After investing in
silver, guns, bullets, iodine pills, my house, even body armor,
after trying my best to blow the remainder on my version of “hookers and blow” (American west road trips),
for the first time in my life I actually had money left over to
invest in an IRA.
Now many of you know my personal opinions about IRA's, 401k's, RRSP's and other retirement plans. Not only do I fear the risk they will be confiscated like they were in Argentina, Bulgaria, Poland, and more recently Cyprus, but I also plain just refuse to pay the current prices being demanded in today's stock market.
Today I am expected to fork over $23 for $1 in earnings, which in actuality only entitles me to a paltry 2% dividend yield (ie- the only REAL rate of return, not the magic paper “capital gains” everybody fawns over). And forget bonds as they're offering rates of return as paltry as stocks.
So where, precisely, is the Ole Captain supposed to park his money?
Why, Davis Aurini of course!
At first you may be scratching your head, wondering if Davis has started a new corporation you can invest in or if he's selling himself into slavery. But there is a very good reason I invested in Davis Aurini instead of an IRA. And if I go through some of the numbers you will most likely be guaranteed to agree with me.
First, I didn't invest in “Davis Aurini.” I hired him to do a project for me. Specifically, I paid him $1,000 to record the audio book version of “Bachelor Pad Economics” because not only does he have the voice for it, he is a pro and I know he will get the job done. So it's not like I bought his servitude for the next couple of months and get a percentage of his future earnings.
Second, that investment will likely give me a rate of return that will beat out all the investment pros in Wall Street, Peter Schiff, Warren Buffett, and anybody else who has an impressive track record. If my audio book sales of Worthless is any indication, I can expect to clear $120 a month in audio book sales of “Bachelor Pad Economics.” 50% of which I pay out to Aurini for his work. This nets me $720 per year and thus a 72% annual rate of return. Again, beating out the majority of Wall Street professionals by far.
And, third, this is nearly 100% under my control. Unlike stocks, bonds, REIT's or other securities, I'm not throwing my money into some large multi-billion dollar corporation with 100,000 employees and millions of moving parts, effectively casting my fate to the wind.
I pay Davis.
Davis records the book.
We upload the files.
I market the book.
In short, I am getting an infinitely higher rate of return for a microscopic fraction of the risk and it's all thanks to our Canuckian friend, Davis Aurini.
Now, naturally, while a 72% rate of return is phenomenal, on a meagerly principal investment of only $1,000 it's not going to bring about early retirement. Additionally, I am well aware that I am in a unique position able to hock my wares leveraging Davis and the internet to realize this 72% rate of return. But eccentric as my investment strategy is, there are lessons for your everyday Joe when it comes to investing. Lessons you may want to heed.
First, the market is so overvalued for anybody looking into government sponsored retirement plans it's just not worth it. For the past four decades trillions of dollars in retirement money has been flooding the stock market driving up prices WELL above what the earnings and dividends warrant. You throw in the added 2-4 trillion dollars recently in QE money and ZIRP-financed corporate buybacks, and the stock markets no longer reflect an investment opportunity, but irrelevant numbers that speak more to inflation, government policy, and central banking policy than earnings, profits, dividends, and future growth.
Second, this then forces the SAVVY investor (ie-one who looks at rates of return and not just “super happy funny magic capital gains on paper”) to look at alternative investments. Ones that provide higher rates of return and compel you to part with your money. But since the public markets are horrendously overvalued, it is the private markets we must look at.
Peer to peer lending.
Lending money to friends.
Investing in a small business.
Taking a crack at entrepreneurship yourself.
Hiring out the Davis Aurini's of the world.
And other forms of “micro-equity investing.”
This isn't to say these investments are not without risk, or that you wouldn't risk straining and alienating friendships violating Shakespeare's “neither a lender nor a borrower be.” But the public markets are so overvalued that the only real investments that are worth a damn are these private, micro-equity, entrepreneurial type investments.
Third, these returns are typically so much higher than the rates of return you realize in public investments that they more than pay for the tax benefits you passed up on in 401k's, IRA's, etc.
You didn't get to write off your IRA contribution at the tax rate of 20%?
Good thing that small, private investment pays 30%.
That Roth IRA would have grown tax free at a whopping annual rate of 8%?
Good thing your private investment grows at 20% more than offsetting any capital gains tax you'd have to pay.
Admittedly, there is no guarantee that your private investments will more than compensate for the opportunity costs of tax benefits that come with government endorsed retirement plans, but the difference between returns can be that wide.
Fourth, as I mentioned before, control.
I can't go to Apple's corporate headquarters and talk to their limp-wristed CEO.
You can't go to Starbucks and chat with their American-hating, leftist CEO.
And neither of us have the connections nor the money to vote in even ONE member of the board of directors to reflect our interests.
However, if I lend money to my friend to purchase a rental property, I can put it in the contract that I have significant say and control over the management of that property.
If you invest in the horse farm down the road (though I'd advise against that), you can stop in and check in on the employees to ensure they're doing whatever it is that makes horse farms profitable (glue).
And if we pay Davis to record audio books for us, and instead find out he's blown it all on Weasel Whiskey, we can both go down there and bash his knee caps in.
Again, when you “invest” in a modern day, publicly traded corporation, you are merely casting your financial fates to the wind. Micro-investments you can wield considerable control over.
Fifth, the risk of confiscation.
All the government has to do is flip a switch and your 401k, IRA, Roth or not, is now part of Obama's or Trudeau's “Wealth Equalization Happy Bunnies Act.” All those digital records of you having that hard-saved $540,000 in your RRSP is “poof!” gone, or (a la Cyprus) 50% of what it used to be. And the reason why is because it's so easy since it's nothing but digital and electronic records.
But a duplex you've gone halvsies in with your buddy is NOT a digital record the government can just “take.”
Those silver coins are not the “Silver ETF” the government just took 25% of, but physical silver coins that are in your physical possession.
And that book deal Davis and I signed is not sitting on some broker's account where the SIPC can just come in and nationalize 75% of. It's an accord between me and Davis.
Admittedly, these investments are not as liquid as say the easily-confiscatable stocks, bonds and other publicly traded securities, but you never invested in them for their liquidation. You invested in them for their RATES OF RETURN. Which leads us to the final point,
Sixth, you are actually INVESTING.
Understand that buying stocks, bonds, mutual funds, etc, in your IRA or 401k is NOT investing. The “investment” happened long ago when those companies issued the original shares or stock or bonds, took the proceeds and then invested that in property, plant, or equipment. After that it is nothing more than secondary “investors” trading very expensive baseball cards in the forms of stocks, bonds, and mutual funds. You buying your “Vanguard Index Fund” from somebody else on the NYSE does NOTHING to increase the amount of investment in the country. You merely traded cash for stocks and they, stocks for cash.
In other words, the rate of return is going to remain the same. The company will still be just as profitable and pay the exact same amount of dividends regardless of how many times you exchange your
Contrast that with investing personally in either entrepreneurial ventures, micro-equity investments, peer-to-peer lending, etc., where that transaction ACTUALLY IS INVESTING, not only providing you a rate of return, but creating something of value, not to mention, likely hiring people in the process.
Again, I admit that not everybody is going to have an entrepreneurial idea at their doorstep, waiting to be financed, that provides a 72% rate of return. And I know it would take multiple of these micro-equity investments to compile an adequate portfolio that would support a retirement. And I also am aware that managing all these investments will take time and labor, unlike the convenience of merely setting your monthly auto-pay to mindlessly invest in the S&P 500 Index fund in your 401k. But here's a dirty little secret…
That's what investing has always been.
Financing individuals who had great ideas or were reliable risks you would personally lend to. Not this mindless zombie 401k clergy BS that the sheeple are sucking down whole, flooding the stock market with trillions in IRA monies because “retirement.”
So if you want to continue on, worrying about how you're “only getting 1.3% in your CD's” or “Oh nosies! The Fed raised interest rates by .0000005% and the markets crashed!”
But if you want to invest, may I suggest my good friend Davis Aurini?