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12.3.2014 Financial Intelligence Report Bookmark

Retirement Talks

For the past few issues I’ve been talking about the things one could do to secure themselves a retirement, so they don’t have to be a greeter at Wal-mart when they’re 75 years old. But it isn’t just “one thing” so to speak, it’s a multi-pronged fork that you need to secure your future. So far we’ve covered such things as buying a “working class” house and renting it out. Not for income, and not to flip, but just so that you have an asset that someone else pays for. Then at the end of the mortgage you have something free and clear you can sell or live in.

We also talked about online investing. The point being that “just having a job” is not enough. The job pays your rent, your food, your insurances, your cars, etc.  But you need something on top of that to use as “savings”. Whether it’s doing side jobs or what have you, we presented the case that if you get a good “market” education, there’s very few things you can do that can make you the kind of money that online investing does, with virtually no manual labor.

Retirement Talks

For the past few issues I’ve been talking about the things one could do to secure themselves a retirement, so they don’t have to be a greeter at Wal-mart when they’re 75 years old. But it isn’t just “one thing” so to speak, it’s a multi-pronged fork that you need to secure your future. So far we’ve covered such things as buying a “working class” house and renting it out. Not for income, and not to flip, but just so that you have an asset that someone else pays for. Then at the end of the mortgage you have something free and clear you can sell or live in.

We also talked about online investing. The point being that “just having a job” is not enough. The job pays your rent, your food, your insurances, your cars, etc.  But you need something on top of that to use as “savings”. Whether it’s doing side jobs or what have you, we presented the case that if you get a good “market” education, there’s very few things you can do that can make you the kind of money that online investing does, with virtually no manual labor.

The question becomes this….Let’s say you have a decent job. You’re not getting rich but between the spouse and yourself you’re taking in 100K a year. Great! But in this day and age, after the food, and kids, and insurance, and clothes, etc, there really doesn’t seem to be that much left at the end of the month. So, you learn how to properly invest/trade the markets. What do you do with the money you make?

Some will say “just keep rolling it over and buying bigger positions to make more money”. That’s fine up to a point, but there’s always the chance of that “Black swan” event, the “out of left field” disaster that completely wipes out your trading account.  Nothing stinks more than having a thousand shares of XYZ and waking up to find out that the company was really a modern day “Enron” and your one thousand shares are now worth 50% less than they were yesterday. So, one of the things I preach to folks is DO NOT PUT ALL YOUR MONEY IN THE MARKET.  

Even in something as brainless and useless as a 401K, it should not be 100% invested all the time.  Leave 15% in “cash” ( money market) and 10% in a bond fund.  What I try and do personally is this…I figure out how much profit I’ve made on a monthly basis, figure out the tax bite, and the remainder I split 50/50.  I leave 50% in to “grow” bigger positions and I take the other 50% out.

The question is… what the hell do you do with it? Is there ANYTHING in this world that has no risk? Frankly the answer is no. Try and show me just one thing that you can invest in that has no possibility of going down, and still gives you some return. I’m afraid you cannot. Thus the next best thing you can do is say “okay, I don’t care about the return ON the money, what can I do where I can at least expect to get a return OF my money?”  

Even that is problematic. There are VERY few things that have consistently been so solid that your chances of losing money is nil. I mention farm land, as it has been a solid performer for a long time, but even that depends on when you purchase it. If you bought 1K acres of good Iowa farm land in 1960, well sure, you’re sitting on a virtual gold mine. But as inflation has pushed the price up into the stratosphere, can you say with impunity that you can buy that land today and not have it fall in value? No, you cannot.

Just like they said about Japan in the 80’s as the mantra was that “it’s an island, they don’t make any more land here, Real estate can never go down” we found out that indeed it could go down. A lot. Like 45% from the highs. Or consider housing in 2004 -2006. Everyone was convinced it would never stop, and people were lining up to pay 800K for a house worth 200K. History shows that indeed it can go down.

So realistically there’s nothing so absolutely solid that there’s no chance of it falling. Even if you just put your cash in a lockbox under the bed, it is going to lose 2 – 3% of its value via inflation. How disgusting is that? Very.

Thus, all we can do is “put” our money in areas where it makes sense that it should be safe.  As you might imagine, I will toss gold and silver into that mix. Now, don’t think I am ignorant of the fact that gold has fallen from 1900 to 1200 the ounce. I know that very well. I also know that Silver should be 40, not 16. I get it. I also “know” that it could fall more.

I didn’t think it was wise buying gold over 1500 and I made that very clear. As it was roaring higher in 2010 – 2011 I told everyone on these pages, that if it gets over 1500 it’s in a bubble. Yet folks continued to buy at 16, 17 , and 1800. So yes I feel your pain. You’re well underwater.

But what about now? Is gold and silver “safe?”   After being attacked for years, and beaten senseless, is it okay to buy it here? That depends on your reason for buying it. I have said a thousand times till you’re sick of hearing it, we don’t buy gold or silver to “make” money, we buy it to try and protect our buying power.  If I buy 20 ounces of gold today, and 10 years from now all it has done is gain a couple percent a year to offset some inflation, I’m okay with that.

While I still absolutely believe we’re going to see 3500 dollar gold and 70 dollar silver, if that happens I’ll take it as a Gift from God. But again, even if it doesn’t reach those levels and just offsets inflation, that’s fine. Again, we’re looking for a return OF our savings, not necessarily a return ON them. (although that would be sweet)

Unless you’ve been living under a rock for the last 4 years, you know that the Central banks along with the Exchange Stabilization fund, have colluded to keep a lid on Gold. Part of it was to try and keep the Petro-dollar in place with little competition. Part of it was to allow China a way to get physical gold without dumping treasuries on the market. Then of course there’s always the desperation side of the equation, where countries have sold their gold for fast money.

I am not a lunatic gold bug. The reasons I think gold and silver are good investment vehicles at these prices is the same as why I thought gold was a good investment in 2000. The Government is allowing the Central banks to destroy our currency. But it certainly isn’t just us. Look at Japan. They’re “all in” concerning destroying their own currency.  Which brings up the simple question…once all currencies are destroyed, what has value?

Some will say bitcoin. Okay, I’d like to agree with that, but I have one major problem with it. You need an internet to make it work and don’t for a moment think the US or Europe is beneath turning it off if they need to. In some Asian and Middle East countries you can be jailed for just making comments online. Do you suppose that if Bitcoin got too big for its britches they might shut that down too? You bet they can.

I’m still under the belief that the IMF is going to try and save the world via a currency reset and issuing SDR’s. But an SDR is simply another fiat currency, UNLESS the members that make up the SDR basket have a currency backed by something. In the case of China, Russia, India, and others, that backing appears to be gold. Every nation with a firing brain cell wants desperately to get away from the US dollar, and they’re amassing gold along the way.

So I think the case for being “okay” in gold is that the dollar’s days are numbered, and we see a very concrete push for amassing the metal by foreign sovereigns. The case for Silver is probably much more concrete. Silver gets used up in electronics, space, solar, the medical field, etc. Our supply of it gets smaller each year, while demand on both the manufacturing side and investment side continue to scream higher.

I said a few weeks back “I was dead wrong” about gold and silver. Not the idea that they couldn’t beat it down, I’d seen that movie before. What I was wrong about was the length of time they could continue to keep it down.  I absolutely expected them to lose control over it and both would be significantly higher by now. So I have to give them Kudo’s for doing a great job of manipulating.

But it won’t last for ever. How do I know? Well one is that nothing does. That’s in the bag. Secondly, there’s going to come a time when all the physical is gone at these prices. This is a fact folks, not some hype and hope. At some point, there’s not going to be any physical metal left that folks will relinquish at these prices. When is that? I don’t know, but the system is creaking and groaning daily.

If you’ve got a decent job, bought a home to rent out long term, learned how to take some money out of Wall Street and bought some gold and silver, you are in a better position than 80% of the population. Just remember this, it isn’t always about “making” money. It’s about keeping the money you’ve made. That seems to be a skill most have forgotten because we live in this material world.

Consider this…if you’ve made 50 grand a year for 20 years, guess what? You made a MILLION dollars. But, do you call yourself a millionaire? Nope, because you don’t have it. It went to rent and cars, and baseball games and food and kids, etc. etc.  For every one dollar you don’t spend on that new handbag, gold club, fishing rod, chrome wheel, gadget, etc, is one more dollar you can try and save for the days when you won’t want to work.

Do you need the 2700 square foot house, or would you be fine in the 1400 footer? Do you really need the hot new BMW, while a Kia will do the same basic job of getting you around? You all know the answer. We WANT those things, but we don’t need them. There’s always been an adage that says you can’t eat your cake and have it too.  Meaning you can’t be saving money if you’re spending on goodies. My response however is simply “make two cakes”.  

Finally, many have asked me if I’m against 401K’s. The answer is yes and no. I hate the fee’s you get smacked with, which eats up so much of your money. However if the company is putting in some percentage of “match” to your donation, at least their contribution is offsetting some of those insane fee’s. So, if you’re working and it is offered, I still say yes, donate to the point where the company will max out it’s maximum donation.

Times have changed folks. The world is supremely different than it was just 25 years ago. The rules that used to work, don’t’ work any more. The job security is a figment of imagination. The inflation they say we don’t have is killing us. Figuring out how to navigate our later years is indeed much different than it was a generation ago, where you worked hard and got your pension for life.  No matter what your age, you need to make some form of concrete decisions on just how you plan to do it. Start now.

The Market…

Last Friday the S&P was red and the DOW was virtually flat on the day. Over the weekend we looked at a lot of “internals” and decided that it was possible we’d get some red this week. Well, on Monday that happened. The DOW fell about 50 points and you could make the case that we were in for some form of a pull back.  But Tuesday came and that idea went the way of the Dodo.

On Tuesday they were going to have nothing of the sort, and not only did they get back Monday’s 50 points, they added another 50. Was it the great economic news? Uhm, no…the reports stunk out loud as they have for years. No it was simply Central planning not willing to let the market fade.

But one day does not a trend make, so on Tuesday evening we really hadn’t determined if the push higher was going to stick or if it was some form of one day wonder.

Wednesday dawned on us with flattish futures, but shortly after the open we were green, adding to Tuesday’s gains. However it was a struggle for them. Even as deep into the day as 1 pm the DOW was up just 11, the S&P up 4. But it was the strange moves inside the market that caught our eye. For instance gold was up some, but so was the dollar. Commondities/materials were doing really well, despite the global slowdown and word out of China that they had something of a glut in iron and copper. Not to mention mortgage applications had fallen another 7.5%. Don’t we use materials for building and repairing houses? We do.  So if mortgages are down again, who’s using the materials?? Inquiring minds want to know.

When the bell rang to end the day, we’d gained another 30 DOW points. I’m trying my best not to go completely off here, but it is hard. We’ve got central banks buying futures and stocks, companies doing billion dollar buybacks, debt issuance and securitization galore,…and it all gets passed off as a glowing recovery. It does make a sane person “wonder” sometimes.

People ask us all the time, “how long can this go?” and the answer is “until it stops” which isn’t an answer because no one knows. We don’t belong at these levels, everyone knows that… but we’re here. It could end tomorrow, it could end 6 months from now. We just don’t know.

We ended our day with four positions in our short term holds account. We’ve got SLB, LLTC,QQQ, and MRVL. All are up for us and looking pretty good. That said, it isn’t a comfortable hold, as again, none of this belongs this high to start with.

Our original idea for the week was that it would be slightly lower and that’s obviously gone sour. So what now? Tomorrow Mario Draghi is going to be expected to make comments about some form of QE as the ECB makes its announcements. That could move us higher again. Then on Friday we have the non farm payroll report and that will be interesting. Will a good number send us higher? Or, is good news going to be bad, and bad news sends us higher? I know…it’s a warped situation.

All we can do at this point is continue to lean long and keep our fingers near the sell button. Yes the market is overbought. Yes it’s extended. But unfortunately YES it is being controlled and for now they want it up. So we have to tag along. Just continue to understand that at some point all this stops and when it does, it will indeed get ugly.

On Sunday I’m going to do an introduction to Options. I’ve had quite a few folks write in about them lately and I think a primer on how they work is in order. I’ll See you then.





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