- Gold shrugs past record highs
- Minority report: Bloomberg’s backtrack
- Selling precious metals (three scenarios)
- Mr. Tech goes to Washington
- “Robinhoodies” strike again
- Great Coin Shortage resolved?
- Readers have political aspirations for The 5… Congress: Are we alone in the universe? (meh)… And a special war on cash overtime!
Gold hovers around $1,950 again today. “It’s an incredible breakout that’s been months in the making,” says our chart hound Greg Guenthner.
No doubt, judging by this candlestick chart going back three years…
In early 2013, Greg alienated our most hard-core gold-bug readers when the Midas metal cracked below the $1,650 level and he declared gold was in a bear market. (One reader labeled him “the Anti-Christ.”) Ultimately, gold bottomed around $1,050 in late 2015.
“Gold has now gained more than 60% since falling below $1,200 in late 2018,” he tells us this morning. “Now that it has surpassed its all-time highs set way back in 2011, we should have many more opportunities to trade it on the long side once it consolidates this move.”
Yep. Some “backing and filling” is inevitable after a breathtaking run-up from $1,800 in less than 10 days. But once that’s done? Back up the truck.
Before we get to our main gold topic today, we want to revisit our mention yesterday of Goldman Sachs’ report entertaining the end of the dollar’s status as the globe’s reserve currency.
Bloomberg revised and updated its story about the Goldman report as the day went on. This paragraph caught our eye:
“While that view is clearly still a minority one in most financial circles — and the Goldman analysts don't say they believe it will necessarily happen — it captures a nervous vibe that has infiltrated the market this month: Investors worried that this money printing will trigger inflation in years ahead have been bailing out of the dollar and piling furiously into gold.”
See, there’s a difference between the massive money printing after the Panic of 2008 and the far more massive money printing now — and it’s not just the sheer amount.
This time at least some of that money is quickly reaching the hands of everyday Americans — the $1,200 Trumpbux payments, the extra $600 a week in unemployment and so on.
So far, people have been using most of that money to save for the next rainy day, or to pay down debt. But as the “stimulus” keeps coming — Congress will likely thrash out yet another $1 or $2 trillion relief measure in the coming days — that money will be spent on goods and services.
Reminder about the classic definition of inflation — “more money chasing fewer goods.”
Now… what about when it comes time to sell your metal? “There’s a way to sell your gold and silver, take profits and not pay a dime in taxes,” says our fearless leader Addison Wiggin.
“The IRS permits it. As long as your physical gold and silver are held in a Roth gold IRA.
“If you believe gold and silver are going higher over time, then a Roth IRA account makes a lot of sense to shield your gains from taxes.
“This is especially valuable for gold, since the tax rate is higher than for other investment assets, currently taxed at a maximum rate of 28% in the U.S. with no special ‘long-term capital gains’ treatment (the IRS taxes gold like a collectible).”
“Sure,” you might say, “that’s what the IRS allows now. Who says it won’t change?” We’re going to tackle that question head-on today.
On one level, Addison and I have been wary about Roths going back to the gone-but-not-forgotten Apogee Advisory newsletter in 2012.
The following year, no less than Steve Forbes affirmed our concerns for Roth holders: “Their contributions have been made with after-tax dollars, with the promise that the ensuing benefits would be exempt from federal income tax. Slapping a special ‘emergency’ levy on these assets will become an irresistible temptation for politicians as the pot of assets gets bigger.”
But what would that actually look like?
Earlier this year, attorney and CPA Chris Hennessey laid out three realistic scenarios during an interview on the Financial Sense podcast.
All of them fall well short of outright confiscation. Depending on your situation, you might decide a Roth is worth your while even if the rules change down the line. Read on and judge for yourself…
Scenario 1: The law is changed so the growth in your Roth is taxed.
The feds can’t tax your original Roth contributions (or conversions) because you already paid tax on that. (Well, they could try, but the courts would squash it immediately — and if they didn’t, that would be a sign of societal breakdown so severe we’d all have bigger problems to worry about.)
But the appreciation in your account, above and beyond that original amount? That hasn’t been taxed… and the feds might decide to make it taxable income in one form or another.
Scenario 2 (more likely): Roths are made subject to required minimum distributions, or RMDs.
We’ve mentioned this possibility before. If you have a conventional IRA or 401(k), you’re obligated to start withdrawing money from your account once you reach age 72… and the amount increases every year.
➢ It used to be 70 and a half, but the law was changed last year. Also, RMDs have been suspended for one year under the CARES Act passed in March.
With RMDs, you’ve got taxable income every year — and Uncle Sugar collects a steady stream of revenue until you die.
Roths are exempt from this requirement. Congress could easily change that.
Now, you might wonder: What’s the difference to you if those withdrawals are tax-free?
Well, if this is money that you’d otherwise leave within your Roth — perhaps with an eye toward passing it to your heirs — you’re likely going to move that money to a taxable account, right? Even a savings account throws off a pittance of interest that’s taxable.
Suddenly Uncle Sugar has a source of revenue he didn’t before. Sneaky…
Scenario 3: The end of the “backdoor Roth.”
This too we’ve mentioned before. It’s a complicated technique higher earners use to skirt the income limits on Roth IRA contributions; this year it’s $196,000 for couples.
Describing how it works would take half of our 5 Mins. today and would be a poor use of your valuable time.
Suffice it to say that if you’re among the tiny minority that uses this workaround, you could face not only a tax bill but a paperwork nightmare that your online brokerage firm might or might not help you with.
Again, only you can decide whether the risks we’ve laid out here outweigh the undeniable benefits of a Roth under the current tax code — especially when it comes to gold and silver.
Whatever you decide… when you’re ready to put precious metals in an IRA, the folks at Hard Assets Alliance stand ready to help. Whether it’s a conventional IRA or a Roth, they’ll get you set up with a minimum of muss and fuss. Your metal will be held in your name at a secure storage facility; you can choose between New York and Salt Lake City.
If you choose to hold your metal outside a tax-advantaged retirement account, you have even more choices. You can take delivery or store it in an overseas vault — London, Zurich or Singapore.
Get started with Hard Assets Alliance at this link. Once more, the obligatory disclaimer: Our firm bought a piece of Hard Assets Alliance last year. Count on us collecting a small cut once you fund your account. But even after we collect that cut, you’ll be paying among the lowest premiums in the industry.
The major U.S. stock indexes are edging higher as traders keep half a nervous eye on Capitol Hill.
CEOs from four of the five biggest publicly traded companies — Apple, Google, Amazon and Facebook — are testifying to Congress today. (Microsoft gets a pass, having previously run through the federal antitrust gauntlet a generation ago.)
No, we’re not watching. We’ve seen this movie before. The CEOs will engage in sterile platitudes. The lawmakers will engage in insufferable posturing. If legislation comes from these hearings, we’ll know in the fullness of time.
Anyway, the tech-heavy Nasdaq is doing best among the three big indexes as we write — up nearly 1% and within striking distance of 10,500. The S&P 500 is up three-quarters of a percent, while the Dow is up only a quarter of a percent.
➢The wildest movement by far today is in Eastman Kodak (KODK) — up 500% at one point, with trading halted more than 10 times. Last night, President Trump announced the firm once renowned for film photography will get a $765 million federal loan to make generic drug ingredients. Guess that’s all the “Robinhoodies” need to pile in, huh?
The Federal Reserve is set to issue its every-six-weeks policy statement this afternoon, but no surprises are in store. Indeed, the Fed stole its own thunder yesterday with an announcement it’s extending its nine alphabet-soup emergency lending programs through the end of the year.
Not only is there a Great Coin Shortage, but there appear to be localized shortages of coin-roll wrappers.
Yesterday we told you how a Chick-fil-A in Lynchburg, Virginia, was planning a special offer today: Bring in $10 in change and you get $10 in bank notes plus a free entree.
As coincidence would have it, our Greg Guenthner — mentioned above — is visiting family in Lynchburg this week. “I walk into the garage,” he tells us this morning, “and my dad is sorting coins he has saved in three or four old paint cans.”
Just one problem: No wrappers around the house. And the nearest Walmart is sold out.
Hmmm… They’re available on the Walmart website — but not for in-store pickup. In Lynchburg or anywhere else, it seems.
In any event, the deal at the Lynchburg Chick-fil-A is now off.
Indeed, the local ABC affiliate says it was over at 9:15 a.m. — almost as soon as it began. Heh…
More on the Great Coin Shortage — and some not-so-amusing implications — in a special Overtime briefing once our regular 5 Mins. are up…
To the mailbag, which when we left you yesterday had turned into a tongue-in-cheek attempt to draft your editor for a presidential run. Or did we not read closely enough?
“Dave, over the years you've been called quite a few different things, most of them not as complimentary as the last contributor in The 5 yesterday that supports ‘YOU for the highest office in the land’…
“But (here we go) do you really want to be the Fed Reserve chairman? LOL!”
Adds another reader: “In response to the ‘We Want Dave’ comment… yes, we do want Dave and like him very much. But let's not ignore Emily, either. She's no chopped liver. Would she be interested in running?
“Perhaps The 5 could start its own political party — no position paper takes more than five minutes to read and must reflect both common sense and humor.”
The 5: “My daughter said she’s writing me in for president — which is a touching endorsement — but I’ll stick with my day job,” Emily says via instant message.
Good thing. Emily’s coming up on three years as associate editor of The 5 and has made herself indispensable.
As for me running the Fed, I happily defer to the far more qualified Jim Grant of Grant’s Interest Rate Observer — who would have been Ron Paul’s choice for Fed chairman.
Assuming “ending the Fed” wasn’t an option, of course…
“I’m bored with China talk for now — maybe you’ll let me start a new thread?” writes one of our longtimers.
“Quote from NY Times, July 23, 2020:
Mr. Davis, who now works for Aerospace Corp., a defense contractor, said he gave a classified briefing to a Defense Department agency as recently as March about retrievals from ‘off-world vehicles not made on this earth.’
Mr. Davis said he also gave classified briefings on retrievals of unexplained objects to staff members of the Senate Armed Services Committee on Oct. 21, 2019, and to staff members of the Senate Intelligence Committee two days later…
Mr. Davis is a well-known and tenured astrophysicist and is just one of a growing list of highly credible professionals, including military and commercial pilots, military personnel at nuclear facilities and, lately, military audio and video with supporting radar recordings of two craft that were beyond our known capabilities. The two craft were referred to as ‘go fast’ and ‘gimbal’ videos.
“And do you know what amazes me?” our reader asks.
“That our current environment is so crazy that this story, which Sagan and others said would be the most important discovery in all of history, isn’t even making a background hiss on social media or the news.
“To quote an old sage, ‘Eddie, If I woke up tomorrow with my head sewn to the carpet, I wouldn’t be more surprised than I am right now.’”
The 5: Meh.
In this day and age, we’d need confirmation of the account by that distraught caller to Art Bell’s radio show in 1997 (later excerpted for a track on the Tool album Lateralus)…
What we’re thinking of as aliens, Art, they’re extra-dimensional beings that an earlier precursor of the space program made contact with… They have infiltrated a lot of aspects of the military establishment, particularly Area 51. The disasters that are coming, they — the government — knows about them… They want the major population centers wiped out so that the few that are left will be more easily controllable. I started —
And then the caller was cut off.
Anyway, check back with us once that penny drops…
The 5 Min. Forecast
P.S. While we await contact with extraterrestrials, readers of The Profit Wire collected two more winners today — 50% on Under Armour in a month, and 100% on Gap Inc. in only 15 days.
With results like that, it’s little wonder we’ve seen a huge surge in interest in this premium trading advisory during the month of July. Click here and I’ll walk you through our one-of-a-kind trading strategy.
The war on cash — the steady “nudging” of the masses toward electronic transactions — is a long-standing theme of this e-letter. Searching through our voluminous archives, the earliest entry we find is an interview with Rep. Ron Paul in late 2012, shortly before he retired from Congress.
These days the war on cash is very nearly mainstream — accelerated by a pandemic that’s prompted the World Health Organization to push for a stepped-up transition toward “contactless” payments.
If the war on cash doesn’t strike you as a big deal, Addison Wiggin — our firm’s executive publisher and the founder of this e-letter — urges you to think twice. Especially in light of the Great Coin Shortage of 2020…
Den of Thieves
“The fact that the banks and card companies implemented [touchless payments] during confinement, and played on the idea that you don’t even have to touch the machine — people accepted it.” — Paris cheese store owner Julien Cornu in The New York Times
Real quick, grab a $100 bill from your wallet.
OK, humor me, any bill will do. What do you see?
I’d tell you what I see, but when I grab my BookBook, which serves as both a phone case and a wallet, there’s no cash in it. There rarely ever is. Please keep that in mind for today’s foray into inductive reasoning.
We saw this makeshift sign over the weekend:
Seen at the Walgreens three miles from my house.
“At the airport. Very sparse here, ghost town,” reads an email from a colleague’s mom. “No coins.”
One of our publishers, Doug Hill, had a similar experience flying to San Francisco last week for a meeting with a private equity fund. He couldn’t get accurate change for a pop rag he wanted to read. No coins.
“With the partial closure of the economy,” Federal Reserve Chairman Jerome Powell says, “the flow of funds through the economy has stopped.” Economically speaking, the national coin shortage is a physical reminder of how slow the nation’s economy has been; the “velocity of money” hit roughly zero.
“We are working with the Mint and the Reserve Banks,” Mr. Powell contends. ”As the economy reopens, we are starting to see money move around again.”
Fair enough. What else is he going to say?
Back to the Benjamin burning a hole in your wallet. On it, you’ll see digits… a serial number for each bill. As those bills are returned to the Federal Reserve from their journey around the country, the bills that have gotten too wrinkled, torn or worn thin get their serial numbers retired. The paper gets shredded.
In the 2018 Gerard Butler film Den of Thieves, a group of ex-military thugs try to rob the Los Angeles branch of the Federal Reserve. The group’s plan is to enter the bank, undetected, and snatch $30 million in $100 bills that have been decommissioned — before they are shredded.
If you like crime thrillers, heavy-firepower shootouts and a neatly choreographed plot where the good guys prevail in the end, you’ll love Den of Thieves.
Here’s what I was thinking while watching the film on Netflix yesterday. Wouldn’t it just be easier, and less expensive, if the Fed didn’t have to go through all the trouble of reclaiming and decommissioning the paper? Why not just track the serial numbers electronically?
While fact-checking the coin shortage story, a USA Today reporter included this little nugget: Facebook posts including “a sign from a Texas-based grocery store chain H-E-B asking shoppers to use a debit card, credit card or correct change, if possible, due to the shortage. The posts then warn against the potential of the U.S. becoming a ‘cashless society.’"
We’ve been on this “cashless society” story for some time. Mostly because it's an intriguing idea. As I mentioned, I rarely hold cash, if ever. Over the weekend, I got a haircut (by a real person) and didn’t leave a tip because my BookBook was dry. Ideally, a cashless society is no big deal.
But the mind does wander, doesn’t it?
The Walgreen’s sign says I can pay with credit, debit or a gift card. I can also use Apple Pay or Google Wallet (now called Google Pay Send). I suppose I could whip out my checkbook and convince the cashier it too is a form of species meant to support commercial transactions. But I’d have to find it first.
Here’s where the story gets spooky.
In recent years, we’ve run into difficulties with Facebook and Google. They don’t like our advertising model. They don’t like a lot of our editorial content. They despise our marketing campaigns. So they have at one time or another banned us from using their platform. Our money is not as good as anyone else’s because they don’t like us. Sure, they may lose a client, but ever since Mark Zuckerberg got summoned to appear before a congressional committee over his backroom dealings with Cambridge Analytica prior to the 2016 election, Facebook is not so friendly to folks who don’t think like they do.
Google followed Facebook’s lead. We have reps at each place. Under their guidance, we try to abide by their rules. But the rules can and have changed, without warning. It’s their platform, they make the rules. “You don’t like the rules,” their attitude goes, “you don’t have to post with us.”
Meh. Just a cost of doing business in a digital age. So we start all over again.
(Ed note: Steve Bannon was a vice president and reportedly used Cambridge Analytica data on Facebook to successfully tilt the Brexit vote in England his way.)
Did you know that according to the U.S. Treasury site as of May 18, since the pandemic began the Treasury has issued “more than 140 million Economic Impact Payments worth $239 billion to Americans by direct deposit to accounts at financial institutions, Direct Express card accounts and by check.”
Starting May 18, 2020, “Treasury and the IRS [started] to send nearly 4 million Economic Impact Payments (EIPs) by prepaid debit card, instead of by paper check.”
A prepaid card from the Treasury. Why not? My kids, who strangely enough qualify, could hypothetically still use the card to procure sundries at the Walgreens down the street.
But what if, hypothetically again, they found out that their dad is an ornery son of a b$tch who got in a spat with some readers over the Black Lives Matter movement last week?
What if Alexandria Ocasio-Cortez is named Biden’s running mate, they win, Biden gets declared unfit for office and then AOC becomes president? My friend from tennis’s nightmare would come true.
What if… this week the ornery SOB were to comment on this piece from The New York Times:
“The American catastrophe seems to get worse every day, but the events in Portland have particularly alarmed me as a kind of strategic experiment for fascism. The playbook from the German fall of democracy in 1933 seems well in place, including rogue military factions, the destabilization of cities, etc.”
[Brown University Professor Michael] Steinberg continued, “The basic comparison involves racism as a political strategy: a racist imaginary of a pure homeland, with cities demonized as places of decadence.”
Trump provokes outrage in a cascade designed to blunt alarm. He deadens reactions through volume and repetition. But something about the recent use of unmarked cars and camouflage-clad federal agents without clear identifying insignia detaining protesters shattered any inclination to shrug.
The president is constitutionally in charge of both the IRS and the Treasury. Suppose suddenly my EIP card doesn’t work at Walgreens anymore?
What if Facebook or Google don’t like what I write? Oh, yeah, we covered that. What if Apple doesn’t like me either? Hmm… I use Gmail. I use a Mac. I shop at iTunes. I use my credit and debit cards for everything. I never have cash in my BookBook.
Phew, going down this rabbit hole is exhausting. It could never happen.
Thankfully, as former National Security Adviser Stephen Hadley recently said: “Over the long term, I still have confidence in our institutions, our entrepreneurial traditions, our universities, our values, our young people and all the rest. But our margin for error is small. The challenges are great and we’re not doing what we need to do to avoid the doomsday scenario.”
Of course, Hadley was referring to the U.S. reputation taking a hit during and following the pandemic, including a heightened level of tensions with China, Germany and the rest of Europe.
It's a good thing, too, Den of Thieves referred to the bad guys — not the honest, well-meaning folks at the IRS and Treasury. Otherwise, we’d never be able to sleep at night.
Executive publisher & founder, The 5 Min. Forecast