Entrust New Direction Blog

And in financial news from earlier this merry merry month of May, Fox news reported:

"A computerized selloff possibly caused by a simple typographical error triggered one of the most turbulent days in Wall Street history Thursday and sent the Dow Jones industrials to a loss of almost 1,000 points, nearly a tenth of their value, in less than half an hour. It was the biggest drop ever during a trading day."

The biggest drop ever thanks to one fat finger.

You may consider this old news (2 weeks ago is old news now), but the stock market is still where 98% of America's retirement dollars precariously reside, so until either the amount of cash or the amount of precariousness changes, this news won't get old.

Some dude fat-fingered my life savings away.

Let's backtrack for a moment. Fat-finger: When a typist mistakenly types a wrong or additional keystroke, thereby taking down the world's financial markets.

Okay, that last part was my own extrapolation. Anyone who works or plays on computers knows how easy fat-fingering is. Whether your fingers are, in reality, quite lithe, is irrelevant. The fact is, mistakes happen. Fat-fingering happens.

It happens so often, we have internet memes and cliches based on fat-fingering. Who hasn't typed teh when they meant to type the?

But when your retirement money is self-directed, YOU can catch the fat-fingering on a contract or other document. YOU decide whether to spend YOUR retirement money on whatever YOU choose in whatever amount YOU choose. YOU tell us if, when, and how you want to invest in your real estate IRA investment or your HSA gold investment or your whatever alternative investment. We do what YOU tell us. You are not dependent on a stranger a thousand miles away who doesn't care (or know) as much as you do. You only rely on YOURSELF.

Even though this specific day's disastrous plunge was supposedly not a fat finger, according to the SEC, this is a realistic, even likely possibility. People make mistakes, and in this era of huge numbers and speed-of-light transactions, wouldn't you rather make your own mistakes, with pen and paper? I know I would.

This most recent stock market plunge is yet another reason why I'm glad I have my retirement money in a real estate IRA investment and a gold investment. Find out how to move your retirement money to a self-directed retirement account and start making your own success (and your own mistakes). And please, if friends or family are still under the shadow of a potential fat-finger disaster, let them know they have another option.

It's not news that banks these days are about as popular as a thundercloud at a solar car race. And why should banks be popular now (or ever)? The one good thing banks ever did for the regular Joe and Jolene was loan money. When you wanted a new car but couldn't afford it, or a bigger barn for your dairy cattle, or a new addition for the new addition in the family, or, these days, a home of your own at all, detached or not - the bank lent you the money, with interest. I always thought that this was how banks made their money. Boy was I wrong.

How Banks Make (Made) Money

Sure, banks may take some interest money in, but their major source of revenue is investment. You've heard the adage, "It takes money to make money". Well, banks had money, all right - our money. And they made money on all sorts of investments that may have been listed grade A, but clearly were grade F or G. In meat quality grading terms, you wouldn't feed that to the racoons (unless you really don't like racoons).

The Credit Snipe

Now, when banks could be making interest money on business, home and car loans, they're too scared to provide credit. This is where you and your self-directed IRA fly into the scene, your cape waving in the wind, a big blue B on your chest.

Your self-directed IRA can save the day! Three scenarios where your retirement fund can be a better bank.

1)After a close loss, the first baseman from your softball team confides that he's paying 15% interest on his Giganto TV loan. Happily, you confide in him that you can pay off his loan and lower his payments. Your IRA will earn 10% interest tax-deferred or tax-free.

2)Your next door neighbor was trying to get ahead of the game with fix 'n' flips, but his last fixer-upper didn't flip. He tells you that he doesn't want to foreclose and he can't rent it for as much as he needs. What he needs is a bridge loan from your IRA, just until the housing market picks up a bit. He's happy to pay less than his current ballon loan, and you're happy that your IRA will earn 8% returns.

3) The sweet older lady who owns your neighborhood craft shop confides in you that The Kraft Nook may not be providing knitting needles and painted pine cones for long. Why? Her business relies on monthly loans so her shelves can be full of popular hobby helpers, but not brimming with the flourescent orange yarn that nobody wants. Your IRA can save the day.

Think about who you know and what they're paying interest on.  Most likely, you know someone who needs your IRA to be a better bank. 

Learn more by registering for these free webinars, Learn the Secrets the Bank Doesn't Want You to Know From a 15 Year Veteran and Overcoming the Top 5 Fears of Private Lending.

The Atlantic Monthly's Jeffrey Goldberg wrote an article this month exploring his options as a small-time retirement investor, "Why I Fired My Broker". He fired his broker, it turns out, because his broker never called him back. Fine reason, if you ask me. But he has many more reasons why everyone should fire their broker.

1. Your broker likely doesn't want you as a client.

Goldberg asked Larry Gellman, a very successful financial advisor, who described a dire situation for anyone with under $10 million to invest. Gellman said, "People like you are in a sort of purgatory because no one would ever come out and tell you that he doesn't want your business anymore. You had to figure that out by yourself."

Goldberg also asked Robert Soros (George's son and deputy chairman of the Soros fund) about his unresponsive financial advisor. Soros reports, "They were never your advisers. Do not for a moment think that a brokerage firm is your friend."

Ouch. (If your broker actually is your friend, maybe you could take him or her out to lunch. Be gentle.)

2.Your broker probably doesn't think you can make your money back.

Goldberg translates a video by Merril Lynch's top investment strategist: "You’re not going to make money on your investments in the next 10 years, or 15, or 20, so you should stop worrying about your portfolio and go to the movies like everyone else."

Of course, not everyone feels this way, especially if they have money in the stock market, but no one can predict how many years you'll need to regain the lost ground. If you've seen 20,30 or 40% loss in a matter of one or two years, do you have the patience to wait for another 10, 15, 20 years?

3. Your broker won't allow you to buy real estate.

At a cocktail party, Goldberg asks another successful investor about advice for the little guy. Bill Ackman said, in part, "Buy a house. I think it’s a great time to buy a house.... It’s one of the best investments you could make."

As we all know, real estate is pretty cheap right now. Loans are hard to find, and more and more Americans have to rent. Your IRA can be the landlord and your IRA can sell the real estate when you decide to sell, not when your broker recommends selling.

4. You can't get a loan on stocks and bonds.

Your broker can't direct you to a bank which will lend your IRA money to double your buying power. Such banks do not exist. Banks in general have not exhibited good judgement lately, but a non-recourse loan is always a good decision for the bank and an excellent decision for your retirement.

5.Your broker earns a commission on what you buy.

Many brokerage firms have products they call self-directed, but the only choice you have is among their products. Not much of a choice, if you're not a stock broker.

6. Your broker likely earns a commission on your transactions, motivating him or her to promote transactions.

Yes, if you pay excellent attention to the market, know the companies and the "rules", and wish to gamble on the uncontrolled activity, of course you should buy and sell frequently. But I prefer blackjack.

It's not your broker's fault. If your broker does call you back, tell them about self-directed IRAs. We'd be glad to get them started in a new direction.