Addison Wiggin – November 15, 2011
- Pity the boomers? Polls show they’re even less confident about their retirement than they were seven months ago…
- Downward mobility, boomer style: From the TV anchor desk to the hardware section at Home Depot…
- Lack of “confidence” in Europe + misplaced confidence in U.S. recovery = flat markets…
- John Paulson cuts his gold position: Why the gold market is shrugging it off…
- “Peace has broken out”… Ralph Benko on the inevitable end of the political class…
- Readers’ eyes on the prize for solving the euro crisis, and (still) more precious metals storage solutions…
The baby boom generation is feeling even less confident about their “retirement” years than they did seven months ago.
A poll of Americans age 47-65 by The Associated Press and LifeGoesStrong.com found the following…
- Last spring, 67% of boomers said they planned to work after “retirement.” Now, it’s 73%
- Also last spring, 44% said they were not confident they could afford a comfortable retirement. Now it’s a solid majority of 53%.
- 40% said they would rely heavily on Social Security in their “golden years.” Now it’s 45%.
Fred Cantu did not take part in the poll. But we can guess what his survey responses would be.
“Fred Cantu, one of Austin’s most beloved TV news personalities,” reads a story from the Austin American-Statesman spied by The 5’s Dave Gonigam, “is working part time at Home Depot because he needs the money.” Dave spent two decades traipsing the country in the trenches of local TV news before taking refuge here at 808 St. Paul. He still keeps up with the trade.
“This is incredible,” says Dave of Mr. Cantu’s fate. “The guy’s a living legend in Austin. He was cut loose last year, probably because the private equity outfit that bought the station was too leveraged up to keep paying a veteran anchor’s salary. So here he is at 56, with some company stock, but no pension… and working in the hardware section of a Home Depot.”
“I would think back then,” says Mr. Cantu, “I was making as much as the entire hardware department put together.
“People think about this as a step down, but I don’t think of it that way,” he says, putting a good face on. “I think of it as part of the ride.”
On that score, Mr. Cantu is not alone. The aforementioned poll finds 70% of boomers either “very happy” or “somewhat happy.” But the damage to their nest eggs is unmistakable…
- 42% say they’ve lost money during the last three years in a workplace retirement plan
- 32% say they’ve lost money in an IRA
- 41% say they’ve lost money in investments held outside a retirement plan
- 29% say they’ve lost money in real estate.
A separate survey by Yahoo! Finance finds 41% of Americans believing the “American Dream” has been lost.
Of the respondents to the Yahoo survey, 37% say they have no retirement savings and 38% plan to live off Social Security, such as it is and will be when the time comes.
[Ed note. If you do have retirement savings and if you’re concerned about where to put it now, our Jim Nelson of our income investing team has uncovered a method of doubling or even tripling the average stock dividend.
There’s nothing fancy about it; it’s as simple as a couple of mouse clicks in your online brokerage account, thanks to a legal “loophole” Jim describes in detail here.]
U.S. stocks are ignoring both “bad” news from Europe and “good” news at home. The major indexes are basically flat.
Volatility as measured by the VIX is approaching 32 — a number that increasingly resembles a “new normal.”
Jitters in Europe have brought the yield on a 10-year Italian bond back above 7% this morning. Recall that’s the “magic number” that drove Greece, Ireland and Portugal to seek bailouts.
France is getting dragged into the quicksand now, too. Yields on 10-year French bonds have touched 3.59%. Compare that with German bunds yielding 2.41% and the spread has hit a record.
No, there’s no real news driver here.
“It’s a confidence crisis,” an economist at the Dutch bank Rabobank told Bloomberg.
A trio of economic numbers in have encouraged a crisis of misplaced optimism in the U.S….
- Retail sales: Up 0.5% in October, the second straight increase, according to the Commerce Department. Electronics and appliances were the big gainers, up 3.7%
- Wholesale prices: Down 0.3% in October. But most of that can be chalked up to falling energy prices, which are now rising again. The year-over-year increase is still an ugly 6.1%
- New York factory activity: Back in positive territory for the first time since May, according to the Fed’s Empire State Manufacturing Survey. But the growth was so small, you’d have to squint to see it on a chart.
Gold continues to do its fair share of ignoring events in the wider world. The spot price is steady-Eddie at $1,781. Silver has held on to $34.
Gold even shrugged off the news that John Paulson has cut his holdings of GLD, the largest gold ETF, by one-third during the third quarter. His funds are still the largest holder of GLD.
“Redemptions from ETFs don’t always mean the outright liquidation of gold positions,” explains Edel Tully, the veteran gold analyst with UBS. “In the past, some investors have chosen to move to less-transparent ETFs or other types of gold exposure.”
In any event, the $1.94 billion of shares Mr. Paulson has unloaded have been more than offset by the purchases of other investors: Total GLD holdings rose 2% during the third quarter.
“We are now entering the strongest months of the year for gold,” notes Frank Holmes, Vancouver favorite and U.S. Global Investors chief.
He points to the chart below, showing “how gold and gold equities have performed on an average monthly basis over the past 10 years. While the spot gold price has differed from the S&P/TSX composite index of gold equities during the first 10 months of the year, their historical pattern is very similar during the last two months.
“November has historically been the strongest month of the year for gold equities, with mining stocks increasing 8.1%.”
So far, so good.
With half of November over, major gold stocks represented by the GDX ETF are up 4.6%.
More bullish gold nuggets crossing our desk this morning…
- Physical gold will outsell ETFs by 500% this year, according to Walter de Wet of Standard Bank. Two years ago, he told the Dubai City of Gold Conference, the positions were reversed — physical gold sales only 20% of the ETF total
- Gold holdings at BullionVault.com — one of our favorite “offshore gold storage programs” — have doubled in the last year. “The major driver of growth,” says founder and CEO Paul Tustain, “has been the steady realization among private savers that low interest rates are here to stay”
- Russia’s central bank says it’s already bought 90 metric tons of gold this year, and is on track to top 100 by year-end.
Here’s what might be the most bullish gold news of all today — a major fast-food chain giving away Gold Eagles.
Seriously.
“You can win either $190 or $1,142 in real gold!” says the contest page at Taco Bell’s website. “The price of gold fluctuates, so the prize values are based on the price of gold as of Aug. 2, 2011.”
The way it works, you buy a bag of Doritos at Taco Bell and text message a code on the back of the bag. “Verified winners will get the gold in American Eagle gold coins (equivalent dollar value is also an option upon request).”
We have a hard time imagining a contest of this type taking place 10, five or even two years ago.
The cops in New York swept in overnight and busted up Occupy Wall Street (OWS).
But they — and the Tea Party — represent something significant in the eyes of our friend Ralph Benko of the American Principles Project: “The Dawning Irrelevance of Obama and the GOP” as he titled his latest post at Forbes.com.
“Scholars of such matters,” he writes, “observe that the number of war battlefield deaths has dropped by a factor of 1,000, falling from 500 per 100,000 in prehistoric times, to 60-70 in the 19th and 20th centuries (notwithstanding epic wars) to… less than one such death per 300,000 now in the 21st.”
“Genocide deaths have dropped by well over a factor of 1,000 from 1942 to 2008.”
“The number of republics has quintupled in just 65 years, the number of authoritarian regimes has dropped from 90, 35 years ago, to 25…”
“In short, it is becoming nearly irrefutable that peace has broken out. To proponents of human flourishing in liberty, dignity and prosperity, this is wonderful news. To the political class, not so much…”
“Without an authentic prospect of war there can be no justification of privileges for our governing class,” Benko concludes, echoing the 90-second manifesto he emailed to us on Friday. “We will reclaim our power over officials.”
Or die trying?
“Could a link be added,” a reader inquires, “to let us get into Simon Wolfson’s contest to think tank a way out of the euro currency without causing a worldwide crash?”
“I have a few ideas. That $250,000 sure sounds interesting. And as a half-assed joke, someone who isn’t a Ph.D. may actually come up with a solution? Love a dare.”
The 5: You’re serious? Here you go. But before you proceed, consider what you’re up against:
“Simple,” says a reader who already has a solution, “legalize competing currencies in the eurozone, including gold backed. The euro will quickly fade from relevance and disappear. Debt denominated in euros will disappear along with them.”
“Any bank that doesn’t get on board with the new competing currencies would suffer the de facto default. Those that do can transfer their healthy balance sheet items to the new currencies.”
The 5: You neglected to read carefully: The aim is to allow countries to exit the eurozone without blowing up the world financial system.
“Careful consideration,” the announcement says, “must also be given to managing the potential impact on the international banking system.” In other words, protect and promote the statist quo.
“I have read with interest the various schemes for hiding your gold stash at home,” a reader writes, “and I keep coming back to the reality of the matter.”
“When things get that tough and someone does actually break in your home looking for your gold, just how cool are you going to be when the robber has a knife at your wife’s or child’s throat and he tells you he just doesn’t believe that’s all the gold you have.”
“Then you see that first trickle of blood coming down your wife’s neck as he lets you know just how serious he is. Do you think you will just say, ‘Honest….that is all the gold I have’ and call his bluff?”
“I doubt it.”
The 5: Hmmn…
“I suggested hiding gold to my dad once,” writes another with a little less graphic specificity. “He has a house that used to have its own water well in a pump room, until they got city water.”
“The old pump was removed and the hole cemented over: just a big rough patch of cement in the cellar. My suggestion was to buy a bunch of gold, dig up a patch of cement and bury the gold in the hole and then cement back over the hole. I don’t know how a thief would know it’s there, and they would need a jackhammer to get it out.”
“My dad’s reaction: If it gets to that point the government will confiscate all the gold anyway, there’s no way for him to avoid a paper trail.”
“I don’t know, with a USA debt of $15 trillion and overspending by a trillion… and huge debt problems in Europe starting to burst everyone’s bubble, I think he should try.”
The 5: Now you’re preaching to the choir.
“A good way,” one final reader suggests, “is to cut out a piece of drywall, insert items, mud over, apply a little spray texture (comes in a can) and then paint area.”
“Just remember to tell some trusted folks the location in case you become dearly departed.”
The 5: It’s true what they say, you can’t take it with you.
Cheers,
Addison Wiggin
The 5 Min. Forecast
P.S. Demand for the Gold Buffaloes we have — along with our own unique “booksafe” storage solution — has exceeded expectations. We have only a handful left. At this stage, if you’re still interested, your best bet is to call John Wilkinson at (866) 361-7662.