Amazing Power

The budget deal is all but done. Woohoo!

Back to spending beyond our means again. Back to buying more iPads. Back to more public work projects.

What a huge relief it is to get that silly spending cap out of the way.

Or… is it?

The deal making its way through congress would provide for an immediate $400 billion increase in the borrowing cap. Then they’ll kick in an additional $500 billion cap increase this fall.

That $900 billion increase in borrowing is supposed to be matched by cuts to agency budgets over the next 10 years. (We’ll believe it when we see it. More on that in a second…)

But first, the deal also creates a “Super Congress” (two words that typically are not found so close together). The do-gooders will appoint six “no-tax-increases-Republicans” and six “no-Medicare-or-Medicaid-entitlement-cuts-Democrats” to this group. Their goal is to find $1.5 trillion in cuts by November.

But what does this plan really accomplish?

Well, despite us waiting for the phone to ring, Congress didn’t seem to ask our opinion. But we’re happy to provide it to you, of course…

Aside from averting an over-due and necessary U.S. default, well… the deal does… NOTHING.

Our so-called “leaders” cut under $1 trillion over ten years. That works out to be about $90 billion per year… while we’re running $1.5 trillion deficits.

And best of all, because of the non-recovery we’ve had, the politicians want to wait until we’re on more stable footing to make any of those cuts. So NOTHING will be done for at least one year.

Laughable, I know.

All that posturing… supposed arguing… back door dealing… for a piddly 5.7% spending cut of this year’s deficit… and not until 2013 at the earliest!

And just for fun, what impact does Moody’s (you know, the rating agency that was so good in correctly forecasting the housing bust) think the deal will have on the U.S. credit rating?

CNBC reports, “the agency was likely to affirm the government’s triple-A rating if it raised the debt ceiling, but it could place a negative outlook on the country if it feels the plan to reduce the deficit doesn’t significantly change the country’s debt situation.”

So, let’s get this straight…

Moody’s plans to affirm the debt rating of a country that just completely admitted that it can’t pay it’s bills (without more borrowing, of course) and just agreed to spend… MORE?

Oh stop it, my ribs hurt!

One thing is clear to me…

Nothing has changed since the fiasco of 2007-2008. Except, of course, for increasing the likelihood and severity of the next recession.

Federal and state debts are climbing. Jobs are disappearing. And any evidence of even meager growth is a result of government intervention and massive misallocation of assets.

And top it all off, the credit rating agencies continue to look the other way.

At some point, however, the music will stop. You can’t forever spend more than you make in your personal life… and neither can the government.

Eventually, creditors will balk – no matter what the rating agencies say.

Eventually, foreign countries and banks will refuse to lend the United States money.

When that happens, no “debt deal” from congress will be able to save you.

Instead, it’ll be just the opposite. Without foreigners lending the United States government money… my guess is that they’ll turn to YOU for the money.

You’ve probably read the news about weird new state fees popping up. From sewage fees, to streetlight fees… even huge hikes in parking fees in state parks, states are already in trouble. And they’re already reaching for your wallet to pay their bills.

But when it really gets nasty will be the day that the feds can’t borrow money.

What happens then?

Consider this…

Americans have some $4 trillion saved in 401K plans and another $8 trillion in IRAs and pension plans, 95% of which are invested in the equity markets, mainly stocks and mutual funds.

If the U.S. government forces investors to invest 50% of their IRAs in government bonds, that would raise $6 trillion.

You may think that the U.S. government would never seize control of a portion of your IRA.

But I’m urging you to think again.

Eight countries have raided retirement plans since 2008, including France, Poland, Ireland, and Hungary.

Could it happen in the U.S.?

Well, that’s what today’s Whiskey shot is all about.

Below Terry Coxon discusses steps you can take to protect your retirement nest egg while giving your retirement a boost.

Amazing Power

By Terry Coxon

Imagine discovering that your dog can fly. As soon as you’d gotten over the surprise, you’d start wondering why you hadn’t noticed years before. Then you’d start thinking about the money you could make with such a talented canine.

That’s the experience I had with IRAs.

IRAs seemed so plain and ordinary. Good to have, comforting at times, but dull, like chicken noodle soup. Nothing special and nothing to get excited about. IRAs ran on AAA batteries and had about as much power… or so I thought.

Then what a surprise! I learned how an IRA can be a powerhouse for accumulating tax-free wealth. I don’t mind admitting I’d been blind to the potential that was right in front of me for so long – I had so much company in not noticing. Even today 67 million Americans have an IRA, but not one in a thousand understands all the good things he can do with it or how powerful it can be for building and protecting wealth.

Here’s a sample of what the rules allow you to do with your IRA (and that most investors haven’t a clue is possible).

Gold. Buy gold coins for your IRA and store them privately at home. You can even hide the coins in a jar of canned peaches and keep them in your refrigerator if you think that’s the safest way to handle them. It’s all within the rules.

Rentals. Your IRA can own an apartment house and be a landlord. And you can be the rent-collector and pick up those checks every month – tax-deferred income for your IRA.

Bigger rentals. Want a bigger apartment house? If you decide the terms are right, your IRA can use mortgage financing for a rental property.

Operating business. Follow the rules carefully and you can run a motel, restaurant, bio-science lab, specialty store or any other business and let your IRA pick up most of the earnings. Running a business is demanding, but the work is a lot more enjoyable when a big chunk of the income is tax deferred – or even tax free.

Foreign real estate. Your IRA can buy an apartment in Buenos Aires or farmland in New Zealand. It’ll be waiting for you if you ever need to go there.

Equipment leasing. Do you have experience selling or servicing heavy equipment, trucks, airplanes, medical equipment or anything else that users often want to lease? Your IRA can be the lessor while you put your knowledge to work helping your IRA earn the lease payments – income for your IRA to add to its growing pile of tax-deferred cash.

Private lending. Your IRA can earn high returns lending money on well-secured first and second mortgages. That’s what the smart banks do, and they collect far more than the sad returns they pay to IRA investors who buy their CDs.

Rehabilitate property. You can buy and manage the rehabilitation of a run-down dwelling, apartment house or office building and let your IRA reap the financial benefit.

Seize bargains. You can show up at foreclosure sales (there are plenty of them these days) and buy property for your IRA at distress prices. You might do the same thing on your own, but you’ll enjoy the profits more if they’re protected from tax by your IRA.

And those are just examples. Whatever investment you’d like to make and whatever business opportunity you’d like to pursue, there is a proper way for your IRA to collect most of the benefit. That means more of your earnings are tax-deferred – and with a Roth IRA the earnings can be tax-free.


Maybe you’re wondering how a secret that big could be a secret at all. The answer is pretty simple.

As a matter of law, an IRA must have a custodian. It’s the custodian that holds legal title to whatever is in your IRA. But the custodian doesn’t have to accept any investment it doesn’t like. It can just say “No.”

Most custodians are attached to a bank, stockbroker, mutual fund complex or insurance company. Not surprisingly, those captive custodians are ready to let your IRA buy whatever the bank, stockbroker, mutual fund complex or insurance company is selling – and nothing else. That’s what keeps the handcuffs on most IRA investors and why most financial institutions like to tell just part of the IRA story. (The rest of the story is in this Report.)

Better Than “Self-Directed”

A sizeable minority of investors have slipped out of the ordinary-IRA handcuffs and moved to a so-called self-directed IRA. They’ve placed their IRA with a custodian that doesn’t sell investments and that will consider accepting any investment.

That’s better than what most IRA investors have, but not nearly as good what you could have.

The key word is consider. With a self-directed IRA, the investor must get the custodian’s approval at each step of every transaction. That means extra work and trouble for the investor. It means delay, which means the risk of missing an opportunity. It also means uncertainty, since the custodian can always say “No, we don’t do that.” And when the custodian of a self-directed IRA finally does sign off on an investment, the starting bell rings for heavy fees that will keep draining the IRA’s value.

The arrangement just isn’t as self-directed as it looks. It would be more accurate to call it a May-I-Please IRA. Or a May-I-Please-Pay-More-Fees IRA.

That’s why I created a report called How to Rescue Your Retirement from Three Dangerous Threats. In it, I reveal a little known IRS loophole that can help you triple the returns in your IRA.

No your dog can’t fly. But your IRA can learn to.

Good luck out there,

Terry Coxon

P.S. If you’d like to take your wealth into your own hands, I invite you to click here. After the jump, you’ll learn…

  • A simple secret that can multiply your IRA’s returns up to tenfold in today’s bull market…
  • How a Special IRA makes more money than a regular IRA that is limited to modest returns from passive investments…
  • How to turn your IRA into a powerhouse for accumulating tax-free wealth…

And much, much more…

Learn how, right here:

The Daily Reckoning