Month: September 2018

InnOvation Capital & Management, LLC

IntelDigest

LAW – POLICY – FINANCE – MARKETS
INFORMATION FOR THE ENTERPRISE AND INVESTOR

SEPTEMBER 26, 2018

 

Contact Richard Power with comments or questions. IntelDigest  is intended for the use of our clients and colleagues.  Material may not be reproduced, forwarded or shared without express permission.

 

As promised last week, we will discuss Self-Directed IRAs in this issue.  When the current “Melt Up” in the markets starts to “Melt Down” … probably some time next year … we can expect traditional stock and bond investments to hit the skids.  We will likely enter a period of several years where stock/bond market gains will be hard to come by.

Investors will need alternative investment vehicles in order to earn reasonable levels of income and capital gains.  Self-Directed IRAs can provide a better platform than the typical brokerage account for finding such investments.

 

Advantages of the Individual Retirement Account (IRA)

Before discussing the Self-Direction aspect, let’s look at the advantages of the Individual Retirement Account (IRA). Congress created the IRA to supplement the existing methods of saving for retirement:  Social Security, company pension plans, and individual stock and bond investments which had no tax advantages.

The IRA grows on a tax-free or tax-deferred basis, so that the gains compound, over time, at a faster rate.  This maximizes one’s ability to grow retirement savings.

 

4 Main IRA Benefits

1) Compound Interest and Tax-deferral make a powerful combination.  Compounding occurs when you earn interest on your original investment, plus all accumulated sums in your account.  Deferral of taxes on these accumulated amounts helps to multiply the value of tax-advantaged accounts such as IRAs.

2) Tax Deductions.  Some IRA plans allow for current tax deductions for deposits to IRAs.

3) Protection from Creditors.  IRAs are afforded protection under federal bankruptcy law, and are generally shielded from creditors in bankruptcy proceedings.

4) Estate-Building and Family Transfers.  There are complex rules on taxability of IRA benefits left to family members; however, proper estate planning can limit or avoid some taxes on assets passing to beneficiaries.

 

Investment Options in Self-Directed IRAs

The ability to invest in a wide range of assets … beyond stocks, bonds, mutual funds, and ETFs … makes Self-Directed IRAs valuable.  Adding a greater array of investment options to compounding, tax-deferral, and the other enumerated benefits of IRAs affords savers and investors more control over their finances and their lives, and augments estate planning and asset protection strategies.

Here is a partial list of the additional investment vehicles available in Self-Directed IRA Plans.

Real Estate:

• Residential Property
• Commercial Property
• Developed Land
• Undeveloped Land
• Foreclosures
• Rehabs
• Mobile Homes

Tax Liens/Tax Deeds:

• Tax Lien
• Tax Deed

Promissory Notes:

• Mortgages/Deeds of Trust
• Secured Notes
• Unsecured Notes
• Vehicle Paper
• Commercial Paper

Entities:

• Private Placements
• Limited Liability Companies
• Limited Partnerships

Traditional Brokerage Investments:

• Stocks
• Bonds
• Mutual Funds
• Exchange-Traded Funds

Alternative Investments:

• Structured Settlements
• Factoring
• Accounts Receivable
• Foreign Currency Exchange
• Equipment Leasing
• Cryptocurrencies

 

 

Co-Investment

In addition to the wide array of investment vehicles open to the Self-Directed IRA, it is possible to “co-invest” or “partner” with other entities or funding sources.  This affords the IRA owner the ability to take advantage of investment opportunities, even if the IRA alone does not have enough money to complete the deal.

It is also possible to combine multiple retirement accounts of the investor and his or her family members, or partner with other businesses or business retirement plans, or partner with the IRAs or Coverdell Education Savings Accounts of third parties.  The Self-Directed IRA may also accept third-party-loans as a funding source.

 

Follow the Rules to the Letter!

It is crucial that savers and investors carefully follow the rules for Self-Directed IRAs.  Certain types of investments are prohibited, as are some types of transactions.

Certain family members and fiduciaries of the IRA owner may NOT co-invest with the Self-Directed IRA or make loans or other business transactions with the IRA.

 

Please feel free to call upon us for advice and information on constructing Self-Directed IRA arrangements, and compliance with the mosaic of tax rules which MUST be followed to the letter.

 

 

InnOvation Capital & Management, LLC

IntelDigest

LAW – POLICY – FINANCE – MARKETS
INFORMATION FOR THE ENTERPRISE AND INVESTOR

SEPTEMBER 19, 2018

 

Contact Richard Power with comments or questions.  IntelDigest is intended for the use of our clients and colleagues.  Material may not be reproduced, forwarded or shared without express permission.

 

We used the last few issues of  IntelDigest  (just before our Summer Hiatus)
to hammer home the point that  Debt  is a major problem in the world, especially for us here in the U.S.   The “way of life” which has been built in this country over the last century will be threatened by the  National Debt, as well as runaway corporate and individual  Debt.

Over the last 20 years, businesses, governments, and individuals have amassed unprecedented amounts of  Debt, much of which must be repaid in the near future.  It is difficult to see where they will find the resources to do so.

To illustrate that this dilemma is not peculiar to Americans, we reproduce a piece reported this week in the U.K. on Sky News.  The headline is, “Next financial crisis ‘has begun and will be worse than 2008 crash,’ economists warn. Economists who predicted the 2008 global meltdown tell Sky News the world economy is in danger once again.”  It is produced by business correspondent, Adam Parsons.

 

 

The beginnings of another financial crisis are already in motion – and it will be worse than the global meltdown of 2008.

That’s the opinion of one of the select band of economists who predicted the 2008 economic collapse, which started with the bankruptcy of Lehman Brothers bank a decade ago and ended up affecting every country in the world.

Ann Pettifor predicted that crisis in 2006, more than two years before it actually struck. Now she thinks the global economy is in danger once more thanks to huge corporate debt, and the prospect of rising interest rates in the United States.

She told Sky News that global debt was now more than three times the level of global GDP.

“So naturally it is not going to be repaid, and naturally there is going to come a point when that debt triggers the next crisis. And, for me, that trigger is going to be high rates of interest,” she said.

“We’re seeing that companies who borrowed too much money at very low rates of interest are now finding the value of their collateral falling. Their debt is rising and the interest on that debt is rising too.”

What’s more, she thinks the process has already started.

She said the US Federal Reserve’s decision to wind back its support for the economy, and reverse its programme of quantitative easing, has already laid the ground for the next crisis.

“In Argentina and Turkey, they are already facing a crisis as a result of the Fed’s decision to diffuse the bomb that is QE, and to increase interest rates,” she said.

“Those decisions have both served to strengthen the dollar, which has hurt their economies.”

She said: “I think it will be worse than the last crisis because we don’t have the tools. It will be really difficult to start pumping out quantitative easing, buying back all those assets.

“Already the new crisis has begun to roll.”

She believes the UK is “vulnerable” to another crisis because of the economic volatility caused by Brexit.

And she also fears the vulnerability of the so-called “shadow banking” sector – financial institutions, such as hedge funds, that are not nearly as regulated as our best-known banks.

Her warning is echoed by others.

In an exclusive interview, Tom Russo, former managing director of Lehman Brothers, told Sky News “the seeds of the next crisis are probably already being watered right now”.

He puts the focus on the process of leverage – a measure of corporate debt.

“I think it’s probably going to be the same fundamental issue of leverage that we had 10 years ago,” he said.

“We have a national GDP of $20tn, but debt of $21tn. Our national debt is growing by $1tn per year. We keep on promising things to people without the means to pay for it. It will just become harder and harder to deal with it.”

Stuart Plesser, a senior director at the rating agency Standard & Poor’s, is one of the most respected banking analysts in America.

He said: “There are single B [a low credit rating] companies who are borrowing a lot of money, because rates are low.

“They have borrowed pretty significantly and so, if they don’t have a really viable business or business is impacted by something in the economy, or if rates go up, then the concern is this – can these companies, that have borrowed so much, really have the werewithal (sic) to pay back the debt they took on?”

 

 

 

In the May and June issues of  IntelDigest, we started  Looking Ahead  to the problems waiting over the horizon for the U.S. Economy.  After the currently-frothy markets play out … probably by the end of this year … complications await, in 2019 and thereafter.

Feel free to review those issues … and our in-depth treatment of the  Debt  crisis (from late-June through early-August).

You can find all past issues in the  IntelDigest  archive.

Next week, we will discuss Self-Directed IRAs.  When the markets hit the skids next year, we will likely enter a period of several years where stock/bond market gains will be hard to come by.  We will need alternative investment vehicles in order to earn reasonable levels of income and capital gains.  Self-Directed IRAs can provide a better platform than the typical brokerage account for finding such investments.

 

 

InnOvation Capital & Management, LLC

IntelDigest

LAW – POLICY – FINANCE – MARKETS
INFORMATION FOR THE ENTERPRISE AND INVESTOR

SEPTEMBER 12, 2018

 

Contact Richard Power with comments or questions.   IntelDigest  is intended for the use of our clients and colleagues.  Material may not be reproduced, forwarded or shared without express permission.

 

Our Summer Hiatus is over, and  IntelDigest  returns with new content.  Today, we would like to ask for your opinion on our content.

We will list, below, some topics which we will explore over the coming months.  However, we would like to receive input from our readers.  Alert us to topics of interest to you!

As stated in the masthead,  IntelDigest  focuses on themes pertinent to Law, Policy, Finance, and the Markets.  In past letters, we have delved into analyses of legislation, such as the landmark tax overhaul;  discussed economic and trade policies; explained the structure and workings of The Federal Reserve; examined trends in employment;  decoded the BlockChain and cryptocurrencies;  interpreted trends in the Economy and investment markets.

Going forward, we intend to discuss:

* China, from several angles, over a series of issues

* U.S. Taxes – updates on changes in the law and regulations

* Work in America – a re-examination

* Robotics and Autonomous Vehicles

* Blockchain – new developments

* Medicare and Medicaid rules

* Self-Directed IRA plans

Feel free to call or email us  …  let us know what you would like to read about in  IntelDigest.