Precious Metals That Pay “Interest”

  • Buffett is wrong: Precious metals can generate an income stream
  • A shaky Thursday rally… and a shock that might arrive next Thursday
  • The “politically incorrect” currency wars… as disclosed in new Fed documents!
  • The IRS expands its audit net… one reader who doesn’t like our “social income experiment”… recovered history about Iran… and more!

Who says precious metals don’t throw off cash?
That’s been Warren Buffett’s dig against gold for, well, eons. There’s no yield. No cash flow. “If you own one ounce of gold for an eternity, you will still own one ounce at its end.”
Better to put your money in Coca-Cola and Wells Fargo, sayeth the Oracle: “It’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.”
Heh… With the proviso that one year hardly tells the whole story, we present the following chart with no further comment…

Description: ATaleofTwoGeese.png

Anyway, if you apply the right strategy, you can generate a yield from precious metals. Readers of Zach Scheidt’s Income on Demand service did so just yesterday — jumping on an opportunity amid yet another market freakout here in early 2016.
“When investors are worried about the market falling, their natural instinct is to look for safe areas to park their money,” Zach explains. “Sometimes this means buying big blue chip stocks with stable businesses. And in many cases, it means buying precious metals like gold or silver.”
As we check our screens this morning, gold is holding onto most of yesterday’s gains at $1,098. Silver is registering a bigger percentage drop but still holding the line on $14.
“Moving forward,” says Zach, “I expect gold and silver to trade higher both because of investors looking for safe places to park their money and because the Fed will not continue to raise interest rates.
“The Fed actually has an effect on how gold and silver trade because interest rate decisions can make the U.S. dollar stronger or weaker. A strong dollar typically sends prices of gold and silver lower because it takes fewer dollars to buy an ounce of gold or silver.
“We’re likely to see the dollar weaken this year because the Fed will keep interest rates low. With low interest rates, investors can’t earn income by holding dollars in savings accounts or other deposit accounts. And if the dollar is weaker, it will help to send the prices of gold and silver higher.”
Right, you say, but what about getting a yield from precious metals? How do you do that, exactly?
It comes back to Zach’s “perpetual income strategy.” We told you all about it yesterday… and how the volatile markets so far this year have presented opportunities to capture $1,490 in instant income just this month. Well, $350 of that total came just yesterday from a silver-oriented play.
Don’t worry if you missed yesterday’s payout. There are always opportunities to grab new payouts using Zach’s perpetual income strategy. Check out the monthly totals of the $35,283 in payout possibilities he identified during 2015…

Description: ATaleofTwoGeese.png

The perpetual income strategy is easy to implement. Our publisher Joe Schriefer is so keen on the strategy — he uses it regularly in his personal portfolio — that recently he grabbed random people off the street outside our Baltimore offices. Just to make the point about how easy it is.
We call it our “social income experiment.” No experience necessary. If anyone can do it, you can…

Click here for an eye-opening demonstration…

Major U.S. stock indexes are seesawing this morning like — well, like two people who had too much to drink and thought it’d be fun to hop on a seesaw.
The Dow opened down about 35 points. At last check, it’s up about 130. The S&P 500 has picked up two-thirds of a percent at last check — now 1,871.
There’s no market-moving news to speak of. The European Central Bank decided to leave interest rates where they are; ECB chief Mario Draghi made noises about further easing come the next ECB meeting, in March.
The one economic number of note is the January Philly Fed survey: The mid-Atlantic factory sector has been shrinking five straight months now. With a blizzard bearing down this weekend, anyone wanna bet against six?
Treasury yields are steady, with the 10-year at 1.98%. Crude has recovered from yesterday’s swoon, a barrel of West Texas Intermediate fetching $28.32.
Back to the stock market action: At one point yesterday, the Dow was down 500. By the close, it was down “only” 250. That “recovery” does not impress Greg Guenthner of our trading desk. He’s still watching the October 2014 lows in the S&P. “Despite yesterday’s big recovery, the S&P is starting to sneak below our line in the sand…

Description: LineInTheSand.png

“While yesterday’s rally off the lows covered an impressive amount of ground,” says Greg, “you should not trust it. I do not think Wednesday morning’s lows marked a bottom.
“In order for the market to put in anything close to a short-term bottom, we need to see true panic. That means a big flush where folks are willing to sell at any price.”
[Time-sensitive market opportunity: Amid this dicey market environment, David Stockman has identified a major U.S. stock in danger of crashing. The bloodbath could begin as soon as Thursday, Jan. 28 — one week from today. You can read David’s exposé — no long video to watch — at this link.]
We’re a bit late to the party… but we noticed something amusing in the recently released transcripts of the Federal Reserve’s 2010 meetings. (Yes, you have to wait a minimum five years before you learn who said what. Transparency.)
Back then, the Fed was about to embark on a second round of “quantitative easing.” Some of the assembled governors worried about appearances — that it would look bad for the Fed to be so, well, obvious about depreciating the dollar. One of them, Kevin Warsh, said it would not be “politically correct.”
They didn’t use the term “currency wars,” but that’s what it was all about. 2010 was the year Brazil’s finance minister said the world’s central banks were engaged in an “international currency war.” Currency Wars is the name Jim Rickards gave to his first book the following year. Nice to see him on the cutting edge.
Jim’s next book, also on the cutting edge, is called The New Case for Gold — set for publication April 5. Your editor is about one-third of the way through a galley proof. It’s a brief tour de force making a case for gold’s relevance in the 21st century — both as the basis for a sound currency and as an essential in your portfolio. Watch for details in the coming weeks about a special edition of the book, available only to Agora Financial readers.
We have to admit, the clickbait headline got us. “Beware: IRS Now Has Six Years to Audit Your Taxes, up From Three,” says Forbes.
Turns out there’s less than meets the eye… but it’s still worth a mention today.
Typically, the IRS can audit your return for any reason going three years back. It can go back as long as six years if it suspects you underreported your income by 25% or more. And it can go back forever if it suspects fraud.
What’s changed is the IRS criteria for underreporting income. It’s a lot broader than it used to be.
Forbes uses the following example: Say you sell a piece of property for $3 million and you overstate your basis (the amount you paid for it). You say it was $1.5 million when, in fact, it was only $500,000. You paid tax on a $1.5 million gain when it should have been $2.5 million.
For a long time, the IRS considered this a case of “understating income”… and thus fair game for an audit going back six years, not three.
That changed in 2012, when a company called Home Concrete & Supply challenged the IRS… took it all the way to the Supreme Court… and won.
But that’s not the final word: Last summer, Congress passed new legislation affirming the IRS’ old interpretation of the rules.
Consider yourself warned… and before you file, make sure you’re taking advantage of every legal avenue you have to lower Uncle Sam’s take. If you click here, it could be worth a minimum $2,000 to you.
“This sounded like something my husband and I would have been interested in and the ‘average Joe’ could use to help generate money, instant or otherwise,” writes a reader about our cheeky “perpetual income strategy” video.
“But then, at the very end of this promising-sounding venture, you turn around and say one needs to have $20,000 in order to use your secret successful plan. Unfortunately, one has to wade through the whole — and as it turns out, useless — video before being told this.
“If you were more honest about that upfront, you wouldn’t have wasted my time — which is what you just did by being sneaky. Do you think those folks on the streets of Baltimore that you have in your video are going to be buying this? No! You know they won’t because they don’t have $20,000 lying around to use in this ‘scheme’!
“I wish there were someone to turn you for ‘almost’ false advertising, so to speak. If I had that kind of money, I probably wouldn’t use your plan anyway, because more than likely there are other ‘addendums’ you’ll spring after you sucker one in with this initial program.
“I bet you’re a Republican, and that’s the worst insult I can think of without using offensive language! Beat it, a**h***, and I hope your program fails dismally!”
The 5: Well, now…
In the first place, we’re thoroughly apolitical. In the second place, in what universe is “alpha hotel” not offensive at least a wee bit?
Anyway, we’re sorry if you feel we weren’t prompt enough disclosing the amount of money needed to take maximum advantage of Zach’s perpetual income strategy. The point of our on-the-street experiment wasn’t to demonstrate how anyone has the capital to generate this sort of income — just that it’s easy to do so, easier than most people think.
As always, our ideas succeed or fail in the marketplace on their merits. It’s up to each reader to decide.
“To the reader who doesn’t ‘blame Saudi Arabia for anything they might do,’” reads another email, “it helps to study history a bit more rather than count on the war-mongering neocons at FAUX (FOX) News for a more ‘fair and balanced’ perspective about Iran.
“The CIA’s Operation Ajax in 1953 deposed the democratically elected leader of Iran (Mossadegh)… after which the U.S regime installed the shah, who ruled Iran as a brutal dictator (Google ‘SAVAK’ — the Iranian secret police under the shah’s regime) until the Iranian Revolution in 1979, when the Iranian people decided to run their own affairs for a change.
“And it took from 1979 until 2015 (36 years) for the U.S. to get over it and ‘bury the hatchet’… one of the few admirable accomplishments of Barack Hussein Obama.
“If the good reader thinks that Saudi Arabia is looking out for the best interests of America, well, the 19 alleged hijackers on 9/11 didn’t come from Iran… 15 came from that ‘bastion of Middle East democracy and human rights’ (cough, cough) Saudi Arabia.
“As far as nuclear weapons development, all 16 U.S. intelligence agencies declared in 2007 that Iran stopped any and all efforts in that regard way back in 2003, regardless of the hot air coming out of Israel from Netan-Yahoo.
“Little wonder also that Saudi Arabia is one of the primary nation-state supporters of ISIS, as both are opposed by Iran. Yes, Iran is helping in the fight against ISIS. ‘The enemy of my enemy is my friend’?
“As regards the U.S.’ ‘loyalty is not to be trusted,’ ask the American Indians about that. But you might have to go out to one of the fine Indian reservations where Washington, D.C., exiled them to drink out their days with ‘rotgut’ whiskey.”
“I do believe I have subscribed to a nut,” a reader writes after we made the observation two days ago that Iran is becoming a respectable country again.
“Although I am unsure that, other than Israel, there are ANY respectable countries ‘over there,’ to claim that Iran can be respectable under its current leaders is bull****.”
The 5: Oy. It doesn’t matter what you or I or anyone else thinks. The Iran nuclear deal — an agreement not only with the United States, but also with Britain, France, Germany, Russia and China — means Iran is slowly coming in from the cold.
Iran once again has access to SWIFT, the global payments system. European businesses can’t wait to start doing business there again, although U.S. businesses will have to wait longer because many U.S. sanctions unrelated to Iran’s nuclear program remain in place.
We’re just following the money here. If you want to close your eyes, that’s your prerogative…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. As we get closer to publication time, the Dow is now up more than 250. And crude has soared within sight of $30 again, thanks to the latest inventory numbers from the Energy Department.
But markets remain vulnerable to a variety of shocks… and one of the biggest shocks might come from nowhere when management at a major U.S. company delivers a rude surprise.
It could happen as soon as Thursday, Jan. 28 — one week from today. “It’s likely,” says David Stockman, “that a tsunami of fear in what were previously thought to be ‘safe’ stocks will follow.” You can examine his evidence right here.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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