Weed, Wages and Global Taxation

  • Penny pot profits growing like weed in Nevada
  • The most important takeaway from today’s job numbers (not the 220k jobs)
  • What really matters at the G-20 summit (not Trump-Putin)
  • Another gold dump… the robo-signing scandal rears its ugly head (maybe)… more problems with pensions… and more!

Recreational marijuana sales in Nevada are off to a smokin’ start.

Legalization took effect last Saturday. Through Tuesday, the Nevada Dispensary Association says retailers have logged $3 million in sales.

“Demand across the board was way higher than pretty much anyone expected — even the dispensaries!” says Ray Blanco, our penny pot stock guru.

Even as early as Day Two last Sunday, the results looked stunning. Ray noticed this post on the Facebook page of a tiny company called Terra Tech Corp.:

The sales surpassed any of our expectations. To put it in perspective, in 2011 our company’s total revenue was about $500,000. Yesterday, through our four retail facilities in Nevada and our continued strong performance in Oakland, we did about half what we did in all of 2011 in a single day!

Yes, Terra Tech is publicly traded. No, Ray has not recommended it to his readers. “While shares popped on the Facebook announcement,” he says, “they’ve been fading ever since.”

Ray spied a much more promising trade possibility yesterday in his premium advisory Penny Pot Profits. With any luck it will perform at least as well as the Nevada legalization play he recommended a month ago; it’s already up 105%.

Not a member yet? You can remedy that here. [Note: If you want to successfully trade penny pot stocks, please heed Ray’s “buy up to” prices.]

Jobs are plentiful. Wages? Not so much.

That’s the takeaway from the Labor Department’s monthly job figures out this morning. The wonks at the Bureau of Labor Statistics conjured 222,000 new jobs for June. And the weak numbers from previous months have been revised upward.

But average hourly earnings grew a measly 0.2% — less than the “expert consensus” was counting on. Year-over-year growth is only 2.5%.

The official unemployment rate inched up to 4.4%. The real-world unemployment rate as measured by Shadow Government Statistics also inched up — to 22.1%. That’s still shockingly high by pre-2008 standards, but on the low side for the last five years.

The lack of wage growth just killed what little chance there was for another interest rate increase from the Federal Reserve come September.

As you might know, the Fed has been raising its benchmark fed funds rate every three months like clockwork, going back to last December. As Jim Rickards explained to us earlier this year, the Fed was planning to keep up that pace well into 2019, in hopes of getting wiggle room to cut rates again whenever the next recession rolls around.

But inflation is just too weak to justify another increase now. The Fed has a 2% inflation target, and its favorite measure of inflation has decelerated from 1.8% in February to 1.4% in May. The Fed was hoping against hope to see evidence of wage inflation in today’s job numbers as a sign the tide was turning… but no such luck.

Thus, “the Fed is on hold until the data become more positive,” Jim tells us. “But the data may not turn positive at all if the U.S. slips into a recession due to the Fed’s misguided tightening since last December.”

For inscrutable reasons, someone decided the release of the job numbers was the ideal excuse to dump a bunch of “paper gold” contracts.

The bid on the Midas metal tanked at precisely 8:30 a.m. EDT. The excuse proffered by the mainstream is that the 220,000 new-jobs figure is “better than expected”… as though that were somehow going to make it more likely the Fed would raise rates in September. Not happening, for reasons just explained.

As we write, the bid has slumped to $1,210 — below the low set two months ago. Alas, the pattern of “higher highs and higher lows” going back to late last year is now broken.

That’s the bad news. The good news is that according to the weird science of “K-Signs,” gold is still set to close above $1,250 by the time its Kinetic window closes on Sept. 22. (Not sure how K-Signs work? Here’s where you can get up to speed.)

Meanwhile, the Dow industrials have recovered about half of yesterday’s losses, which were the steepest since May. At last check the Big Board rests just above 21,400.

Nothing happening today at the G-20 meeting in Germany will affect the markets or the economy.

There, we just saved you some time. Although if you still crave analysis of every gesture and facial expression between Trump and Putin today, there are dozens of media outlets ready to indulge you. But count us out.

It’s what comes at the end of the summit tomorrow that matters.

As Jim Rickards has explained here before, the G-20 is the closest thing we have to global government today. What began as a meaningless photo op in 1999 transformed into a powerful organization indeed during the weeks and months after the Panic of 2008.

For instance, he says, “it was at the Brisbane, Australia, G-20 Summit in November 2014 that the global bank ‘bail-in’ plan was agreed.” Taxpayer bailouts of shaky banks were mothballed; the banks’ depositors and bondholders would take the hit instead.

“These bail-in rules from 2014,” Jim says, “were contained in a technical report, which was listed as a hyperlink in an appendix to the G-20 final communiqué. That communiqué, issued on behalf of the entire G-20, tends to be a bland list of worthy goals expressed in precatory language.

“The real substance of the G-20’s work is contained in the appendixes and technical reports, where efforts at world government and world financial control are spelled out in detail.”

Gotta watch those footnotes. Which Jim will be doing after the final communiqué goes out tomorrow. “I’ll be looking for hidden G-20 agendas that could affect investors and the safety of their portfolios,” Jim promises.

He’ll be especially on the lookout for new global taxation schemes. He’ll report back to us here in The 5 in the days and weeks ahead.

From Georgia comes the strange tale of a home where squatters have moved in — legally.

Dena Everman is selling a home in Cobb County; she’s already moved out. One day recently she discovered a broken window and squatters inside. She called the cops, confident they would evict any trespassers.

Unfortunately for her, “I found out in the past week there is some archaic law that says if someone sets up residence in your home, it doesn’t matter how they get in there. They have rights until we evict them,” she tells Atlanta’s WSB-TV. That is, under Georgia law, evicting them is up to her.

Police said as much to the squatters — a woman, her fiancé and two kids. For her part, Tamera Pritchett says she found the home on Craigslist, signed a lease by fax and used a money order to pay a security deposit and rent. “We just spent $3,000 — that’s not something we can just pull out and immediately move somewhere else, you know.”

Police are now looking for the fraudster who collected the $3,000 from Ms. Pritchett.

Or is it a fraudster? Is Ms. Everman an unwitting victim of the “robo-signing” scandal a few years back?

Recall that the titles on millions of properties across the country got balled up as part of that scandal, documented here in The 5: During the go-go days of the housing bubble, mortgages were getting sliced and diced into securities so quickly that banks frequently ignored the niceties of properly recording title. (And WSB’s story says Everman bought the house 11 years ago.)

Once the bust hit, banks often foreclosed on properties they didn’t own the note to; indeed, they might have already sold off the note to someone else. Bank of America tried more than once to foreclose on homes whose buyers paid cash. So it’s not inconceivable that whoever rented the house to Ms. Pritchett and family has a legitimate claim to ownership.

Granted, we’ve wandered into the realm of speculation. But if we’re onto something here, Ms. Everman’s problems with the pending sale might just be starting…

“Regarding your issue on the death of defined benefit pension plans,” a reader writes, “I can’t argue with the theory that people are living longer and current low interest rates are affecting the current ‘crisis’ of increasing cost to finance a defined benefit annuity.

“However, in the case of pension plans, there are other factors at play that have been brought on by the company or government themselves and have contributed to the problem.

“It is my understanding that companies and government entities can select the ‘assumed rate of return’ when accounting for their pension deposits. The higher the assumed rate of return, the lower the calculated present value of what they have to put in. So the first problem factor is that plans have been set up with unreasonable return scenarios that benefit the depositor (company or government) and not the employee. However, as the saying goes, ‘past performance is not a guarantee of future results.’

“Second, if there are exceptional years when returns exceed the assumed rate, the excess returns can be used by the organization to minimize the required annuity deposit and can be instead contributed to increased profits or cash withdrawn for other projects. If that money had been left in the plan to compound, we probably would not be having this crisis now and could ride out several years of low ‘sequence of returns.’”

The 5: To quote Phil Hartman channeling Ed McMahon, you are correct, sir.

For years the managers of public-sector pension plans labored under what we called “the 8% illusion” — based on average annual returns across a 25-year span. The managers of private-sector plans have been only slightly less optimistic.

On a related topic, a reader writes: “I understand Zach Scheidt’s assertion that the nonunion employees at UPS may actually find themselves better off in a 401(k) arrangement.

“When he says, ‘You see, if your employer contributes money to a 401(k) or other savings account for you, you can then use our perpetual income strategy to generate extra cash in these accounts,’ he is right only if UPS doesn’t shoehorn their employees into a 401(k) administrator with limited choices, few options and high fees.

“My bet is the employees at UPS won’t have enough freedom with their money to pursue Zach’s plan for more golden years in their golden years.”

The 5: Good point. Here at Agora Financial we’ve become accustomed to a 401(k) program that offers a vast variety of choices (and a crazy-low plan administrator fee). Not everyone’s as lucky. Heck, I wasn’t as lucky when I was working for a Fortune 500 company in the early 2000s…

“Dave, this is an interesting point,” writes one of our regulars on the subject of gold’s cyclical patterns.

“We should always think in multiple time frames, starting with the long view — especially when we’re being peppered with so much noise in the short term.

“So it is also useful to consider that gold is entrenched in a multimillennium trend of holding its value. The same is true for silver.

“The dollar price of precious metals seems to be bottoming right now. As many battle-hardened investors point out, that’s usually a process, not an event. So we need to be judicious.

“The other (very long-term) trend at work is the fact that fiat currencies consistently die, and it’s always an ugly death. That process has a common etiology: It typically involves overreaching governments that debase their currency and then inflate their pseudo-money into oblivion — and rack up a mountain of debt — in order to fund pork and wars.

“The problem is that our current inflation/debt bubble is unprecedented. There’s no conceivable way this ends without the dollar collapsing or gold and silver soaring. IMO, that’s a useful context for both the bulls and bears to keep in mind.

“Got bullion?

“Thanks as always for the great work you and your team do!”

The 5: Well said. You get the last word this week.

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Something interesting is happening with Bitcoin this month… and you don’t have to know the first thing about Bitcoin or other “cryptocurrencies” to make a small fortune off it. Maybe even a big one.

And all you need is $20 to get started. Details 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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