Why Gold Might (Weirdly) Be A Contrarian Investment Right Now

Why Gold Might (Weirdly) Be A Contrarian Investment Right Now

Notes From the Field By Simon Black/James Hickman  March 5, 2024

[Important Reminder: (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

It’s hard to say with a straight face that an asset hovering near its all-time high could be a “contrarian” investment. But I’m going to say it anyhow-- I think gold may be a contrarian play right now.

Now, it would be easy to assume that gold is near its all-time high because everyone is buying. And normally that would be true; typically, whenever an asset soars to a record high, it’s because individual investors are piling into the market.

We’ve seen this countless times, from Bitcoin to meme stocks; once something becomes the hot thing to own, small investors-- and occasionally professionally managed funds-- drive the price higher.

But that’s not happening with gold. In fact, investors have been abandoning gold for years.

Publicly available data from more than 100 gold ETFs (all of which are conveniently aggregated by the World Gold Council) show that western investors have been selling off their gold ETFs for most of the past few years.

WGC data show that North American and European investors dumped over 700 metric tons of gold since May of 2022, equivalent to nearly 20% of ETF holdings.

In fact, outflows for the month of January alone (the most recent month of published data) totaled more than 50 metric tons-- the second highest outflow in a year.

Most notably, however, North American, and European investors dumped 179.6 metric tons of gold September 2023 through January 2024.

This is important, because during that time period, the price of gold surged from $1820 per ounce to nearly $2100.

Strange, right? If investors were selling off substantial quantities of gold, it seems like the price should have fallen. Instead, it rose 15%. How is that possible?

Well, the reason that gold keeps going higher is because, while individual investors are selling, there’s another group that’s buying.

In fact, this group of buyers is completely price insensitive. They don’t care how much they pay per ounce. They are not even looking for a return on investment. And they have mountains of cash to spend.

The group of buyers I’m talking about is central banks and governments.

And not just the usual suspects like China and Russia either (though China did buy more than 200 metric tons in 2023). Others like Poland, India, Singapore, Czech Republic, Philippines… and even Iraq.

To me this is an obvious signal that the global financial system is probably going to change sooner rather than later. And long-time readers know we have been writing about this for years.

Reserve currencies throughout history have always come and gone.

There was a time when the Greek drachma dominated trade and commerce in the Mediterranean (due in large part to the conquests of Alexander the Great). It was displaced by the Roman denarius, then the Byzantine gold solidus, then the Venetian ducat.

Reserve currencies rise to prominence because people have confidence in the issuer, i.e. the Roman Empire, or the Republic of Venice, or the Spanish Empire.

But eventually that confidence wanes-- especially as the empire debases its currency and runs up massive debts.

That’s the situation the United States is in right now.

The national debt is already $34.4 trillion. And the Congressional Budget Office expects it to rise by at least $20 trillion over the next decade.

The dollar became the global reserve currency back in 1944 when there were no other nations to rival the US.

The US was the only country that hadn’t been completely obliterated by war. It boasted the largest, freest, most productive economy. It possessed the best technology and manufacturing capacity. It had the largest pool of savings.

And it also had one of the world’s largest and most rapidly growing populations.

Yet even with such an impressive socioeconomic resume, the rest of the world wasn’t willing to blindly trust the US government with the world’s reserve currency… not without first putting some critical checks and balances in place.

First, while other nations agreed to fix their currencies to the US dollar, the US agreed to fix the dollar to gold at a rate of $35 per troy ounce.

And second, the US government had to guarantee that the dollar would be freely convertible to gold; that way, if any nation ever lost confidence in the Treasury Department or Federal Reserve, they could easily redeem their dollars for gold.

This is a pretty critical point to understand: immediately following World War II, the US was at the peak of its power. Every other developed nation on earth had been devastated by the war. Farms and factories had been destroyed. Chaos and hunger were rampant. Entire governments had been toppled.

Yet even with such a tremendous power imbalance (i.e. the US was in pristine condition compared to Europe), allied nations still weren’t willing to go all-in on the US dollar. And they demanded the gold convertibility as a guarantee.

That was 80 years ago. And it’s safe to say that the US is nowhere near the peak of its geopolitical power anymore. Adversary nations are everywhere, and the US government’s finances are an embarrassing catastrophe.

When I see central banks buying up gold at record high prices, this suggests to me that they are preparing for a new global financial system-- one that is based on gold instead of the US dollar.

After all, this is the most logical scenario.

It would be naive (and deliberately ignorant of history) to believe that the dollar will go on indefinitely as the world’s dominant reserve currency, given the pitiful trend of US government finances. Even the IMF has called for a reset in the global financial system.

It’s also hard to believe that any new financial system would be centered on a Chinese currency; no one trusts the CCP, nor should they.

Gold is the most viable option to replace the dollar as the global reserve currency because it doesn’t require any convincing. Governments and central banks all over the world already own gold, just as they have for thousands of years.

And it’s a lot easier for everyone to have confidence in an asset class that no single nation controls.

Given the trend of their large-scale gold purchases, it appears that foreign governments and central banks may be preparing for this potential new financial system.

I’ve argued before that a gold-based financial system could send prices beyond $10,000 or more.

So, yes, even though gold is near a record high, it’s important to remember that individual investors are selling at a time when central banks are gobbling it up even more quickly.

And it’s possible they’re buying for a very deliberate reason.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

What Lies Beneath Monday Afternoon 3-4-24

What Lies Beneath Monday Afternoon 3-4-24

Jonathan Clements  |  Feb 24, 2024 Humble Dollar

MONEY IS A TOOL. But a tool for what? We might imagine it’s simply a way to purchase the goods and services we need or want. But in truth, there are all kinds of things that money can do for us—some worthy, some not so much.

Want to use your wealth more wisely? I think all of us should spend time pondering what money represents to us, how we use it and why we like to have it. Here are just nine of the reasons that folks look to amass money:

1. More options. I’ve heard folks describe their savings as “-— you” money, offering the chance to give the middle finger to the boss whenever work becomes unbearable. Less crassly, others have said money represents “stored energy” or “financial freedom.”

The notion: Even if we aren’t currently putting our money to use, we know we could—and that potential is one of money’s most appealing qualities. I agree, though I’m also aware that the seemingly endless options offered by money come with a catch: As soon as we take advantage of them, our pool of money dwindles, and with it our financial options.

2. Financial security. “You’ve saved all that money. When are you going to spend it?” I’ve long thought “never” was a perfectly fine answer.

Money may represent the financial freedom to purchase all manner of goods and services. But instead of buying things, we can use money to buy freedom from worry. In a world where many—and perhaps most—folks fret constantly about their finances, I think the freedom not to worry about money is one of the top reasons to amass some savings.

3. More time. Research has found that, if our goal is greater happiness, one of the more effective strategies is using money to pay others to do tasks we find distasteful, whether it’s cleaning the house, mowing the lawn, painting the bathroom or whatever else makes our personal list of loathsome tasks.

This strikes me as a wise way to spend money: Time is the ultimate limited resource, and we don’t want to squander it on tasks we loathe. But—fingers crossed—having money should also save us time for another reason: Once we have a healthy sum set aside, we should be able to spend less time worrying about financial issues.

4. Fewer hassles. Money doesn’t just allow us to pay others to do tasks we find distasteful. It can also make life easier and less stressful. Travel is an obvious example. Thanks to money, we might take a taxi rather than a bus, or fly first class rather than economy.

Still, if we aren’t careful, money can have the opposite effect, resulting in even more hassles. For instance, emboldened by our fat financial accounts, we might buy another car or purchase a second home. These additional items might seem like they’d enhance our life. But often, they quickly become a burden, because we now have to care for these possessions, with all the wasted time and hassles that are involved.

https://humbledollar.com/2024/02/what-lies-beneath/

Yesterday’s Influence Sunday Afternoon 3-3-24

Yesterday’s Influence Sunday Afternoon 3-3-24

Adam M. Grossman  |  Humble Dollar

MY FIRST DAY IN the investment industry was—unfortunately—not so great. On the morning of Sept. 15, 2008, the investment bank Lehman Brothers filed for bankruptcy, sending the stock market into a free fall. The rest of 2008 was equally ugly, with the S&P 500 losing 37% for the year. But that experience provided investors with a valuable lesson—about the power of recency bias.

Recency bias is the mind’s tendency to extrapolate. When things are terrible, as they were on that day in 2008, it’s hard to imagine how or when things might ever get better. On the other hand, when markets are rising, it’s hard to imagine what might cause that positive momentum to slow.

Recency bias causes us to look backward—to assume that what happened yesterday will happen again tomorrow. That can lead investors to do the opposite of what would be best. Consider what we’ve experienced in just the past two years.

At the beginning of 2022, the stock market was on a tear. After hitting bottom in the spring of 2020, investment markets had been delivering steady gains for nearly two years. The economy was strong, and it looked like this good fortune would continue. But it was at that point that inflation readings began to become more problematic and, in response, the Federal Reserve began lifting interest rates. In all, the Fed raised rates seven times in 2022. The result for investors was punishing, with both stocks and bonds dropping at the same time—a rare occurrence. Stocks lost nearly 20% for the year, and bonds lost more than 10%.

By the end of 2022, investors weren’t feeling so good. Markets were down, inflation was still running high, and it was hard to see how things could improve. The notion that the Fed could engineer a “soft landing”—bringing down inflation without causing a recession—appeared remote. But just when sentiment seemed to be at its worst, inflation turned a corner. The Fed did continue raising rates into 2023, but the increases were smaller and sentiment improved. The result: Just when investors least expected it, stocks took off, gaining more than 25% for the year.

This describes just the past two years, but it’s a microcosm of investors’ experience nearly every year. Just when one trend appears to be well entrenched, something changes, upending expectations. It’s at times like this that recency bias can lead us astray. What can you do to combat it?

The simple answer would be to ignore the news. In fact, a famous study once tested this idea. Participants were given paper portfolios to trade and were split into two groups. The first group received regular news reports on their investments, while the second received less information. The result:

https://humbledollar.com/2024/03/yesterdays-influence/

Even The FDIC Doesn’t Want To Pay Its Tax Bill…

Even The FDIC Doesn’t Want To Pay Its Tax Bill…

Hotes From the Field By Simon Black/James Hickman February 28, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

Almost one year ago to the day-- on February 24, 2023-- Silicon Valley Bank released its 2022 annual report. And senior executives must have been pretty nervous since the report showed that the bank was nearly insolvent.

The bank had acquired a massive portfolio of more than $100 billion of US government bonds-- supposedly the ‘safest’ asset class in the world-- during 2020 and 2021 back when interest rates were at historic lows.

But then the Fed started hiking rates very quickly in 2022. And higher rates cause bond prices to fall-- even the ‘safest’ ones like US Treasury bonds.

By the end of 2022, Silicon Valley Bank’s portfolio of US government bonds was down by more than $15 billion. And with barely $16 billion in total capital, Silicon Valley Bank was nearly wiped out.

Their 2022 annual report communicated this insolvency risk very clearly. And the bank’s leadership must have probably been expecting the stock to crash almost immediately.

And yet it didn’t. After the annual report was released and all the ‘experts’ on Wall Street had a chance to see the alarming data, Silicon Valley Bank’s stock price barely budged.

Then, just ten days later, the Chairman of the Federal Reserve testified to Congress that the Fed’s rapid interest rate hikes presented absolutely zero risk to the financial system:

“Nothing about the data suggests to me that we’ve [raised rates] too much. . .” he said.

Of course, the Fed’s rapid interest rate hikes were precisely the reason why Silicon Valley Bank’s bond portfolio had lost so much value.

But again, neither Wall Street nor the Fed (which, as a financial regulator, had unfettered access to Silicon Valley Bank’s real-time financial condition) thought there was any risk whatsoever.

We know what happened next, and Silicon Valley Bank collapsed within a week.

But there’s now a new, and even more bizarre chapter to the story.

Typically, when banks in the US fail, one of the federal banking regulators (usually the FDIC, or Federal Deposit Insurance Corporation) steps in to take over. 

And that’s what happened with Silicon Valley Bank: the FDIC took over operations almost immediately to try and sort out the mess.

Bank restructurings, however, are almost always chaotic. They take time. The FDIC must liquidate assets in an orderly manner to maximize the value of the balance sheet, then prioritize claims against those assets.

Depositors obviously need to be paid. Creditors and lenders want their money too. And so, of course, does the government.

It turns out that Silicon Valley Bank also owed a tax bill to the IRS… $1.45 billion to be exact.

And since the FDIC became the legally responsible party of Silicon Valley Bank, the IRS went knocking on the door of its fellow government agency to ask for the money.

The FDIC refused.

In fact, according to the FDIC, they owe absolutely zero tax and will pay nothing.

Hilarious, right? This is literally government agency versus government agency in a dispute over taxes. And they can’t even settle the matter like grown adults, so the case is now going to federal court.

This raises an obvious point: if even a government agency like the FDIC is going out of its way to minimize its tax bill, then why shouldn’t everyone else?

There are way too many hard-core Marxists in the United States these days who insist on higher taxes, new taxes, punitive taxes. Activist groups like Pro Publica have published the illegally acquired tax returns of wealthy Americans in an effort to shame people… as if following the tax code and taking completely legitimate steps to reduce what you owe is some mortal sin.

But this case between the FDIC and IRS only proves the point made by Judge ‘Learned’ Hand decades ago, that “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury.”

Taking legal steps to reduce your taxes is completely sensible. And frankly tax reduction isn’t even part of a Plan B; it should be Plan A!

Fortunately, there are plenty of ways to do this. In 2024, for example, you can reduce your taxable income by $23,000 (or $27,000 if you're 50 or older), through pre-tax contributions to a Traditional 401(k).

For those who are self-employed or have a side business, a solo 401(k) allows an even greater tax-free contribution of up to $69,000 (and $76,500 for those aged 50 or older).

Plus, you have more freedom to invest your money as you see fit-- real estate, crypto, and more.

And while you do eventually have to pay taxes when you withdraw the funds in retirement, most retirees will be in a lower tax bracket at that point. Plus, your investments will have grown and compounded tax-free for that entire time.

If you’re willing to move across state lines, you can reduce or eliminate state and local taxes. If you are willing and able to move abroad, you can potentially eliminate federal taxes as well.

For US citizens living abroad, the Foreign Earned Income Exclusion (FEIE) allows you to earn up to $126,500 as an individual, or $253,000 as a couple, tax-free (though this does not include investment income).

Plus, you can exclude even more as a housing expense, which varies depending on where you live overseas.

And for people who move to Puerto Rico, as both myself and my partner Peter Schiff did, tax rates go down to 0% on capital gains, and just 4% on business income.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/even-the-fdic-doesnt-want-to-pay-its-tax-bill-150216/

Even Warren Buffett’s Legendary Optimism Is Fading

Even Warren Buffett’s Legendary Optimism Is Fading..

Notes From the Field By Simon Black/James Hickman February 26, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

Early in the spring of 1956, only weeks after Elvis Presley released his debut studio album, and actress Norma Jean Mortenson had her name legally changed to Marilyn Monroe, a budding 25-year-old businessman from the American Midwest fatefully registered his first-ever company.

His name, of course, was Warren Buffett. And the company he founded was called Buffett Associates-- which was formed with $105,000 of capital from his friends and family.

The US economy at the time was absolutely booming. Interest rates in 1956 were at historic lows. Inflation was practically zero. Economic growth was a dizzying 7%. Productivity growth was strong.

The US was no longer at war. And the national debt-- which had reached a peak of 120% of GDP in the 1940s due to the costs of World War II-- had been cut in half… and was falling further each year.

America was proudly capitalist, and the government actually made sound and effective investments, like the US federal highway system. Businesses reaped the benefits: corporate earnings across the S&P 500 index soared.

Yet, at the time when Buffett formed his business in 1956, stocks were still cheap… trading at less than 12x earnings (versus nearly 30x today).

It’s hard to imagine better economic or market conditions: a high growth, capitalist economy with low inflation, low debt, high productivity, and cheap stocks? Buffett could have hardly picked a better time to get started.

And, although there were plenty of ups and downs along the way, those pristine conditions lasted throughout the first several decades of his career.

Buffett is obviously one of the most talented investors to have ever lived, and he surrounded himself with other incredibly talented people.

But (and he would probably be the first to admit) his success would not have been as great without the power and dynamism of the US economy behind him.

And this is why Warren Buffett has long been one of America’s biggest economic cheerleaders.

Over the past 15+ years, Buffett has had an insider’s view of some very concerning trends. The US national debt has been rising out of control. The Federal Reserve has made a mess of the dollar. Woke fanatics have hijacked capitalism.

Yet through it all, Buffett has maintained a calm, persistent optimism in America; he routinely dismisses concerns over the debt, or the dollar, or the future of the US economy, and has seemed to believe that nothing could ever derail American progress.

But as I read through his annual letter this past weekend, it seems that even Buffett’s legendary optimism is starting to crack.

First, it’s clear that even Buffett thinks that government regulation has gone way too far.

Buffett explains, for example, that utility companies were “once regarded as among the most stable industries in America” because of their consistent profitability.

Yet he laments that the utility companies he acquired were a “severe earnings disappointment” in 2023 due to over-regulation from fanatical politicians.

Buffet complains that “the regulatory climate in a few states has raised the specter of zero profitability or even bankruptcy (an actual outcome at California’s largest utility and a current threat in Hawaii).”

“In such jurisdictions,” he writes, “it is difficult to project both earnings and asset values in what was once regarded as among the most stable industries in America.”

In the end, he tells shareholders that he “did not anticipate or even consider the adverse developments in regulatory [changes] and . . . made a costly mistake in not doing so.”

He goes on to talk about America’s dilapidated infrastructure, which is in critical need of maintenance and reinvestment. And Buffett cites the case of BNSF Railway (the largest freight rail in the US) which he acquired in 2009.

BNSF, he explains, has had to spend tens of billions of dollars to fix up its rail network “simply [to] maintain its present level of business. This reality is bad for owners. . .”

But it’s not just BNSF. And it’s not just railways. Almost ALL infrastructure in the US is in serious need of repair.

Obviously, the US government made a halfhearted attempted to address infrastructure challenges when it passed a $1 trillion investment package in 2021. But “the consequent capital expenditure” that’s truly required to fix it, Buffett writes, “will be staggering.”

One final point worth mentioning is Buffett’s comments on size. Again, when he started his first partnership in 1956, he only had $105k to invest, and he could move nimbly in and out of the market.

Today, Buffett’s company has almost $170 billion in cash, which is virtually impossible to manage efficiently. He writes that it’s “like turning a battleship”, and that the days of being quick and nimble “are long behind us; size did us in...”

Buffett, of course, is talking about his own company (Berkshire Hathaway). But the same could just as easily be said for the US government.

Think about it-- if someone of Buffett’s extraordinary talent admits that he cannot efficiently deploy $170 billion, how are Joe Biden or Transportation Secretary Pete Buttigieg supposed to be able to invest that $1 trillion infrastructure money?

Quite poorly, I’d imagine.

Buffett does acknowledge that “America has been a terrific country for investors.” And he’s absolutely right. It still is, for the most part.

Nvidia is an easy example: it simply would not have been able to achieve the same level of success had it been based in most other countries. If Nvidia were a Chinese company, for example, it would have been taken over by the CCP long ago, and CEO Jensen Huang would have probably been disappeared.

But one of the most important caveats of investing applies to the US economy as well: “past performance does not guarantee future results.”

Warren Buffett enjoyed some of the most pristine economic conditions imaginable for the vast majority of his nearly 70-year career. And as I have written several times, it is absolutely possible that America’s best days are still ahead.

There is clearly a future scenario in which small-scale nuclear reactors generate clean, low-carbon, ultra-cheap energy which powers highly productive AI and robotic automation. Economic growth is off the charts, and tax revenue soars as a result. The national debt eventually melts away, and the US re-establishes its primacy by out-producing and out-innovating the competition.

But at the moment there are serious issues to contend with.

US productivity is anemic. So is economic growth. War, inflation, cyberattacks, border crisis, social conflict, the rise of adversary nations, decline of the US dollar’s dominance, etc. are all pervasive challenges.

(Not to mention potential near-term consequences-- like the impact of Russia, China, North Korea, and terrorist groups sending so many of their operatives across the southern border.)

The government not only isn’t fixing these problems, but they seem to be making them worse by the day.  So, it’s important to take notice when even someone as optimistic as Buffett starts complaining.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/even-warren-buffetts-legendary-optimism-is-fading-150201/

Why The ‘Netflix’ Stock Of 100 Years Ago Fell By 98%

Why The ‘Netflix’ Stock Of 100 Years Ago Fell By 98%

Notes From the Field By Simon Black / James Hickman  February 21, 2024

[Important Reminder: In case you missed our announcement from January 24, Sovereign Man has merged with Peter Schiff's media group. We are now called Schiff Sovereign, and our founder (Simon Black) has dropped the pen name and is now writing under his real name, James Hickman.]

On January 16, 1917-- at the peak of World War I, the imperial German Foreign Minister, Arthur Zimmerman, sent an encoded telegram destined for the President of Mexico.

Zimmerman wanted to form an alliance with Mexico, in the hopes that the United States would be too distracted with potential conflict at their southern border to even think about joining the war in Europe.

So, in his effort to strike a deal, Zimmerman promised not only a military alliance, but to help Mexico “reconquer her lost territories of Texas, New Mexico, and Arizona.”

Unfortunately for the German Empire, Zimmerman’s secret cable was intercepted and decoded by a British cryptography team; it was then shared with US President Woodrow Wilson, who released it to the newspapers on March 1st.

Americans were outraged, and five weeks later, the US joined the war… with the entire nation singularly focused on one goal: beating Germany.

The United States economy answered the call with remarkable vigor.

American businesses cranked out tanks, bullets, airplanes, fuel, provisions, and anything else needed for total victory. And as a result, companies which were vital to the war effort shot up in value.

The profits of the United States Steel Corporation, for example, more than quadrupled from 1915-1917, and the company became one of the first in history to be worth $1 billion.

Other companies, including Anaconda Copper, and various food and energy producers, also performed extremely well.

But eventually the war ended, and the roaring 20s began. The economy was flush with cash. Jobs were plentiful. Prosperity was everywhere.

And eventually the values of hard work and sacrifice were displaced by a culture of leisure and recreation.

These new values were reflected in the stock market.

Radio and motion picture were the hot new consumer technologies of that era. And the Radio Corporation of America-- RCA-- manufactured the radios and phonographs, produced music and records, owned broadcast stations (including the original NBC), and even bought movie theaters.

RCA was basically the Netflix and Apple of its day. And during the 1920s, RCA stock rose 200x… which was really a sign of the times. This was an era of peace and prosperity, so Americans prioritized consumption and recreation over production. And RCA was the ultimate consumer recreation stock.

But then the Great Depression set in at the end of the decade; RCA stock dropped 98% from a peak of $114.75 in 1929 to $2.62 in 1932.

Suddenly, American values had changed again. Money was no longer plentiful, and people had to make tough decisions about what to buy.

Hard work and sacrifice were back in vogue, and spending money on leisure and recreation seemed absolutely insane.

Once again, this shift in values was reflected in the stock market.

Recreation-oriented companies were out, while ‘boring’ companies like Proctor & Gamble-- which efficiently manufactured the most critical consumer staples-- became the best performers of the era.

Energy companies also did very well, because, when push comes to shove and consumers have to make decisions about where to allocate scarce resources, energy (along with food) almost invariably ranks towards the top.

This cycle has repeated again and again throughout history. During boom times, the world’s most critical resources like food, energy, and raw materials often become forgotten investments. Meanwhile, investors chase hot fads which are usually oriented towards consumer leisure and recreation.

We’ve seen this in our own recent history.

Netflix is a great example; it’s often (hilariously) referred to as a technology company. But Netflix is obviously in the recreation business.

So is Facebook (Meta) for that matter, whose products really just enable people to waste time by swiping and scrolling through endless butt selfies.

Apple designs the devices which people use to swipe and scroll. Amazon makes it super easy for people to spend money on stuff they don’t really need.

You get the idea. These are ultimately consumer recreation businesses... and there’s nothing wrong with that. But it is worth noting that the most valuable companies in the world are predominantly in this consumer recreation sector.

That’s because most of the last 15 years has been an era of abundance, similar to the Roaring 20s. And with so much boundless prosperity, consumer recreation once again became a major financial priority, whereas something as banal as energy production simply fell off the list of core economic values.

Think about it: we constantly hear famous economists praise the “American Consumer”. No one ever talks about the American Producer. And certainly not the American Energy Producer.

But values can and do shift very quickly. Just look at Pfizer.

As recently as 2019, Big Pharma had been among the most hated sectors in the world due to sky-high drug prices. But then the pandemic came along, and suddenly everyone started exuberantly supporting Big Pharma.

Priorities shifted. And Pfizer became one of the world’s most valuable companies.

I believe that priorities are on track to shift again, given how the US government’s massive debt problems will likely lead to sustained inflation within the next 5-7 years (if not sooner).

And as financial values and priorities shift, critical resources should take precedence over consumer recreation once again.

This doesn’t mean that consumer businesses will go bust. However, the sky-high valuations that we’ve seen (like 50x Price/Earnings ratios) for recreation-oriented businesses will not last.

Conversely, critical resource businesses will likely surge in value.

These are companies which have been mostly ignored (or even deliberately injured) ... which means that many such businesses are selling for historically low valuations.

But over the next several years as priorities shift again, they could easily become the ‘must own’, best performing companies in the world.

To your freedom,  James Hickman   Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/why-the-netflix-stock-of-100-years-ago-fell-by-98-150163/

7 Signs You’re Financially Healthy

7 Signs You’re Financially Healthy

Even If You Don't Feel Like It — How Many Do You Have?

Lou Carlozo   Wed, February 21, 2024

January was Financial Wellness Month, but it's possible many people still began February believing that in some way — perhaps many ways — they must be mishandling their income, investments and spending.

Though we may feel literally poor about our financial standing, taking a courageous closer look may show us a much different reality.

In one of his videos, YouTuber and former financial advisor Humphrey Yang’s identifies seven signs that you’re actually doing well with your money, emotions or beliefs to the contrary.

With over 275,000 views to date, the clip isn’t set up as a pass-fail test or a prelude to a guilt trip. “... if they don’t apply to you, we can talk about how you can quickly achieve financial wellbeing,” he says.

1. You don’t try to signal your wealth

Using big ticket items to flaunt how much you’ve got is “a zero sum game” of winners and losers, he says. “If you’re buying a Lamborghini, you’re probably just trying to show to outsiders that you’re successful enough to buy a $300,000 car.” Yang says instead of borrowing large sums to buy expensive things and elevate your social status, you should be seeking freedom and peace of mind through building wealth, which he says is a "positive sum game" where everybody can win.

2. You have an emergency fund of at least $2,000

You're on the right track if you have a $2,000 rainy day fund you can tap. The truth is that unexpected bills will pop up. Yang cites a Bankrate article saying 57% percent of Americans can’t afford a $1,000 emergency expense. Having at least double that in a high-yield savings account will mean you're ahead of most Americans, and he adds that it’s ideal to shoot for a cushion worth three to six months of expenses.

3. You’re able to meet your spending and savings targets

Yang sees this as evidence that you have defined financial goals and a budget or a way to track your expenses. He says if you’re making $75,000 annually and spending $60,000, then you should be “making a plan for that extra $15K." You should also be reviewing expenses to identify areas to cut back and identifying ways to earn more income.

To continue reading, please go to the original article here:

https://www.yahoo.com/finance/news/7-signs-financially-healthy-even-113600089.html

Aiming for Less

Aiming for Less

Richard Quinn  |  Jan 5, 2024 Humble Dollar

WHAT DOES IT MEAN to “live within your means”? To answer the question, we first need to define “means.”

If your gross income is $60,000, that income isn’t your means. For starters, you need to subtract income and payroll taxes. To live within your means, you need to spend no more than your net income—income after taxes and other withholdings.

I’ll go further and suggest that your true means are your income net of monthly savings for retirement and financial emergencies. Some people do even better. They live below their means, meaning they save extra—denying themselves spending that many others happily embrace.

Living below your means isn’t about deprivation or sacrificing all enjoyment. Rather, it’s about making a conscious decision to prioritize financial security. If you’re already saving enough to meet long-term and short-term goals, living far below your means strikes me as unnecessary, even punitive. I’m not a fan of super-frugality.

Living prudently is about managing your finances responsibly and making choices that align with your income. The key words here are “align with your income.” Living within your means is easier as your income rises, and yet many higher-income folks fail to do so.

Where you live is a factor, too. I live in the third highest income-tax state, one that also has the nation’s highest property taxes. The average property tax in our town is $17,206, and our bill is $13,600. One result: Our monthly fixed costs are $4,193.

These expenses include property taxes, homeowners’ association fees, and all insurance and utility bills. They don’t include the cost of groceries, gasoline, clothing, personal care services, gifts, eating out or car maintenance. It also doesn’t include any expenses related to our vacation home.

While some say they live comfortably in retirement on $50,000 a year, it costs us much more. We live comfortably, not luxuriously, but where we live makes a big difference in what it takes to do that. In other words, how much a person spends isn’t, by itself, an accurate indicator of frugality or prudent spending. Still, we manage to live below our means. One sign: We’re retired, and yet we still save each month.

Living within your means is easy. Let me rephrase that: It should be easy, but for many people, it isn’t. They falter in the face of all the pressure and encouragement to spend.

Some people will say that tracking your income and expenses is essential. Typical advice includes creating a budget to identify areas where you can cut back. I disagree. I contend the real problem isn’t a lack of knowledge about spending. Rather, it’s a lack of discipline, an inability to stay focused on financial goals and a propensity to rationalize spending.

My advice is to avoid impulse purchases. Don’t succumb to the temptation to buy things you don’t need or can’t afford. Give yourself time to think before making purchases.

To continue reading, please go to the original article here:

https://humbledollar.com/2024/01/aiming-for-less/

Outsmarting Pickpockets and Thieves

Outsmarting Pickpockets and Thieves

By Rick Steves 

A money belt tucked underneath your clothes keeps your essentials on you as securely and thoughtlessly as your underweaCrowded transit lines that cover tourist sights are happy hunting grounds for pickpockets — stay in physical contact with your bags.

While Europe has little violent crime, it does have its share of petty purse snatching, pickpocketing, phone grabbing, and general ripping off of tourists — especially in places where tourists gather. Thieves target vacationers — not because they're mean, but because they're smart. Travelers have all the good stuff in their bags and wallets. Loaded down with valuables, jetlagged, and bumbling around in a strange new environment, we stick out like jeweled thumbs. If I were a European street thief, I'd specialize in Americans — my card would say "Yanks R Us."

If you're not constantly on guard, you'll have something stolen. One summer, four out of five of my traveling companions lost cameras in one way or another. (Don't look at me.) But in more than 4,800 days of travel, I've been pickpocketed only once (on the Paris Métro, on a rare day I didn't wear my money belt) and mugged a single time (in a part of London where only fools and thieves tread).

My various rental cars have been broken into a total of six times (broken locks, shattered windows, lots of nonessential stuff taken), and one car was hot-wired (and abandoned a few blocks away after the thief found nothing to take). Not one of my hotel rooms has ever been rifled through, and I simply don't let thoughts of petty crime — or the rare instance of it — spoil the fun of being abroad.

Many tourists get indignant when pickpocketed or ripped off. If it happens to you, it's best to get over it quickly. You're rich and thieves aren't. You let your guard down and they grabbed your camera. It ruins your day and you have to buy a new one, while they sell it for a week's wages on their scale. It's wise to keep a material loss in perspective.

There probably aren't more thieves in Europe than in the US. We just notice them more because they target tourists. But remember, nearly all crimes suffered by tourists are nonviolent and avoidable. Be aware of the possible pitfalls of traveling, but relax and have fun. Limit your vulnerability rather than your travels.

If you exercise adequate discretion, stay aware of your belongings, and avoid putting yourself into risky situations (such as unlit, deserted areas at night), your travels should be about as dangerous as hometown grocery shopping. Don't travel fearfully — travel carefully.

Here's some advice given to me by a thief who won the lotto.

Be prepared. Before you go, take steps to minimize your loss in case of theft. Make copies of key documents, and store them online. Consider getting theft insurance for expensive electronics. Leave your fancy bling at home. Luxurious luggage lures thieves. The thief chooses the most impressive suitcase in the pile — never mine.

Mobile payment technology reduces the need to handle your cards or cash; if you have a payment app such as Apple Pay, Google Pay, or PayPal on your phone, become familiar with it before your trip.

If your phone disappears, you're out not just the cost of the device — but also the photos and personal data stored on it. It's smart to take extra precautions before your trip: Make sure you've got a "find my phone"-type app, back up your data, and enable password protection. While traveling, use the Wi-Fi at your hotel to back up your phone and its photos each night. If you don't know how to sync your stuff to the cloud, learn before your trip.

Wear a money belt. A money belt is a small, zippered fabric pouch on an elastic strap that fastens around your waist. I almost never travel without one — it's where I put anything I really, really don't want to lose.

To continue reading, please go to the original article here:

https://www.ricksteves.com/travel-tips/theft-scams/outsmarting-pickpockets

The 5 Levels of Wealth and How To Get There

The 5 Levels of Wealth and How To Get There

January 27, 2024 By Sheiresa McRae Ngo, AI Editor

If building wealth is one of your goals this year, you’re not alone. Roughly 48% of Americans are making financial resolutions for 2024 according to a study by Allianz Life Insurance Company. This is up from 43% last year.

Certified financial planners Brian Preston and Bo Hanson, hosts of The Money Guy Show, discussed how to reach the five levels of wealth. Here’s what they revealed about each wealth level and how to get there. 

Level 1: Stability

of their show, Hanson and Preston explain that financial stability signifies the ability to pay your bills without living paycheck to paycheck. This level is not solely about income, as even high earners can struggle to achieve stability. It’s about adopting a mindset of deferred gratification and discipline in spending.

Key aspects of stability include eliminating bad debts, following a budget, and understanding the importance of saving. To assess if you’re at this stage, check if you are not relying on services like “buy now, pay later,” have an emergency fund, and are not carrying a credit card balance.

Level 2: Strategy

Moving up the wealth pyramid, the next stage is strategy. Here, you’re no longer just surviving; you’re beginning to make your money work for you. This level involves controlling your paycheck rather than letting it control you. It’s about having a financial plan and executing it, not just dreaming.

Investing for Everyone

Strategy is also about educating yourself financially and avoiding the trap of chasing the latest investment fads. To transition to this stage, focus on increasing your income, managing major expenses wisely, and ensuring your spending aligns with your financial goals.

Level 3: Security

To continue reading, please go to the original article here: LINK

https://www.gobankingrates.com/money/financial-planning/the-5-levels-of-wealth-and-how-to-get-there/?utm_term=related_link_1&utm_campaign=1261535&utm_source=yahoo.com&utm_content=2&utm_medium=rss

8 Ways You Can Go From Broke to Rich in 2024

8 Ways You Can Go From Broke to Rich in 2024

Cindy Lamothe   Thu, February 15, 2024

Trying to get to a place of financial stability when you’re broke can feel like an uphill battle. But according to experts, you shouldn’t give up hope. With the right mindset and strategies, you can dig yourself out of financial struggle and significantly grow your wealth this year.

Here are some ways you can get ahead in 2024.

Identify Your Limitations

“In my experience as a finance expert, I have gathered that there are two major reasons individuals are broke and living paycheck to paycheck,” said Mafe Aclado, general manager of Coupon Snake.

“It is either they are not earning enough, or are like so many others who bring home a pretty decent income, but neglect to budget their expenses,” she explained.

“Without first identifying why you are broke and why you always blow through your earnings before the next paycheck arrives, it would be next to impossible to make any significant strides in your finances, much less go from broke to rich in 2024.”

She said finding out what aspect of your finances, or spending habits is limiting and hindering your financial growth, is the first step toward going from broke to rich this year.

That said, she noted that one way to tremendously improve your finances this year is to become dedicated and ready to put in the hard work that is required.

“You would just have to realize and be ready to make the necessary changes both in your spending and saving habits,” she added. “You would also have to be realistic and adopt a growth mentality because your money mindset is crucial to how much financial success you are able to achieve within one year.”

Start Investing Wisely

“I would say one of the best, and perhaps only, ways to go from broke to rich in a single year would be through making lucky picks when it comes to investments,” said David Kemmerer, CEO of CoinLedger.

“I have seen some of these types of results from crypto investments, but these do tend to be riskier and you should never be investing money you can’t afford to lose,” he noted.

“However, if you’re looking to accrue wealth and improve your financial situation through passive income, I would highly recommend investments as one way to grow your money and escape the paycheck-to-paycheck cycle in 2024.”

Ethan Keller, president of Dominion, also recommended you start investing as soon as possible to take advantage of the compounding growth.

“In order to reduce the amount of risk you are exposed to, you should diversify your portfolio and investigate low-cost investment options such as exchange-traded funds (ETFs) and index funds.”

Live Frugally

“Make the decision to live a frugal lifestyle and fight the urge to spend more than you can afford,” Keller said.

By living below your means, he said you’ll be able to save and invest more money, which ultimately speeds up the process of reaching your goal of becoming financially successful.

Begin Networking

To continue reading, please go to the original article here:

https://www.gobankingrates.com/money/wealth/ways-you-can-go-from-broke-to-rich-this-year/?utm_term=incontent_link_8&utm_campaign=1261535&utm_source=yahoo.com&utm_content=14&utm_medium=rss