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Protecting Your Financial Assets
by Richard O. Aichele
The November 2011 Standard and Poor's Case-Shiller National Home Price Index "recorded a 3.9% decline in the third quarter over the third quarter of 2010." Possibly seeing a bottom in the market prices of single family house, it noted that "over the last year home prices in most cities drifted lower. The plunging collapse of prices seen in 2007-2009 seems to be behind us. Any chance of sustained recovery will probably need a stronger economy." Read the reference article
Other news from Florida concurred that the real estate recovery is still weak. "Florida is another foreclosure-studded state where home prices continue to get hammered." It cited Orlando's home prices losing 11% this year "with 9.4% predicted in months to come." Yesterday's hope for the builders of unsold houses was the "anticipated deluge of Baby Boomer snowbirds that, thanks to the current economy, have yet to retire." The bottom line, the article noted is that "we have large numbers of homes sitting empty…causing prices to fall." Read the reference article
For many Americans, real estate in the form of their home has been their primary long term financial investment. Traditionally it had gained value slowly but steadily keeping ahead of the monthly mortgage payments including the bank's interest. That ideal scenario crashed in 2007. Rapidly rising real estate prices in the mid-2000 years coupled with heavily promoted home equity loans encouraged home owners to borrow against the higher apparent value of their houses. Those unsustainable higher valuations suddenly began flipping negatively in 2007 creating the housing depression that is now still now underway.
Protecting Investment Assets
Most individual's financial security and investment approaches have been significantly challenged since 2008 by the economic roller coaster to which most folks have been subjected. At its worst, some people have lost their jobs, their homes to foreclosure and their futures. At its best, other people have only lost value in their 401K and other investments without significantly "losing their shirts" to use an old expression. Most people lost enough of their investment assets to seriously threaten their long term financial security.
The challenge of taking control of assets to preserve them requires serious choices. Real estate with up-to-date mortgage payments can still be "under water" if current housing market valuations are less than the amount still owed on the mortgage. Home valuations are also affected by neighborhood trends as with the Florida example noted above. Stocks, bonds and related investments including retirement accounts have all been affected by the general depressed economic conditions.
Recently popular again are hard asset investments such as gold or silver. For some investors, the hard assets have become more appealing than investing in the actual mining companies stocks themselves. Among the options are buying gold bullion, gold coins, silver or stocks in entities that promote investments in gold holdings without the actual transfer of the metal to the investors. A recent article by Agustino Fontevecchia in Forbes Magaizine reported that gold trust investment funds are "actually a lot more complicated than simply allowing investors to 'own' gold. ... The trust seeks to reflect the price performance of gold bullion by holding gold bars and issuing shares backed by their holdings of the precious metal." Refering to one of the precious metal Exchange Traded Funds, the Forbes article referred to a market criticism that, "the whole EFT industry is that it distorts prices in underlying markets by offering 'on-demand liquidity to investors while they are in some cases based on much less liquid underlying assets."
As with other commodities not under an investors or owners direct control, any investments in the actual gold bullion commodity or coins could possibly be an asset immediatey unavailable during serious financial emergencies. The Forbes article noted that investments in ETF's are not the same as owning the physical metal but do eliminate "the underlying costs and logisitical problems" of physical ownership. One reality has been the overall steady rise in gold prices coupled with investors' concerns about inflation and the stability of printed money. Read the reference article
Worldwide, concerns about the value of "money" and inflation continue to stoke the interest in gold the metal, gold the mining option and gold ownship through ETF's. A recent Fobes article noted, "Despite suffering a massive December correction, the underlying fundamentals for gold point to another strong year in 2012. Extraordinarily loose monetary policy in so-called advanced economies, the beginning of anti-cyclical easing and stimulus cycles in emerging economies, and rising central bank demand for the physical metal, particularly from China, should push gold prices higher in 2012, setting the stage for some gold equities to shine." Read the reference article
The possible temporary unavailability of direct access to gold bullion investments concern not only individual investors but also international bankers. In late November, Venezuela announced the start of transferring 160 tons of gold worth $11 Billion dollars out of European bank vaults. The Guardian newspaper in the UK quoted Nelson Merentes, chief of the Venezuela Central Bank, "It's coming to the place it should never have left … the vaults of the Central Bank not the bank of London or the bank of the United States. It's our gold." The article also noted bringing the gold back to Venezuela eliminates the risk of seizure or being frozen while stored in foreign bank vaults due to international political disputes. Read the reference article
Back at home in the U.S., the latest report by the Mortgage Bankers Association noted, "The economy is growing, but it continues to grow at a slower pace than necessary to reduce the unemployment rate. In such an environment, we continue to expect that mortgage rates will rise only gradually over the coming year, and that the housing market will continue its frustratingly slow recovery. GDP growth in the third quarter was faster than anticipated. This growth was driven by consumer spending and business spending on equipment and software. More recent data, including the retail sales report for October showed that consumers continue to increase their spending, although the increase is driven by lower personal saving rate, not higher incomes."
The financial challenges faced by Americans since 2007 continue. The long term causes have been under-reported, generally not fully understood by the public and therefore almost ignored. However, for those individuals following the concept of holistically living better lives, it is likely best understood that economic issues are a one of the five very important Guiding Influences of a successul holistic lifestyle and require attention.
Notice: The information provided in this article is for general information only and does not in any way represent to be professional financial advice. The best personal procedure for individuals is to consult their financial consultants for any and all financial issues.
