BLAST FROM THE PAST: Goldman Sachs Bitcoin Advice Edition

When Goldman Sachs tells me to zig, I zag.

What would an investment in Bitcoin of $1,000 on Aug. 6, 2018 be worth today?

CLINTON VS. TRUMP TAX PLANS: The Differences to Your Wallet Will Blow Your Mind

By Robert Donachie

Democratic and Republican nominees Hillary Clinton and Donald Trump agree that the U.S. tax code needs major changes, but their proposed changes have drastically different effects on Americans’ pocketbooks.

Clinton wants to increase taxes on individuals, specifically wealthy Americans, and businesses. She also proposes a significant change to the capital gains tax and wants to expand the estate tax, according to analysis by the Tax Foundation.

Trump wants to abolish the estate tax and wants an income tax reduction that encompasses most American families.

Let’s get into the specifics of each tax plan and how they impact America’s bottom line.

REALLY COOL GRAPHIC: 15 Years of Asset-Class Returns

Really cool graphic by Novel Investor relayed by Barry Ritholtz: knowing what you know now about the tech implosion in 2000 and the subprime meltdown in 2008, any patterns you can discern?

Click to explongify

Hat tip: BadBlue Money News.
 

6 Interesting Facts About the 2015 Final Four Point Spread

Morning Call has some interesting facts about the 2015 Final Four Betting Line.

6: THE PROS ARE BETTING WISCONSIN

The KY-WI betting line opened at -6 for Kentucky but "significant professional action on Wisconsin" has driven that number down to 5.

5: SMALLEST SPREAD OF THE YEAR FOR KENTUCKY

The -5 number for Kentucky is its smallest favorite all year, tied with its -5 at Louisville in December.

4: 70 PERCENT OF BETS BACK DUKE OVER MICHIGAN STATE

Duke is a -5 favorite over Michigan State, but Vegas has let 70 percent of the bets go Duke's way. This tells me that someone very knowledgeable is putting their money on MSU covering.

3: IN FALL OF 2014, KY WAS A 50-1 LONGSHOT TO GO UNDEFEATED

Sportsbooks "will suffer a big loss if this prop cashes".

2: THE ODDS AGAINST A PERFECT BRACKET

The odds against a perfect bracket thus far in the tournament (picking all 60 games correctly): 2,300,000,000,000 (2.3 trillion) to 1.

1: POSSIBLE TITLE GAME SPREADS

• Wisconsin -5.5 over Michigan St
• Wisconsin -1 over Duke
• Kentucky -11 over Michigan St
• Kentucky -6 over Duke

Hat tip: BadBlue Sports News.

No one told you when to run... you missed the starting gun

By Jim Quinn

Ticking away the moments that make up a dull day
You fritter and waste the hours in an offhand way.
Kicking around on a piece of ground in your home town
Waiting for someone or something to show you the way.

Tired of lying in the sunshine staying home to watch the rain.
You are young and life is long and there is time to kill today.
And then one day you find ten years have got behind you.
No one told you when to run, you missed the starting gun.

Pink Floyd – Time

I stumbled across two mind blowing charts yesterday that had me pondering how generations of Americans had frittered their lives away, spending money they didn’t have on things they didn’t need, utilizing easy to acquire debt, and saving virtually nothing for their futures or a rainy day. We are a nation of Peter Pans who never grew up. While I was driving home from work, one of my favorite Pink Floyd tunes came on the radio and the lyrics to Time seemed to fit perfectly with the charts I had just discovered.

We were all young once. Old age and retirement don’t even enter your thought process when you are young. Most people aren’t sure what they want to do for the rest of their lives when they are in their early twenties. Slaving away at your entry level low paying job, chasing the opposite sex, getting drunk, and having fun on the weekends is the standard for most young people. But you eventually have to grow up. Because one day you find ten years have got behind you. No one tells you when to grow up. And based on the charts below, tens of millions missed the starting gun.

I graduated college in 1986 and started my entry level CPA firm job, making $18,000 per year. I did live at home for a year and a half before getting an apartment with a friend. I was able to buy a car, pay off my modest student loan debt, go out on the weekends, and still save some money. I was in my early 20’s and had opened a mutual fund account at Vanguard. Anyone who entered the job market from the mid 1970s through the mid 1980’s, which would be the late Baby Boomers and early Generation Xers, had job opportunities and the benefit of low stock market valuations.

Top 20 Quotes From The Intelligent Investor

Some excellent advice, culled from 74 Quotes From The Intelligent Investor, Revised Edition, via BadBlue Money.

20. If fees consume more than 1% of your assets annually, you should probably shop for another adviser.

19. There is no reason to feel any shame in hiring someone to pick stocks or mutual funds for you. But there’s one responsibility that you must never delegate. You, and no one but you, must investigate whether an adviser is trustworthy and charges reasonable fees.

18. The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is cause for concern.

17. Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.

16. Never mingle your speculative and investment operations in the same account nor in any part of your thinking.

15. Thousands of people have tried, and the evidence is clear: The more you trade, the less you keep.

14. No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. Only by insisting on what Graham called the “margin of safety” – never overpaying, no matter how exciting an investment seems to be – can you minimize your odds of error.

Even as the Stock Market Soars to Record Highs, the Ultra-Wealthy Swarm to Buy Physical Gold

By Michael Snyder

Did you know that the number of gold bars being purchased by ultra-wealthy individuals has increased by 243 percent so far this year? If stocks are just going to keep soaring, why are they doing this? On Thursday, the Dow Jones industrial average and the S&P 500 both closed at record highs once again. It is a party that never seems to end, and there are a lot of really happy people on Wall Street these days. But those that are discerning realize that we witnessed the exact same kind of bubble behavior during the dotcom boom and during the run up to the last financial crash in 2007. The irrational exuberance that we are witnessing right now cannot go on forever. And the bigger that this bubble gets, the more painful that it is going to be when it finally bursts. Those that get out at the peaks of the market are the ones that usually end up making lots of money. Those that ride stocks all the way up and all the way down are the ones that usually end up getting totally wiped out.

To get an idea of how irrational the markets have become, all one has to do is to look at Twitter.

Would you value "a horribly mismanaged company" that is less than 10 years old and that has never made a yearly profit at 31 billion dollars?

Well, that is precisely how much the financial markets say that Twitter is worth at this moment.

Even though Twitter will probably never be much more popular than it is right now, it continues to bleed money profusely. On a GAAP (generally accepted accounting principles) basis, Twitter lost an astounding 145 million dollars during the second quarter of 2014...

Hannity's Old House is for Sale

I guess I should've been a talk radio host.

And, no, drones: he doesn't live here any more.

TICK TOCK: The Countdown To Government Confiscation Of Your Retirement Savings Has Begun

Writing at Zero Hedge, Nick Giambruno of Casey Research sounds the alarm on President Obama's new "MyRA" program.

Simply put, the new myRA program put forward by Obama is at best a sucker's deal… or worse, it's a first step toward the nationalization of private retirement savings... Even before the new myRA program was announced, there had been whispers about the need for the US government to assume some risk for US retirement accounts. That's code for forced conversion of private retirement assets into government bonds.

...With foreigners not buying as many Treasuries and the Fed tapering, the US government has been searching for new buyers of its unwanted debt. And this is where the new myRA program comes in.

In short, it's ostensibly a new way for people to save for retirement. Of course, you can only invest in government-approved investments—like Treasuries—which probably won't even come close to keeping up with the real rate of inflation. It's like Jim Grant says: "return-free risk."

In reality, a myRA doesn't really provide any significant new benefits over existing options. To me it just looks like a way for the US government to pass the hot potato on to unsuspecting Americans in exchange for their retirement savings.

The net effect is the funneling of more capital to Treasury securities and thus helping the US government finance itself.

...I believe myRA is a way to nudge the American people into gradually becoming more accustomed to government involvement in their private retirement savings.

It's incorrect to assume nationalization couldn't happen in the US or your home country. History shows us that it's standard operating procedure for a government in dire financial straits... In just the past six years, it's happened in some form in Argentina, Poland, Portugal, Hungary, and numerous other countries.

To me it's self-evident that most Western governments (including the US) have current debt loads and future spending commitments that all but guarantee that eventually—and likely someday soon—they will try to unscrupulously grab as much wealth as they can.

To put this news in context, consider that in late 2008 Democrats openly discussed the possibility of confiscating private retirement accounts in order to "strengthen and protect Americans’ 401(k)s, pensions, and other... plans".

How To Make Money From Facebook In 3 Simple Steps

Guest post by Tyler Durden

It's different this time

They tell us that the Dow is at a record high even though the economy is a disaster. They tell us not to worry about rampant unemployment, the layoffs caused by Obamacare, and all of the new EPA regulations that are killing thousands of jobs each day. They tell us not to worry about all of the Fed's money-printing.

They tell us not to worry that the Dow is truly down by 50 percent if you price it in gold.


After all, it's different this time.

The Endgame for Currency Debasement: Exter's Pyramid

Where will the global race to debase currencies end? A diagram known as "Exter's Pyramid" offers us a hint:

...Before we delve into why backwardation in gold has some very unique and stark implications, let’s first take a moment to understand exactly what backwardation is.

...Backwardation is the condition where the spot price is higher than the forward price. Backwardation often exists in perishable commodities, right before the harvest. This happens because even though demand is constant throughout the year for a commodity like wheat, the harvest only happens once a year. If you demand delivery right before the harvest, it will be more expensive than taking delivery one month later, after all the grain silos are full. Backwardation is usually a fleeting phenomenon, occurring only when a particular commodity is in short supply and there is great demand for immediate delivery, not in the future.


...[But] gold is a unique commodity in that it is not consumed... it’s hoarded. Estimates of world gold supplies are north of 170,000 tons. So what would backwardation mean in the gold market? ...if and when we see gold in backwardation, it should be considered something like a fire alarm for the system. Something serious is happening. Investors would be rejecting what should be a “risk free” profit opportunity. We would like to suggest two (not mutually exclusive) causes: 1) the threat of counterparty failure and/or 2) loss of confidence in the $US Dollar.

The first implication of gold in backwardation is straightforward and easy to understand. The market is pricing in significant counterparty risk of failure to deliver gold in the future... [We] believe the second implication for gold backwardation is a collapse in confidence in the $US Dollar itself.

...So what would extended or permanent backwardation imply? According to Prof Antal Fekete, “gold going into permanent backwardation means that gold is no longer for sale at any price, whether it is quoted in dollars, yens, euros, or Swiss francs. The situation is exactly the same as is has been for years: gold is not for sale at any price quoted in Zimbabwe currency, however high the quote is. To put it differently, all offers to sell gold are being withdrawn, whether it concerns newly mined gold, scrap gold, bullion or coined gold.”

...For physical gold owners searching for clues to tightness and demand in the physical market, they would be wise to keep a sharp eye on these metrics. It is our belief that this is happening, right now. Money is moving down Exter’s pyramid and while the final denouement may be days, weeks, months or years off, we are certain it would be preferable to be years early as opposed to a day late.

But don't worry, folks. Ben Bernanke's got this.

INTERESTING CHART O' THE DAY: Inflation vs. Gold, 1915-2010

In order to pay for excessive government spending, the United States and other countries around the world are busy printing money. This practice, known as "debt monetization", is the precursor for inflation. Sometimes, in fact, the act of paying sovereign debt by printing money can lead to hyperinflation and currency collapse; the Weimar Republic and Zimbabwe's recent experience being two noteworthy examples.

I was thinking to myself how a typical investor might be able to profit from a sudden burst of inflation. After all, the printing can only go on so long before a currency becomes a joke. We also know that America's most recent bout of severe inflation took place during the Carter administration.

Knowing that gold and silver are bellwether commodities that tend to march inversely against a devaluing currency, I decided to compare those metals against CPI to determine whether any obvious trends could be discerned.

History tells us that timing a peak is well nigh impossible. Perhaps once gold and silver go parabolic it will be time to sell. And given this administration's march to currency collapse, parabolic it will go.


Hat tips: Wikipedia: Consumer Price Index by Country and MacroTrends.

NEAT STOCK MARKET GRAPH: What goes around, comes around

That much is clear from this excellent chart spotted at Above The Market:

The largest contributing factor to equity returns is the P/E ratio. The expansion or contraction of the broad market P/E ratio creates secular bull and bear markets. The chart below from Crestmont Research breaks down the components of total return for the S&P 500 for ten-year rolling periods.

Yale Professor Robert Shiller’s 10-year Average Inflation-Adjusted PE Ratio, also known as CAPE, Shiller PE or PE10, provides the best longer-term market gauge available. PE10 is the stock index price divided by the average real earnings from the previous 10 years – the time period is designed to smooth out near-term noise in the data. The basis for this approach is the finding that earnings valuation ratios provide predictive power for long-term stock market returns.

It's science, dammit! Like global warming, only real!

THAT "COMING COLLAPSE" HAS BEEN COMING FOR DECADES: What does this gold ad from 1973 really tell us?

Considering that the CAGR (compound annual growth rate) of gold since 1973 is roughly 17.2%, who's to say this ad wasn't right?

An ad from a 1973 issue of Barron's provides clear proof that feverish concerns about imminent economic collapse and a concomitant enthusiasm for precious metals has long been a theme amongst modern investors.

With the race to devalue currencies around the world -- led by Ben Bernanke's magical printer -- and unsustainable sovereign debt, it's pretty clear that a collapse will come.

The only question is whether it's two years away -- or 10. History and arithmetic both tell us it won't be longer than that.


Hat tip: BadBlue Money News.

I HOPE YOU'RE SITTING DOWN: Why Gold Is Insurance

Writing at Safe Haven, Przemyslaw Radomski offers the historical perspective on U.S. deficit spending and the price of gold.

I repeat: you should be sitting down before viewing the following graph.

While the general idea of dividing your portfolio between long-term and speculative capital (the latter is only the money you can afford to lose) is not a particularly new one, the inclusion of the insurance part in the portfolio may make it more robust to financial blow-ups. We will now focus on that - gold and silver as insurance against severe financial turmoil.

Gold may be perceived as insurance if you believe that, because of psychological reasons, it appeals to investors as a wealth-preservation vehicle. In case of financial turmoil they turn to precious metals, the increased demand causes an increase in the price and gold and silver deliver on their promise to provide an alternative to government bonds.

There is also another dimension to it: in the past gold and silver were used as money. As a matter of fact, gold had been indirectly used as money up to 1971 when U.S. president Richard Nixon officially announced that the U.S. government would cease to adhere to its promise to redeem the greenback in gold. Since that moment money has been only paper and a promise of the government to accept payments in it...

Some investors fear that excessive deficits as seen in the U.S. will result in money being printed on a large scale (which actually is already the case: open-ended QE) or even in the implosion of the dollar. The bigger the deficits, the more likely such a scenario seems. This is shown on the chart below.

...since 2000 increases in the U.S. debt have been accompanied by increases in the price of gold. This might reflect investors' fear that the U.S. government will eventually default and their belief that gold may be a safe haven in case of such a development.

The abovementioned points may lead to the conclusion that gold may in fact skyrocket if things get out of hand in the U.S. or in the European Union. The main problem here is that nobody knows when (if at all) the paper currencies will begin to visibly deteriorate or disappear completely. Precisely because of that, we suggest holding on to gold and silver at all times with a part of your portfolio.

We call this part of your portfolio "Insurance," because by holding on to gold and silver even during corrections you accept small losses in hope of enormous gains should serious economic turmoil materialize. Economic crises have the inherent quality of catching most investors off-guard. We don't want you to be among them.

If you believe that government can continue to increase its debt -- which already amounts to 550 percent of GDP (all the goods and services produced in a year) -- then by all means, ignore the advice.

Because if you believe that, you're obviously a Democrat and an Obama supporter, in which you can fend for yourself after the inevitable reboot.


Hat tip: BadBlue.com/Money.

A must-read: What happens when the dollar dies?

In Investment News, the brilliant Peter Schiff describes the real fiscal cliff facing Americans.

The current national debt is about $16 trillion (this is just the funded portion...the unfunded liabilities of the Treasury are much, much larger). The only reason the United States is able to service this staggering level of debt is that the currently low interest rate on government debt (now below 2 per cent) keeps debt service payments to a relatively manageable $300 billion per year.

On the current trajectory the national debt will likely hit $20 trillion in a few years. If, by that time interest rates were to return to some semblance of historic normalcy, say 5 per cent, interest payments on the debt would then run $1 trillion per year. This sum could represent almost 40 per cent of total federal revenues in 2012!

In addition to making the debt service unmanageable, higher rates would depress economic activity, thereby slowing tax collection and requiring increased government spending. This would increase the budget deficits further, putting even more upward pressure on interest rates. Higher mortgage rates and increased unemployment will put renewed downward pressure on home prices, perhaps leading to another large wave of foreclosures. My guess is that losses on government insured mortgages alone could add several hundred billion more to annual budget deficits. When all of these factors are taken into account, I believe that annual budget deficits could quickly approach, and exceed $3 trillion. All this could be in the cards if interest rates were to approach a modest five per cent.

If the sheer enormity of the red ink were to finally worry our creditors, five per cent interest rates could quickly rise to ten. At those rates, the annual cost to pay the interest on the national debt could equal all federal tax revenues combined. If that occurs we will have to either slash federal spending across the board (including cuts to politically sensitive entitlements), raise taxes significantly on the poor and middle class (as well as the rich), default on the debt, or hit everyone with the sustained impact of high inflation. Now that's a real fiscal cliff!

By foolishly borrowing so heavily when interest rates are low our government is driving us toward this cliff with its eyes firmly glued to the rear view mirror. For years I have warned that a financial crisis would be triggered by the popping of the real estate bubble. My warnings were routinely ignored based on the near universal assumption that real estate prices would never fall. My warnings about the real fiscal cliff are also being ignored because of a similarly false premise that interest rates can never rise. However, if history can be a guide, we should view the current period of ultra low rates as the exception rather than the rule.

And what happens when our colossal debts truly become unmanageable? Chris Martenson provides the sobering lessons from one such episode that occurred less than a century ago in "Our Money Is Dying."

In the book When Money Dies by Adam Fergusson, which details Weimar Germany's inflation over the period from 1918 to 1923, the most riveting parts for me were the first-hand accounts from the people caught in the storm.

So many people left their wealth in the system only to watch it get eroded and utterly destroyed over time. The reasons were many: patriotism, inertia, disbelief, and denial cruelly fed by hope every time prices moderated or even retreated momentarily.

The simple observation is that many people had a blind belief in the money system. They lost their wealth because they were unable or unwilling to allow reality to challenge their beliefs. It's not that there weren't numerous warning signs to heed -- in fact, they could be seen everywhere -- but most willfully ignored them.

Most mysterious is the fact that in Austria and Germany, where the inflation struck most severely, there were numerous borders and currencies into which people could have dodged to protect their wealth. That is, protecting one's wealth was a relatively straightforward and simple manner. And yet…it did not happen.

What can you do to protect yourself? I'm no expert, but according to the real financial gurus like Mike Shedlock, investing a portion of your assets in gold could help protect your portfolio. Shedlock recommends GoldMoney to do so.

I would just recommend preparing. Because annual trillion-dollar deficits are certain to end in disaster, unless we return this country to Constitutional conservatism.

Best I can tell, if you're a gun-owner, Bank of America would prefer you move your business to another bank. Immediately.

Papa B writes, "If you are not familiar with McMillan manufacturing, they are a large manufacturer of firearms stocks and components located in Phoenix, Arizona."

McMillan Fiberglass Stocks, McMillan Firearms Manufacturing, McMillan Group International have been collectively banking with Bank of America for 12 years.

Today Mr. Ray Fox, Senior Vice President, Market Manager, Business Banking, Global Commercial Banking (Bank of America) came to my office. He scheduled the meeting as an “account analysis” meeting in order to evaluate the two lines of credit we have with them... He spent five minutes talking about how McMillan has changed in the last five years and have become more of a firearms manufacturer than a supplier of accessories.

At this point I interrupted him and asked "Can I possibly save you some time so that you don’t waste your breath? What you are going to tell me is that because we are in the firearms manufacturing business you no longer want my business."

"That is correct", he says.

I replied, "That is okay, we will move our accounts as soon as possible. We can find a Second Amendment-friendly bank that will be glad to have our business. You won’t mind if I tell the NRA, SCI and everyone one I know that BofA is not firearms industry friendly?"

"You have to do what you must," he said.

"So you are telling me this is a politically motivated decision, is that right?"

Mr. Fox confirmed that it was. At which point I told him that the meeting was over and there was nothing left for him to say.

I think it is important for all Americans who believe in and support our Second amendment rights to keep and bear arms should know when a business does not support these rights. What you do with that knowledge is up to you.

When I don’t agree with a business’ political position I can not in good conscience support them. We will soon no longer be accepting Bank of America credit cards as payment for our products.

Kelly D. McMillan
Director of Operations
McMillan Group International, LLC
1638 W Knudsen Dr
Phoenix, Arizona 85027
McMillan Integrity-Global Vision

I later discovered that William Jacobson wrote about this incident a few weeks ago. You can confirm the letter's content on McMillan's Facebook page.

Good News: Feds Look Seriously at Attacking the Deficit. Bad News: They're Targeting Retirement Accounts.

There are really no depths to which Democrats won't stoop in order to keep their unconstitutional Ponzi schemes running, are there?

Uncle Sam, in a desperate attempt to fix its $16 trillion-plus deficit, is leering over Americans’ retirement nest egg as its new bailout fund.

Capitol Hill politicians are assessing tax changes that could let the Internal Revenue Service lay claim to a portion of the $18 trillion sitting in 401(k) accounts and other tax breaks used by middle-class workers, including cutting the mortgage tax deduction... as one way to prevent government bankruptcy.

I love the term "tax breaks", don't you? As if it's the government's money, and not yours.

Besides 401(k)s, other possibilities include the mortgage-interest deduction on second homes, as well as benefits from employer-provided health insurance, which are untaxed now.

And once the mortgage-interest deduction is removed for second homes, it won't be much longer until all mortgage deductions are eliminated. Because when the Constitution no longer constrains government, the leviathan becomes insatiable.

And all of these Rube Golberg contraptions should do wonders for the housing market, don't you think?

Last week a group of retirement industry experts went to Capitol Hill to criticize these proposed changes in retirement-plan rules. “These changes could have unintended consequences,” warns Lynn Dudley of the American Benefits Council (ABC).

Testifying before the House Ways and Means Committee about the proposals, Randolf Hardock, of ABC’s board of directors, said, “[The idea] could seriously undermine the retirement savings system.”

Jack VanDerhei, research director of Employee Benefit Research Institute (EBRI), believes either of the two proposed 401(k) changes under review would have a “catastrophic” effect on the current retirement saving system.

Unintended consequences indeed.

How about a really crazy idea? Like the federal government slashes expenses until it's spending only what it takes in? Oh, that's right -- we have a president addicted to trillion-dollar deficits. Forget I mentioned it.


Hat tip: Mark Levin.

Chart: The Price of Gold Since... The Year 1265 A.D.

Tyler Durden offers the following graph courtesy of the Bank of England, which reinforces the notion that what goes around comes around.

We have often seen requests to show the price of gold going back as long as possible. Tonight we can oblige, with a gold price chart, indexed in 2010 British Pounds, going all the way back to 1265...

...To the surprise of many, the early 1980s gold price surge is not the only time in history when gold exploded. It appears that based on the surge in gold back in the late 15th century, there was actually quite a serious need for Columbus to go forth and find a source of gold, because last we checked Ferdinand and Isabella did not have Bernanke's money printers back then. And yes, as Goldman says, there were no ETFs back in the 16th century to draw demand away from the real deal and into make believe exposure.

Ben Bernanke could not be reached for comment at press time.


Related: Introducing the Obama Financial Anxiety Index Level™ (O-FAIL for short)