprised!

WARNING: More doom and gloom in this posting.

According to CNNMoney.com, more prime borrowers are defaulting on their mortgages (see The Next Wave of Mortgage Defaults).

Not good.

Experts believe that the initial wave of foreclosures started a vicious cycle of delinquencies begetting delinquencies. "It's a feedback loop," chief economist for the National Association of Realtors, Lawrence Yun, told CNNMoney. "Price declines lead to more defaults, which leads to more price declines."

While this does mean that it may be even longer than expected for the housing market to recover, it also means that foreclosures and related investment opportunities may continue to be available to self-directed IRA investors.

We like to believe that, even though the contribution may be relatively small, those aggressively utilizing their self-directed IRAs to make the most of a bad situation are helping to bring the vicious cycle to a stop.