It is great to be back home for a few weeks before my next adventure (that would be the upcoming Casey Conference in lovely Carlsbad, CA… I hope to see you there!).   🙂

You may have noticed a change in my posting schedule recently…I used to post faithfully every Monday, Wednesday, and Friday, and then switched to Tuesday, Wednesday, and Friday to see how that worked (that was fine, too).

Last week and this week I have posted only twice (Wednesday and Friday), and in all honesty I will be sticking with that schedule for the next several months, although the days will most likely change to Tuesday and Friday.

But I promise you I am not slacking…not in the slightest!

On the contrary, I have been busier than ever creating a real live Kung Fu Finance “product” for you that I hope will help answer all of the questions I receive from you on a daily basis and will truly help you achieve what you are here for in the first place — financial independence.

That’s something I simply cannot help you do all by myself (hence my mysterious visit to Stowe, VT…more on that forthcoming!) and something I can only do in a limited fashion by writing 2 or 3 free articles per week (although I give it my very best shot!). But to truly achieve financial independence and learn all you need to learn, I’ve got to deliver a lot more value to you.

And in order to do that, I need a bit more time in my week to do so!

So hence the new schedule…I’m not going anywhere…on the contrary I’m working harder than ever and ramping up to hopefully deliver you something that will truly help you attain all of your financial dreams, just like I promised you when I started this website almost a year ago!

I’m going to jump into this week’s questions, but first, I want to show you something super-cool that I found this past weekend…check it out!

What is that, you ask?

That is a new super-awesome looking game for the xBox/Kinect called Kung Fu Superstar! A new dear friend of mine has gotten me completely hooked on Kinect (yes, I realize that is “so 2010” but hey, I live under a rock…) and I am so excited to get this game — it’s not out yet, but when it is, watch out…I intend to be kicking ass all over the place!  (Kung Fu Superstar: Become the fighter, become the legend.) AWESOME.

Will you join me? We can play multi-player online, LOL!

Seriously, so far I love my Kinect…I am hooked (and not on the dance-y games I thought I would like, but on the fighting games…too much fun!).

Now onto this week’s questions!

First, Mark asks,

Dear Kung Fu Girl,

When Pandora played “Hotel California” shortly after reading your column, I knew it was time to ask a few questions:

If one believes the current fractional reserve banking system is corrupt, how can one justify using it for personal gain by buying investment real estate? It seems that would be buying into the system and exploiting it. Your thoughts?

Absolutely, I’m happy to give you my take.

However, I should warn you, in general I don’t consider myself a terribly deep, philosophical person…I try to do my best, do what I say I will do, help others when I can, be a good friend, and live a good life, but at the end of the day, that’s pretty much it…I don’t spend a lot of time analyzing “why” I do the things I do — I’m content with looking in the mirror and being happy with what I see there each day (and my definition of happiness might not match yours or someone else’s).

But with that giant caveat in place, here’s what I think.   🙂

I believe in personal freedom first and foremost. You, as a human being on this planet, have a right to be free (or at least you should have that right) and to live your life largely as you choose, so long as you don’t harm others.

I also believe strongly in the “serenity prayer”:

“God (Universe, Buddha, Allah, etc…) grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.”

This guides me in many aspects of my life. When I focus on the things I do have control over and can change (namely, my own behavior and actions) I find I am a much happier (and more successful) person.

And this brings me back to your question…you need to decide what you are comfortable with as a person and as an investor and whether you will be able to wake up every day, look at yourself in the mirror, and feel good about who you see looking back at you.

For me, I have decided that I have exactly zero control over our fractional reserve banking system. I could dedicate the rest of my life to trying to change that system and fail utterly.

Heck, if Ron Paul can’t do it as a well-known U.S. Senator and presidential candidate, what possible chance do I stand in changing the system?

To me, it makes more sense to work within the boundaries of what I’ve got…which unfortunately, is a crappy fractional reserve banking system. But since I can’t change it, I may as well learn to use it to my advantage, or at least do the best I can to maximize my personal freedom within the system that we have.

(And it’s not as if we have a lot of alternative choices in that regard…every country on the planet uses that system, so it’s not a simple matter of “voting with your feet”, as you can do with some unpalatable choices.)

But at the end of the day, it’s really up to you and YOUR conscience. Many people, for example, will not invest in Philip Morris stock because they feel that cigarette smoking is abysmal and terrible and a killer and all of those awful things. Others, though, have no problem investing in cigarette company stocks because they have no issue with smoking and feel they should have the right to smoke if they choose.

Ditto with other controversial companies like Monsanto, or mining companies (what about the environmental impact?) or companies that are alleged to employ slave labor in third-world countries…some investors ask themselves, “how could you possibly support a company that does that???”.

There are so many ethical issues out there and so many moral dilemmas just waiting for you to trip over, and I don’t know about you, but for me the older I get the more “grey areas” I continue to discover, even within my “black-and-white” staunchest beliefs.  (I’m nothing if not open-minded!)

So to answer your question, it is most certainly up to you. If you choose to not support the fractional reserve banking system, you will definitely find supporters and people who greatly admire your ethical code (although I would put forth that you might have a hard time simply existing, as you use the fractional reserve system anytime you spend or save or invest or use any currency on earth, so it’s a bit tough to avoid!).

Likewise, if you choose to take out a loan to buy an investment property, you will also find supporters and people who admire your initiative and gumption and willingness to live life on your terms, not those of your government or your central banking system. Some people will rally behind you and say, “look what a wonderful and free life he has created for himself!” Others will not.

What I am trying to say (and probably poorly, as it is now Friday evening and I’ve had a glass of wine…) is that it doesn’t matter what I or others think, although I’m flattered that you asked for my thoughts…it really only matters what YOU think, because you are the one who has to live with yourself every day.

For me? I feel exactly zero guilt taking out a loan on our fractional reserve banking system and using it to fund an investment property to hopefully add to my and my family’s personal freedom. I am reminded of the saying, “I don’t make the rules, I just play by them.”

But I can’t say that in every circumstance…for example I would never fund a company that sold slaves or did something I found appalling even if I made a tremendous return doing so, because that would completely violate my moral code.

But taking out loans to buy investment properties? I have exactly zero problem with that and will not lose even one wink of sleep over it.   🙂  (But as they say, YMMV…your mileage may vary!)

What is your opinion of using scare tactics to gain attention in the alternative investment arena?

I don’t like it.

My husband, Kung Fu Guy, calls it “FUD”…spreading “Fear, Uncertainty, and Doubt”. I am absolutely against this as a “tactic”…I don’t believe in frightening people into doing anything. We don’t even threaten the Kung Fu Kids! I am 100% against that.

However, many people in the “prepper” industry are not really using fear as a “tactic” (although some certainly do) — they are genuinely concerned that some extreme social unrest could occur, or that martial law could be imposed, or all of their assets seized, or something equally atrocious. When people honestly express their beliefs and don’t attempt to “scare” people into submission, I have no problem with it.

For me, I believe in being prepared…I certainly hope that Armageddon never arrives (!), but on the off chance it does, I try to be prepared to the best of my ability (without going overboard…and again, that’s a very personal decision — what’s “overboard” to you might be completely negligent to someone else!).

Your missives always contain straightforward and honest information without any commercial taint. Do you plan to “commercialize” your offerings at some point?

Thank you! Yes, I actually do! But probably not in the way you think, and I’m not going to just start hawking stuff for the sake of making money (“Get your Bruce Lee key chains here!”) LOL. I would, however, love to create more value for subscribers as I mentioned above and I hope to do so, and the market (that would be you…) will then tell me if it is “worth it” or not! (I fervently hope it is, as I am putting a LOT of work into it!)

Thanks for all the heartfelt hard work.
Mark

Thank you Mark, these are some of the most interesting questions I’ve received since starting this website almost a year ago! Thanks very much, and I hope I answered your questions.

Next, I have an update on a question about the HAA and “checkbook IRA’s” from Gary:

Your Hard Asset Alliance looks very interesting, and Kent tells me he is very interested, but we are concerned that it’s not a valid way of storing assets held in our IRA LLCs, which there are very specific rules for the vault that gold can be held in, and who the actual custodian is. I wonder if any of the alliance partners know about this?

I am pleased to confirm that the answer is now YES, you MAY use the HAA with your “checkbook” IRA LLC. I’ve received confirmation from the head of the HAA and from Gold Bullion International who provides the underlying trading system.

Just be sure you know and understand the tax laws and implications…for example, bullion to be stored in IRA’s must meet certain criteria in order to be “acceptable” to the IRS…choose the “wrong” type and they will consider that a “disqualifying event” and will consider your ENTIRE IRA “distributed” (costing you heavy penalties and taxes) in the year you make the error, even if it was 10 years past (you’ll owe 10 years’ worth of back taxes and penalties…ouch!).

Only specific US gold, silver and platinum coins are allowed, such as US Gold and Silver Eagles, along with other bullion coins that meet specific fineness standards (.999 pure) such as the Canadian Maple Leaf. Numismatics and coins certified for grade or items that carry a numismatic premium are not allowed, so check with your tax advisor before purchasing gold/silver for your IRA.

We have 1000-oz. silver bars and U.S. gold eagle coins in ours, and those are both acceptable. Good luck!

Here is the HAA link one more time if you need it.

I also heard back from Doug Clayton re: this question from Joey,

Great summary Susan! I am looking to hopefully start coming to these conferences soon and start mingling with like-minded individuals and investors.

Just a quick question, do you know what’s the minimum amount needed to invest in Doug Clayton’s Fund/private placements? It looks extremely interesting with the frontier markets in it.

Doug says, “Hi Susan,

Nice to meet you in Vancouver, and thanks for the nice mention.

We can only take Accredited investors and generally our minimums are $100,000. We also have a backdoor way for non-US Accredited investors to enter with smaller amounts into our Cambodia fund, through secondary trading, but not for US investors, unfortunately.

Potential investors can write to info@leopardcapital.com, and our marketing manager will reply.”

Next, Nick asks,

I agree with shorting bonds. What do you think is the best way to apply this view?

There are many, many ways you could do this, but probably the easiest way if you are comfortable with short selling is to sell the TLT ETF short. The TLT is the iShares Barclays 20+ Year Treasury Bond Fund that holds 20-year-plus U.S. Treasury bonds. The longer the duration of the bond ETF, the more the ETF will rise or fall in value when interest rates change, because the duration measures the sensitivity of a bond’s price to a move in interest rates.

So, if a bond has a duration of 10 and interest rates move up by 1%, the bond’s value will fall by 10%. The farther a bond’s maturity date is in the future, the higher its duration. By buying an ETF with a very high duration, you will not need leverage to turn a modest interest rate move into a big profit or loss.

However, if you want to use leverage, there are a few ways to do it, including leveraged ETF’s, but I have had abysmal experience with those in the past—they simply do not do what they have promised to do!

I can do a full-length article on this soon…there are many ways to do this, much more to explain, and much to watch out for!

Hi Kung Fu Girl!

I have a question; with the real estate market collapse, the economy going the way it is right now, and the ‘possibility’ of the dollar collapsing…I’ve been looking into precious metals (have bought some), and want to know more about foreign currency investing. Do you have any advice for me on this? Or how to get started?

Thanks! Love your site!
NP

Hi NP, thank you for your kind words! For foreign currency investing, you can look in three main areas: Everbank (where I would recommend starting if you’re new to it), ETF’s, or Forex (which is highly leveraged…I would only go here after you’ve been studiously following currencies and their movements for a long period of time).

Everbank is a great place to start your research. They have simple instruments like CD’s that you can hold in various currencies, where you will make the stated interest rate plus or minus the currency differential. They also have a nice “education” start page where you can find out some good information on each currency…for example, you can find out all about the Singapore dollar at:

https://www.everbank.com/personal/singapore-dollar.aspx

From there you can look at historical exchange rates, their economy, risks, strengths, etc…it’s a nice overview. You can also subscribe to Chuck Butler’s Daily Pfennig newsletter (it’s free) — he does a currency market update at the crack of dawn each morning and if you are interested in learning about currencies you will learn a lot!

I would start there, and then you can dip your toes into ETF’s and Forex later….good luck!

“The Truth” asks,

Hi Susan, long time reader and big fan.

I’m starting to believe in a very, very contrarian view right now. Yes, even the contrarians will think I’m absolutely crazy, which makes me think this has merit.

Truthfully, reading the news, listening to the presidential campaigns, the forecasts from all the major institutional investors… Is. Flat. Out. Negative.

A depression, deflation, financial collapse, et al, is the common lexicon today. These terms would be though as lunacy 10 years ago.

Well, fast forward 10 years from now, what if I state an opinion today that sounds like lunacy today: we are at the beginning of a restarted boom of historic proportions, with technology advancing, a lesser government trend, and unions losing power. Now, campaigns are geared toward managing budgets, and consumers are deleveraging which will be so bullish for the future. A golden era of prosperity is dawning, and I am a true contrarian for believing this…rather than refuting Dow 13k as bunk.

This will (sadly) hurt many, many people’s secret and naturally human instinct that the downfall is near, and that’s why I love it.

Hi Truth, I love your contrarian view. I actually completely agree with it, although I think there is a high probability that we are going to get squeezed painfully through the eye of a needle first before arriving at advanced technology and lesser government. But I absolutely believe (and hope!) that the scenario you present is our future.

It’s just a bit of semantics…when you say “campaigns are geared toward managing budgets” I believe it’s “campaigns are geared towards marketing that they are managing budgets” (e.g. all sizzle, no steak). As far as consumers deleveraging, I am anxious to get the latest statistics from the smart people at the upcoming Casey conference and will let you know the numbers of whether this is true or an illusion!

But good for you for being a contrarian (and again, I actually agree….but I think it will be a painful process unfortunately to get there!).

But you never know…Porter Stansberry’s thesis could be correct and we could grow our way out of this mess by becoming the world’s largest energy exporter. (I’m not quite there yet!) In either case, though, I do believe and hope that in 10 years our future is just as you say.

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That’s it for this week…many more questions and I am working on an FAQ to answer the most common ones.

I hope you have a fabulous weekend, and go out and kick some kung fu booty!

To your financial success,

— Kung Fu Girl