“U.S. 801K Plans — double the returns from 401Ks!”

There’s a new teaser going around from a Stansberry newsletter, this time it’s from the 12% Letter by Tom Dyson, and it’s teasing us about a secret retirement plan they call the 801K. They’ve got a special report to send you called How to build a $1,000,000 Retirement with “U.S. 801(k) Plans” … and all you need to do to find out what these 801K plans are is to try a subscription for $99.

So there are two parts to this tease, the way I see it — there’s the actual “801K” concept, and then there are eight individual companies that provide these plans, which Dyson thinks are the best ones to buy.

First, the idea of the 801K:

“These companies encouraged the direct investment by paying out unusually high dividends and designed programs that automatically reinvested the profits. This ensured that ordinary Americans like you and me could start out small, with as little as $25, and quickly accumulate thousands of dollars in savings, without ever investing another penny.”

“But don’t ask your broker or financial advisor about “U.S. 801(k) Plans.” They will try to push you instead into a mutual fund that returns, at best, 10% a year. Remember, brokers can’t collect big fees and commissions with “U.S. 801(k) Plans” because you buy shares directly from the company.”

“Perhaps this is why the government restricts the advertisements of these opportunities. If they didn’t, some brokers might actually go out of business! Like I said, you’re not likely to hear about “U.S. 801(k) Plans” any place else.”

So, you may have figured this out on your own, but 801K plans are simply Dividend Reinvestment Programs (DRIPs). This is a program whereby companies — usually big, stable ones — sell stock directly to shareholders with an agreement for a regular ongoing investment and the reinvestment of all dividends. You invest a set amount, usually every month, not unlike with a mutual fund investment program, and the share price doesn’t matter because they’ll issue partial shares.

Some companies charge a fee for this, some do not, and some even offer a discount for purchase via reinvested dividends … but it is indeed a direct relationship with the company that doesn’t involve a traditional stockbroker. Services like Sharebuilder.com also do this, so you can initiated a DRIP plan even for companies that don’t offer them directly, but they charge either a small commission or a monthly fee.

There is plenty of good basic info on DRIPs out there — including from the Moneypaper, the Motley Fool and others. Most companies require you to be an owner of at least one share listed in your name already, some don’t or will help you to get that share, or there are some “single share” services that will help you to easily buy and get a certificate for a single share. This “single share” business is probably the biggest impediment to DRIP adoption, aside from the fact that you have to have separate plans set up with each company unless you want to join a club or pay for a service that does it for you (and really, it looks like fees for that negate much of the advantage of the DRIP for many stocks).

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But several “801K” companies were teased in this email, too — what are they? More than half of the S&P 500 offer these plans, as do many other companies, so I’m not certain that the clues given here will be enough to smoke out the company names … but we’ll try. Here’s what I know about the first two, I’ll try to get to the other six shortly:

“U.S. 801(k) Plan” Company #1 – This company is a fast-growing restaurant chain. It’s been in business for more than 30 years and operates in more than 20 different countries (and counting). In fact, it’s raised dividends every year but one since 1976, which are rising at more than 30% per year – almost twice as fast as the stock price.”

I thought this might be Wendy’s (WEN), but it hasn’t quite raised dividends every year. The 20+ countries, “more than 30 years” history and the DRIP plan and the rate of increase in share price could, arguably, fit.

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Brinker (EAT) also fits in some areas — they’re in about 23 countries, but haven’t payed a consistent or rising dividend. Most of the other big restaurant chains are either way too big (even Burger King is in 65+ countries), completely North America-based (only a couple foreign locations), or don’t pay dividends, or, and this cuts most of them out, haven’t been around for 30 years.

But, strange as it seems, I’m pretty certain that this one is actually McDonald’s (MCD)

I know Tom Dyson likes McDonald’s as an income play — he previously teased the stock as The World’s #1 Dividend Machine — so I imagine he was being sneaky, it could well be that McDonald’s actually operates restaurants in more than 20 countries, since most of their restaurants (70%+ internationally) are actually franchisor-operated. The other stuff — company history, dividend history, all matches well. It was at the nadir for this company, in 2002, that they cut their dividend for the first time since 1976, and it has since grown significantly, including a $1 dividend back in November. The DRIP info for McDonald’s is here.

“U.S. 801(k) Plan” Company#2 – This New Mexico-based banking company holds $42.5 billion in high quality assets and has delivered consistent dividend income every year for the past 14 years. It currently pays a 10.10% dividend.”

This one is definitely Thornburg Mortgage (TMA) — DRIP plan info here.

Thornburg is a mortgage REIT that specializes in Jumbo adjustable rate mortgages — the theory is that because they’re dealing with big mortgages, the rich people that owe them money are less likely to default than are subprime borrowers. I don’t know whether or not that’s true, but pretty much all the mortgage-related companies are being tarred by the same brush right now, so if you think TMA stands out as better than its compatriots now might be a fine time to look into it.

One nice thing about TMA is that, because they focus on adjustable rate mortgages, they should theoretically be less susceptible to interest rate risk — assuming, of course, that their spread doesn’t go negative, which is always possible in a world where the yield curve can invert (they borrow money, then lend it in the form of mortgages, and they need their ARMs to pay off more than they have to spend to continue borrowing the money).

So … those are the first two candidates for your 801K plan in case you’re interested in DRIP investing. I’ll try to cover the other six as soon as I can … or you can beat me to the punch and tell us all the sleuthed solutions to these over in the Gumshoe Forum.

Want to keep up with the Gumshoe? Click here to subscribe now — free email alerts.

This writeup is a bit old, you can find an updated look at the 801k ads here.


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Anonymous
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Anonymous

Regular brokers also let you participate in DRIPs (I know Schwab and ETrade do). The dividend reinvestments are fee- and commission-free, but you have to pay for your initial purchase and sale. In this respect, they’re probably not for the monthly contributor, but if you can set up a decent initial position AND want to build shares through the DRIP, check out your current broker.

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Jim
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Jim

I also think CLL is a good bet – I bought just under $1.00. It was recommended last fall by an Alberta oil patch legend writing in Investor’s Digest as Wildcat Willy. He’s got a great track record. I scored big on one of his recommendations a few years ago – Duvernay Oil, starting out very much like Connacher. It’s down in the last couple of weeks so I think it’s a good buy again, right now.

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Anonymous
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Anonymous

Here are all the DRIPs companies recommended in the 12% Letter:
NGPC,MCD,TMA,MGU,NLY,TSX:WTE-UN

Anonymous
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Anonymous

There’s been a lot of insider buying on TMA including a 2 million dollar purchase by the CEO.

Gravity Switch
Admin
👍11

I don’t necessarily disagree, though I expect we’ll eventually be using up a lot of the tar sands — but as for timeliness, I’m largely reactive: if the marketers are sending it out and my readers are asking about it, chances are I’ll write about it. That’s often a pretty good contrarian indicator, as the performance of teaser picks in the past has shown, but certainly not always.

One Guy
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One Guy

Thanks for submitting the other DRIP company tickers, saves me a few minutes.

And I note that tons of companies in the real estate finance sector have huge insider buying recently … maybe they see a bottom here that other folks aren’t catching (or maybe they’re wrong). CHC and RAS, which I just sleuthed out today, both have a pattern of insider buying recently too. Wonder what will happen with these.

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Anonymous
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Anonymous

True, the “801k Plans” hype may be only DRIPs (i suspected so before I ran across this site) but the trick is which of the hundreds(?)are the best i.e., get you to the wealthy status the fastest and safest way. If his choices are only 80% correct, its worth the 99 bucks for those who dont/wont do extra research.

Anonymous
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Anonymous

Quote “If someone is paying the money to host a site, pay for Search Engines to ‘Find’ it and to process the resulting enquires from advertising something, they will be the ones making the money”

The examples quoted are not necessarily brokered through this company. The concept could make individuals money although over a longer term than is given the impression of.

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Anonymous
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Anonymous

I was thinking of paying the 99 bucks. He says if you don’t like it he’ll do a pro-rated refund so what the heck!

Travis Johnson, Stock Gumshoe
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StockGumshoe

Interesting to hear about Connacher again — I remember looking at that one three years ago when Tobin Smith was flogging the stock, though at the time oil sands enthusiasm was far higher and the shares were above $3.

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Maya Sophia Uzwyshyn
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Maya Sophia Uzwyshyn

First of all, I want to really thank ‘one guy’ for creating this post and beginning to clear this up a little. All of my coworkers (and my retired father who is in Canada who – I kid you not – forwarded me this email) and everyone was discussing this spam at my place of work trying to figure out whether this was a scam or not! Thank you for the links also to the Motley Fool and other link to explain DRIPS. This again begins to clear some of this up but would investing with these companies directly also… Read more »

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Pete
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Pete

Boaz Is that true?…..Well I'll be a monkey's Uncle LOL. I subscribed to his newsletter but cancelled……..nothing earth shaking there either!

One Guy
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One Guy

Thanks for the comments, Maya. I’m not an investment advisor, so I can’t really answer your questions specifically — but shares bought from a company would not usually be tax deferred like an IRA or 401K (though you pay taxes only on your dividends each year, then on the capital gains only when you sell.) These are generally large, solid, consistently profitable companies with decent and growing dividends — I think most advisors would agree that they are good candidates for DRIP investing, if not necessarily the ideal candidates. I do think Sharebuilder is a pretty good idea for folks… Read more »

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David A
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David A

I keep beating this dead horse. I am a thrilled Stansberry fan. You get what you pay for in research. Not every news letter is for eberyone. I for one, have trashed ALL news letters and rely ONLY on Stansberry investment and of course Gumshoe. Why? I have made a respectable amount of money from the research (Stansberry). Stansberry has the integrity to GRADE themselves each year, and inform everybody how they did within the context of their research. Were they up, down, way up, way down, or did they bomb on the research advice? Who else does that? NOBODY… Read more »

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Maya Sophia Uzwyshyn
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Maya Sophia Uzwyshyn

Wow,thanks for all the great information, one guy. I really appreciate it and I will check out that link!

Anonymous
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Anonymous

DRIP plans have changed a lot over the last 30 years. I think they were originally created to engender customer loyalty, but many companies now consider them a nusience. If you are investing $50 at a time and they change you a $3.00 fee plus $.03 per share plus a 4% fee on reinvested dividends like Wells Fargo does, then you should be looking at other DRIP plans. Some companies like 3M charge no fees and pay all commission costs and sometimes offer discounts on selected products. Bottom line, check the fees and when they go up get out by… Read more »

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Anonymous
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Anonymous

This is in response to Maya asking about Stansberry Research. I’ve been with them for over 4 years through their True Wealth newsletter and also reading their daily email called “Digest” which I find very useful. I think they are one of the best investment newsletters around. They are very responsible and you learn a lot, even if you just subsribe to their digest for free.

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Anonymous
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Anonymous

For you in Canada – CANROYS are great. For we do have some and have good payouts as DRIPS. Thanks – Paul

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shoosh
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shoosh

Try this site out. http://www.stockbny.com you can go on at the top for a list of companies and it breaks them down whether they do direct reinvestment plans etc. I use them to buy GE. It is through the Bank of New York Stock transfer. Good information on there.

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Anonymous
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Anonymous

Thanks for your good service- Standberry and associates are all part of the Ten Headed Hydra known as AGORA– they make outrageous claims many times a day! I may be wrong but Ive never seen a picture of this Porter Stansberry guy–I believe it just to be a NAME..like George Rayburn who also signs a name to the myriad emails I get daily from these people. Agoras Head is a guy named Bill Bonner who writes the Daily Reckoning and many times has referred to the investing public( you and I) The LUMPEN INVESTORATE..he lives abroad and considers us all… Read more »

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Passer by
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Passer by

If you folks are thinking about DRiPs, check out NAIC: http://www.better-investing.org/Public/default.htm . Their principles have stood the test of time and they’ve been around since the early 50’s (I think). I’ve started back in the early 1990’s and am completely satisfied.
They teach one how to evaluate a company based on the facts and figures (as so to speak) and not what some journalist thinks might be hot…

Better Investing:
http://www.better-investing.org/Public/default.htm

todd shriber
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todd shriber

I think it’s right to be skeptical about some of the investing newsletters we all get. However, the 801(k) seems pretty legit. Keep in mind the author overtly says 801(k) is a term he coined because the POTENTIAL exists to double the returns of a 401(k). I’ve seen some other boards with people saying “there’s no such thing in the IRS code as an 801(k).” Duh! As for Thornburg, I could swear they also operate an asset management service, so they’re may not be a pure mortgage play. Check on that though, I could be wrong. At the end of… Read more »

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Gregory Pastik
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Gregory Pastik

Stansberry and Associates certainly are experts at hype in thier marketing effort. But i really do not blame them for this as it is the best way to be able to entice potential subscribers. Overall I believe thier picks do not do any better or worse than the average of the newsletters, and certainly even thier best newsletters have extreme blowups. Which considering sell stops are not alwasy used/advised can destroy a portfolio. But from my perspective, the best reason to purchase these newsletters is not to only get the occasional triple digit winners, but the education you get from… Read more »

Anonymous
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Anonymous

I am a VIP member of three Agora groups: Taipan, Agora Financial and the Oxford Club. Of the three, the Oxford Club has the best record for steady appreciation of capital and good dividends. They are also least inclined to bombard you with sales pitches. The base entry level cost is about the same for each, e.g. $100-$150/yr. VIP lifetime subscriptions are much higher but give you access to all of their publications–and lots of inbox mail. Be sure to ask to be removed from the solicitation emails! I also subscribe to Changewave and Stansberry-Sjuggerud’s True Wealth. Both are good,… Read more »

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bill
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bill

I am a True Wealth (Sjuggerud) subscriber and just love his stuff. Watch out for Thornburg, however, as Stansberry just sent an email about its imminent demise (or at least uncertain future) the other day.

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rhett
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rhett

Mr. Shriber! Shouldn’t it be an “802K” if in fact the reference was to a doubling of a “401k”. Duh.
Rhett

Prevalent Entertainment
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Prevalent Entertainment

If someone can respond to my following question – it would be much appreciated:

How can Tom Dyson claim that the “801K” would earn twice as much as a 401K – isn’t the point of most 401k’s that the company matches there employee’s contribution dollar per doller, or sometimes .75 cents on the dollar. How can a company’s DRIP earn as much if they are not matching your contributions like your employer’s 401k?

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Anonymous
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Anonymous

Well if it is TMA the stock is off 60% recently. Not such a great place to put a large part of your retirement.

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Anonymous
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Anonymous

Does anyone know if Enron had DRIPs? If so they would be a definate model to watch out for!

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Satish
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Satish

How can I get into this DRIP investing or 801(K) plans? I want to have a systematic monthly contribution of say, $100. Please advise

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Charles Cullens
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Do you sell 801K investments?

Jerry Kindall
Guest

Prevalent Entertainment asks –> How can Tom Dyson claim that the “801K” would earn twice as much as a 401K – isn’t the point of most 401k’s that the company matches there employee’s contribution dollar per doller, or sometimes .75 cents on the dollar. Most of the 401(k) plans I personally have had through my employers do not match anywhere near 100% of employee contributions. The one I am currently participating in matches 50% of the first 3% of salary contributed. The one at my previous employer did no matching at all! So if your employer matches 100%, my advice… Read more »

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NewInvestor
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NewInvestor

I’m a recent college grad who recently started working so this 801k would be a good investment for me. How exactly do I get started? Any advice would help.

bsabin
Guest

I work for the McLane Company for 15 years now.
Our 401k has just matched out at 2 to 1.
They actually took last years earnings and matched that 2 to 1 also….that was an extra $5,000 into my 401k plan.
I am wondering if it is possible to actually make a descent monthly income from 801k’s

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G
Guest

Sorry this is not a more meaningful comment but let’s make sure everyone knows there is no such thing as an 801k – Stansberry & Assoc made up the term. They make up terms all of the time. Their 801k is everyone else’s DRiPs (Dividend Reinvestment Plans). Personally, I find it demeaning that they take fairly well known investing concepts (like covered calls) and literally make up names for them (California Overnight Dividends?!?) as if they somehow discovered something brand new or previously kept secret. This makes me believe that their customer base is composed of new and/or naive investors.… Read more »

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Gravity Switch
Admin
👍11

Thanks G — it’s true, the covered call stuff has been going out under both “California Overnight Dividend” and “Transfer Dividend” for the last few months. I’ve put out some notes on both, FYI:
http://www.stockgumshoe.com/2007/09/california-overnight-dividend.html
http://www.stockgumshoe.com/2008/01/jeff-clarks-transfer-dividends.html

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Gravity Switch
Admin
👍11

And bsabin, the idea of the “801k,” if we want to persist in calling DRIP/DSPP plans by that name, is generally not to get income, but to build your capital through low cost dividend reinvestment. Much more of a slow wealth building exercise than an income strategy.

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jason
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jason

the last of the 6 companies is Westshore terminals.

True12%
Guest
True12%

I don’t know about all the investment that’s been marketed here, but I’ve been getting 12% returns on a monthly check for a few years now and never miss a payment yet. It’s a corporate guaranteed commercial REIT notes, 9% double insured through a $60billion dollar insurance company. e-mail me if you’re interested at helloed@gmail.com

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W. Page Hill
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Folks, I am 84, fully invested in equities, and have been for the past few years since I discovered Investors Business Daily….or IBD….the research is all done for you….with graphs, and all the stats you can digest…NYSE stocks are grouped by industry….evern the WSJ doesn`t do this….stocks are rated from 1 to 99 which is the best….Subs is about $300 a year but it is to be seen FREE at your public library… or you can sub it online cheap, or 1 or 2 days a week..it aint a newspaper ……it is a textbook for successful investors….try it, you`ll like… Read more »

UK investor
Guest
UK investor

Hello, can someone advise if I can invest in DRiPS based in UK? or is this something soley for US residents?

New to this
Guest
New to this

I have only recently become interested in investing and do not know where to begin. What is a good way for someone with basic knowledge and limited funds to get started?

Investing for five months now
Guest
Investing for five months now

In response to “New to this”, I was in the same boat as you back in December 2007. I had decided that the only way someone could have become a “dot com millionaire” was to open up a trading account and fund it. I ended up opening up a Scottrade account with a minimum $500 investment and bought two stocks that were recommended in a stock picking membership that I had signed up for. But I only had $675 invested and that wasn’t very exciting. I’ve been with my current company for almost eight years now and had previously been… Read more »

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Investing for five months now
Guest
Investing for five months now

Holy cats! I just looked at the TMA stock. It went from $12.40 on February 27, 2008, to an all-time low of 69 cents on March 10, 2008. If you had invested $10,000 in that stock on February 27th, you would have lost $9,443 in 12 days. No thanks! But I am still curious to read up on the research in the “801(k)” report. I’m going to sleep on this and check out the performance of the other picks before I part with my $49.50 though! This has gone from high urgency to low priority now…

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Mike S.
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Mike S.

I listened to this Stansbury paper and bought Japanese REITS through Everbank over a year ago and it has done nothing!! He said that real estate in Japan was about to explode after so many depressed years. I get my principal back at the very least if the Japanese index declines or doesn’t move forward. I wont be taking his advice again. I think this guys just pulls alot of these ideas out of his butt and works sweetheart deals with certain coin dealers, banks and other co-conspirators.

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Mike S.
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Mike S.

“Investing for 5 Months Now” – Don’t buy gold now. It is too expensive. Buy real estate funds in the good old USA. It is cheap now. I bought some shares in Ishares Tr COHEN&ST Rlty and am up 17% injust a few months.

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Bruce
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Bruce

I subscribed to Agora one time and that was enough. The ‘Oxford Club’ was late to buy and late to sell. They had more lag than a simple moving average crossover on Stocks.com. Bonner even admitted buying his chateau in France without inspecting that it had a roof in some rooms. I find it pretty hard to trust my investments to an eliteist dodo that doesn’t have basic common sense to walk through each room of a place you are buying and see if you can see the sky. (My take is that Agora is a club of middleage smartass… Read more »

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cyhi12664
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cyhi12664

I to have my IRA with scottrade and have had it there for years. I wanted to invest in silver in my IRA and didn’t want the hassel of transfering it to another high priced outfit. So I bought SLV, a silver ETF that per share price closely matches 10 ounces of silver. Cheapest way I saw to fund an IRA with silver.

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MK