A Real Asset With A 12% Dividend Yield

A Real Asset With A 12% Dividend Yield

Notes From the Field By James Hickman / Simon Black October 17, 2024

It’s very hard to overstate just how obliterated the global economy was following World War II. Europe was in ruins, with many major cities having been bombed back into the Stone Age. Japan had literally been nuked.

And just about every economy around the world that still had any manufacturing capacity was pumping out guns, bullets, and bombs; there was hardly any economic activity taking place that wasn’t somehow tied to the war.

It was sort of like Covid— the regular economy was shut down... and governments discovered very quickly that they couldn’t simply turn the global economic machine back on with the flip of a switch.

The transition from obliterated war economy to booming peacetime economy was an incredibly difficult one. So in 1948, the United States (which was among the only developed major economies still standing) launched the Marshal Plan.

The idea was simple, America would shovel $13 billion (which, as a percentage of global GDP is equivalent to around $5 trillion today) around the world to facilitate trade and economic development.

But alongside the financial aid came a promise: the US Navy would protect the seas, ensuring that the global flow of goods could continue unimpeded.

For decades, American naval dominance guaranteed a level of safety and stability that allowed international trade to thrive. Shipping routes were secured, costs remained low, and commerce could flow relatively uninterrupted across the world's oceans.

The post-WWII era ushered in an unprecedented period of cooperation and prosperity, making international trade easier, faster, and more profitable.

But those calm seas are growing choppy again.

The war between Russia and Ukraine, for example, has drastically altered oil trade routes. Russian crude oil, which once flowed easily into Europe, is now making much longer journeys to places like India, where it’s refined and then sent back to Europe as diesel.

This convoluted, inefficient process is adding enormous strain and cost to shipping routes, increasing the “ton miles”, i.e. each mile that a ton of product must travel.

But this is just one example. In the Middle East, the Houthis in Yemen have launched attacks on vessels transiting the Red Sea, creating a new chokepoint in global shipping lanes. Pirates have increased their attacks in the area as well.

Many oil tankers are now rerouting entirely around the southern tip of Africa to avoid the Suez Canal, extending travel times significantly.

The further oil must go, the more tankers are needed. The problem is, these changes took place quite rapidly, yet shipbuilding is not an industry that can quickly respond to that demand.

Shipbuilding is a slow, capital-intensive process. And after years of underinvestment, there are hardly any new tankers being built. Shipyards are busy constructing other types of vessels, but the number of new oil tankers remains near record lows.

At the same time, a large chunk of the existing global fleet is over 20 years old, nearing the end of its lifespan. This imbalance is going to worsen before it gets better, leading to a serious shortage in oil tankers at the exact moment when the world needs them most.

The combination of more ton miles and fewer ships is creating a perfect storm in the tanker market.

This imbalance is inflationary. Both shipping and energy are core components of nearly every supply chain. Higher costs to transport oil mean higher costs for just about everything else we buy—from groceries to manufactured goods.

Climate fanatics can pretend that the world is ready to run off wind and solar, which is why they suppress investment in everything from new drilling, to transport ships. But the reality is, oil is still the most important energy source on earth.

Energy is a prime example of a real asset— a critical resource that keeps the economy going, and cannot be created out of thin air by governments and central banks.

And the shipping companies which transport that oil are real asset businesses... which is why we have been following this industry closely.

One company in particular that we told subscribers about in our premium investment research stands out as being uniquely positioned to capitalize on these trends.

It has a fleet of 82 ships, with an average age of just over 10 years, meaning they have plenty of life left. They can also continue to benefit from the shortage of ships as long as it lasts— which we know from the global orderbook for new ships, will be several years at least.

But this also means the company won’t have to spend huge amounts of capital in the near future buying new ships. And already, it carries little debt... yet still pays around a 12% dividend.

Again, in addition to the dynamics of debt, deficits, and dysfunction in the US government which promise to increase inflation, global conflict is also inflationary.

This is another example of the real asset companies not only poised to do well in an inflationary world, but that are also trading near historic low valuations.

This shipping company, for example, is trading at a P/E (price to earnings) ratio of just 4.44.

While we can wish all we want that the world was not becoming less cooperative, that won’t change the reality. Better to position ourselves to benefit under these conditions, by investing in companies that actually gain from that disorder.

We’ve talked a lot about this same dynamic when it comes to gold, and why central banks around the world are turning to it, and away from the US dollar.

We also talked about it recently in relation to how the prices of certain critical metals have been artificially suppressed by climate fanatics who think the days of gas vehicles are past. They are wrong.

The best way to fight back, while inflation-proofing your future, is to invest in critical real asset companies at historic lows.

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

PS-

Our premium investment research service, The 4th Pillar, has provided recent, in-depth reports on several undervalued real asset businesses, which we believe are set to boom under these conditions

https://www.schiffsovereign.com/trends/a-real-asset-with-a-12-dividend-yield-151662/

Do I Need to Worry About Gift Taxes?

Do I Need to Worry About Gift Taxes?

Eric Reed  Tue, October 15, 2024  SmartAsset

I Want to Give $50k to My Daughter for a Down Payment on a Home - Do I Need to Worry About Gift Taxes? 

Imagine you have $50,000 to give to your daughter and her husband for a down payment on their new home. The question is, will you owe gift taxes because of your generous gesture?

Despite popular framing, the federal gift and estate taxes only apply to very wealthy households. Unless you have approximately $13 million to give away over your lifetime, these taxes likely won’t apply to you.

A financial advisor can help you navigate and plan for gift and estate taxes. To be very clear, these are the rules for federal taxation. Every state also has its own tax laws and every tax profile is different, so make sure to speak with a financial or tax professional before making any plans for your own assets. However, there are two main issues to consider within this scenario: the mortgage process and potential gift tax implications.

Down Payments and Gifts

With the mortgage and lender process, you want to ensure that you fill out all forms and requirements correctly. It is extremely unlikely that you can complicate the title to this property, but you can certainly complicate or invalidate the loan by making a mistake.

When your daughter applies for her mortgage, the lender will go through her finances in detail. They want to know what assets she has, where they came from, what income she has and any other information related to how she will repay this debt. The down payment is intended as an indicator of this financial stability, so receiving it from a third party can raise concerns.

Many lenders have rules around who can provide the money for a down payment. It’s common for them to reject a mortgage with a gifted down payment unless that money comes from someone with a longstanding relationship to the borrower. Among other issues, this is intended to prevent fraud and money laundering. Since the borrower is your daughter, that shouldn’t be a problem.

If you are giving the money directly to your daughter you will typically either need to “season” the money or provide a gift letter. Seasoning the money means transferring it more than 60 days in advance, again as an indicator of legitimacy against fraudulent transfers. A gift letter is a document signed by both the giver and the recipient confirming that this is a unilateral transfer with no right to repayment.

The specific format of the gift letter will vary based on lender and jurisdiction, so consult an attorney about this document. A financial advisor can also potentially help you through this process.

TO READ MORE:  https://www.yahoo.com/finance/news/want-daughter-her-husband-50-120000119.html

Financial Role Models of Millionaires: Who Do They Look Up To?

Financial Role Models of Millionaires: Who Do They Look Up To?

Cindy Lamothe  Sun, October 13, 2024  GOBankingRates

Many people seeking to grow their wealth may look up to millionaires as a source of inspiration, But who do these wealthy individuals admire?

According to Stephen Greet, CEO & co-founder of BeamJobs, self-made millionaires often seek advice from bold thinkers outside of traditional finance. “While this advice can be valuable for people with lower net worth, it’s crucial to adapt it carefully to fit your financial situation,” he said.

Below are some of the types of financial role models that inspire millionaires.

They Admire Contrarian Thinkers

“In my experience, self-made millionaires often look to contrarian thinkers or those who have succeeded by taking calculated, unconventional risks,” said Greet. He noted that they don’t always rely on traditional financial advisors or family; instead, they value perspectives from entrepreneurs, innovators or even mentors outside finance.

“These are individuals who see the world differently and aren’t afraid to break from the norm — a mindset that resonates with those who have built wealth from scratch,” he explained. “Now, are these good sources for people with lower net worth? I think the answer is yes — but with a caveat.”

While following these bold thinkers can open your eyes to opportunities others might miss, he said it’s essential to temper their advice with a strong understanding of your own financial reality. “For those with less wealth, risk tolerance is lower, so applying insights from these contrarian sources means adapting strategies to fit your financial situation.”

In other words, he said you can learn how to think differently, but the execution must be more conservative.

According to Greet, the takeaway for those with lower net worth is this: don’t limit yourself to traditional advice. “Look for insights from innovators who challenge the status quo. The key is blending their visionary mindset with practical, scalable steps that fit your financial capacity.”

They Look Within, Not Out

TO READ MORE:  https://www.yahoo.com/finance/news/financial-role-models-millionaires-look-170108523.html

6 Frugal Habits of the Super Rich and Famous

6 Frugal Habits of the Super Rich and Famous

Caitlyn Moorhead  Mon, October 14, 2024  GOBankingRates

In order for you to live frugally, you might want to take a page out of the super-rich. Though it may seem counterintuitive, wealthy people often practice a frugal lifestyle as they only spend their money when they see that money’s worth. In other words, they don’t just throw their money around, but rather make it work for them by forming healthy habits.

No matter if they are just making a good living or they have the net worth of Warren Buffett, the super-rich are also often frugal people. It’s not necessarily about clipping coupons or not using your credit cards, but it is about reshaping your spending habits in order to meet your long-term financial goals. Here are six ways millionaires practice a frugal lifestyle.

Pay Using Cash

Just because you have enough money to buy whatever you want, doesn’t mean you shouldn’t just stick with what you need. Next time you go to the grocery store, make a list and only bring enough cash for you to buy the items on this list. It will help you not make impulsive purchases and stick to your budget.

Try this practice every time you go shopping for clothing, household items or other specific things you can gauge the price beforehand. Only use the cash you bring on these outings and fight the temptation to use your debit or credit card to buy other stuff outside the budget you’ve set.

Pay Yourself First

Paying yourself first, or reverse budgeting, is when you create your budget around your savings goals and not your expenses. Here are a few key takeaways:

Allocate a percentage of your paycheck into savings each month.

Saving money can be done by setting up direct deposit so your savings are automated.

If you don’t want to directly deposit a percentage of your paycheck into a separate bank account you can also try setting up a recurring transfer from your checking account.

These automatic savings can pay future you in the form of investment accounts, retirement plans or IRAs.

You can spend what is left of your paycheck after savings on necessities and wants.

As your pay increases so should the amount you pay yourself each month in savings. Make sure to grow this annually to create a brighter financial future.

Travel on a Budget

Though there are exceptions, even the super-rich don’t always book the most expensive hotels or transportation accommodations. Instead, they opt to travel frugally and spend below their capability. All traveling frugally means is to not be wasteful with your money on your next trip- which often saves you the money you can then put toward other savings goals or even future vacations.

Live Beneath Your Means

Slight edits to your budget make a big difference has certain discretionary choices can save you hundreds per month. Being able to afford something doesn’t make it a good investment. Here are some ways you can live below your means like the rich do:

TO READ MORE:   https://www.yahoo.com/finance/news/6-frugal-habits-super-rich-140004741.html

3 Things the Wealthy Worry About Most

3 Things the Wealthy Worry About Most

Christy Bieber   Updated Mon, October 14, 2024  Moneywise

2 out 3 millionaires in the US don’t consider themselves rich — here are the 3 things the wealthy worry about most

Most people in America don't believe they're rich.  In fact, only 12% of the population thinks they're wealthy, according to recent research from Edelman Financial Engines.

Surprisingly, it's not just low- and middle-income households who don't feel flush with cash. A separate Northwestern Mutual study revealed only 33% of millionaires count themselves among the rich.

With so many millionaires reporting they don't feel great about their finances, it's worth looking at exactly what has this demographic group so concerned.

Here are three top fears of wealthy Americans so you can see how their fears compare to what average Americans worry about.

How Taxes Impact Retirement

For wealthy Americans, their No. 1 retirement concern isn't whether they'll have enough money to retire comfortably or have enough cash to last for life. Instead, Northwestern Mutual reveals their top fear is how taxes are likely to impact their retirement.

Concerns about taxation have prompted 61% of millionaires to create a plan to reduce the share of their retirement savings going to the IRS. These plans include strategic withdrawals, using a mix of traditional and Roth accounts, and claiming tax breaks for charitable deductions.

For Americans who are living on less, obviously running short of money is a more pressing concern than future tax bills. Still, even lower and middle-income individuals should consider how their retirement income will be affected by taxation.

The Senior Citizens League reports around half of all households now face taxes on Social Security benefits. Many older Americans whose income comes primarily from 401(k)s, IRAs or other accounts with taxable withdrawals could easily find themselves among this group. Taxes on withdrawals from these accounts will also cut into the amount of money they have to spend.

Making a strategic tax plan by borrowing the techniques of the rich and choosing a good mix of tax-advantaged accounts is a smart move no matter how big your bank account.

The Political Environment

TO READ MORE:  https://www.yahoo.com/finance/news/2-3-millionaires-us-don-105500922.html

Here Are 7 Things You Should Leave Out Of Your Will In The US

Here Are 7 Things You Should Leave Out Of Your Will In The US if you really care about your loved ones

Maurie Backman  Sun, October 13, 2024  Moneywise

Estate planning is one of the most important things you might do in your lifetime. But it can also be a bit complicated and, let's face it, uncomfortable. That perhaps explains why only 32% of Americans have a will, according to a survey from Caring.com, while 1-in-4 of those without a will don’t plan on getting one.

1. Specific Dollar Amounts

It's natural to want to leave your loved ones as much money as possible. But rather than commit to specific dollar amounts, you may want to work with percentages instead.

The reason? It's hard to predict how much your estate will amount to upon your death. You might leave your eldest child $500,000 thinking there will still be plenty of money left over for your remaining heirs. But if your estate only ends up being worth $550,000, you're limiting the amount of money your remaining beneficiaries get.

A better approach would be to distribute your assets in portions. You may, for example, decide to leave your eldest child a larger percentage of your estate because they're the person who's cared for you in a hands-on manner through the years. But that way, you're also not leaving your remaining heirs in the lurch if the value of your estate ends up being smaller than expected.

2. Account Passwords

You may be inclined to use your will as a means of giving your heirs access to your various accounts, and so you might think it's smart to include your bank and brokerage account passwords in that document. But that's a mistake.

Once you pass away, your will may go through probate, which is the process of proving its validity, before it’s executed. And at that point, it becomes a matter of public record. You don't want that information getting into the wrong people's hands, so a better bet is to share a list of passwords with your loved ones in a separate, private document.

3. Funeral Instructions

You'd think your will would be the perfect place to describe your ideal funeral. But there's a problem with this approach.

Your loved ones may not receive a copy of your will until after your funeral. So a better bet is to map out your wishes separately, whether in a document or verbally.

TO READ MORE:  https://www.yahoo.com/finance/news/7-things-leave-us-really-102500277.html

3 Ways To Overcome Fear of Spending in Retirement

3 Ways To Overcome Fear of Spending in Retirement, According to a Financial Expert

T. Woods  Sat, October 12, 2024   GOBankingRates

James Canole is the founder of the financial advice website Root Financial Partners, and is a CFP professional/financial advisor whose podcast, “Ready for Retirement,” helps guide people toward a comfortable and prosperous nest egg for their retirement years.

On a recent episode of his podcast series, Canole spoke to a retiree facing a fundamental challenge: how to comfortably spend money in your retirement.

Canole introduced his guest, “Ben,” as a man who “saved aggressively” so that he could retire at the age of 53. However, while Ben is enjoying his retirement, he’s found it incredibly difficult to spend money on certain things.

Growing up with a single mom, Ben came to appreciate what “a very important channel for us” money was, and how much he needed to value and appreciate it. As he became older, and aggressively saved in order to build a portfolio upon which he could retire early, his value of money only increased.

As such, Ben has found that the major issue for his retirement has been the struggle to give himself permission to spend the money that he saved and earned. “I hate to say that I’m denying myself,” he lamented, “but I oftentimes feel that that’s the case right now.”

Making the transition from “a saving to a spending mindset” was a problem he never anticipated, but it is one he has had to confront now, to the point that his retirement spending actually continues to decrease. Through Ben’s discussion with Canole, however, the two worked out ways to overcome the fear of spending and allow Ben to enjoy his golden years.

Give Yourself Permission To Spend

You’ve worked hard for your retirement, and you’ve planned ahead. This is the moment you’ve been saving for. If you don’t spend on yourself now, when will you?

Commit to a Spending Decision

TO READ MORE:  https://finance.yahoo.com/news/3-ways-overcome-fear-spending-120021438.html

How to Buy Gold for $900 per Ounce

How to Buy Gold for $900 per Ounce

Notes From the Field By James Hickman / Simon Black  October 11, 2024

Today’s letter is about how to go back in time.

A lot of us remember 2009 as a pretty tough economy. The whole world was in bad shape. Major banks had failed, panic had set in, governments were spending money hand over fist, and debts were rising fast. It was pretty brutal.

But if there’s anything nostalgic about 2009, it would be that, almost exactly 15 years ago, gold traded below $1,000 an ounce for the last time.  Today, the price of gold is hovering at its all-time high, more than $2,600 per ounce.

We’ve talked a lot about why that is. Central banks have been buying up physical gold, literally by the metric ton, primarily because they are looking to diversify a portion of their reserves outside of the US dollar.

And central banks are sitting on a LOT of US dollar reserves— more than $8 trillion.

It makes sense that they want to diversify. There’s so much more conflict in the world, and US global dominance is waning.

Iran is now flat-out threatening the US government and promising to retaliate if America provides military support to Israel. This would have been unthinkable even five years ago.

But today, adversary nations have seized on the US government’s weakness. And foreign central banks— which, again, hold trillions of US dollar reserves— have noticed.

They’ve also noticed America’s outrageous national debt, and its annual budget deficits; in fact the most recent estimate by the Congressional Budget Office of the Fiscal Year 2024 is an incredible $1.8 trillion.

So obviously these central banks see a clear need to diversify. And gold is one of the best and easiest ways for them to do that.

The gold market is big. It can handle tens of billions of dollars of inflows at a time. Plus gold is universally valued around the world with a 5,000 year history of maintaining its value. No central banker is worried about whether or not they’ll be able to liquidate their gold holdings in the future.

But central banks only buy physical gold, i.e. piles and piles of physical gold bars. They do not buy gold mines... or gold miners.

This is why there is a historic anomaly in front of us: the price of gold has soared to an all-time high. But many gold companies are laughably cheap.

This is pretty strange when you think about it; a gold miner’s revenue is denominated in... gold! And many of these companies are starting to see soaring revenues and record profits. Yet their stock prices are still languishing.

For example, one gold producer we profiled in our premium research is trading at a Price to Earnings (P/E) of just 4x. It has almost no debt. And it produces a ton of Free Cash Flow.

The company has even blown away expectations and managed to produce 100,000 ounces of gold. Yet the stock price has barely budged.

What’s amazing is that the entire company is currently valued at less than the market price of that one year's worth of gold that it mined.

But the kicker is how little it cost this company to produce that gold.

Their “All In Sustaining Cost” (AISC)— everything spent to pull that gold out of the ground, from mining to processing— was less than $1,000 per ounce.

And in our view, buying shares in an efficient, profitable, deeply undervalued mining company with such a low cost structure is almost like going back in time to 2009 and buying up gold at less than $1,000 per ounce... especially given that the company still has millions of ounces of proven gold reserves in the ground which it has yet to extract.

I’ve written many times before— we still see significant upside for gold. Especially if Kamala is elected.

Based on the type of spending she envisions, plus her weak “vibes” and “joy” leadership, I don’t expect the dollar to last as the global reserve currency beyond her first term.

Instead, central banks will continue to turn to gold. And when central banks converted just $80 billion— about 1%— of their US reserves into gold, the price increased to over $2,600 an ounce.

What would happen to the gold price if they converted 5%... or 20% of their US dollar reserves into gold?

Even buying physical gold, right now, at all time highs, would probably work out really well.

But buying a company whose revenue is gold, yet costs a fraction of that price, could work out even better.

Gold is just one of the real assets we talk about in Schiff Sovereign Premium.

We’ve been clear that America’s debt problems can only be solved by lower interest rates and more money printing from the Federal Reserve.

That’s why we don’t believe inflation is behind us, and why we believe so whole-heartedly in the value of real assets— critical resources that cannot be conjured out of thin air by governments and central banks.

This gold producer is just one example of these massively undervalued real asset companies we’ve named in Schiff Sovereign Premium— a highly educational, month-by-month guide that is designed to help you navigate the world from a position of strength, both personally and financially.

You can click here if you want to learn more about both the Plan B strategies and compelling investment research we present.

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

https://www.schiffsovereign.com/trends/how-to-buy-gold-for-900-per-ounce-151648/

18 Rules To Creating Long-Term Wealth

Billionaire Michael Lee-Chin’s 18 Rules To Creating Long-Term Wealth

Special to Financial Post | Daina Lawrence  Thu, October 10, 2024

Billionaire Michael Lee-Chin has 18 principles he has stuck to in order to build his wealth, he says.

The Jamaican-Canadian chairman and chief executive officer of Burlington, Ont.-based private investment firm Portland Holdings Inc., says it is possible for other investors to follow these principles and build wealth, especially younger ones who have time and compounding on their side.

With Warren Buffet as his role model since the 1970s, Lee-Chin has used his prescriptive framework to predict, and invest in, future trends, such as wealth management for a growing baby boomer cohort.

Lee-Chin came to Canada in 1970 and studied engineering on a scholarship, then graduate business studies, eventually becoming a financial advisor. In the 1980s, he borrowed money to invest first in Mackenzie Financial Corp., then in what became AIC Ltd. and set up financial services entity Berkshire group of companies, with billions of dollars in assets under management, selling to Manulife Financial in 2009.

Forbes pegged Lee-Chin’s wealth at $1.4 billion in 2023.

What follows is a condensed and edited interview with Lee-Chin, where he shares his investment rules, including the 3 Ps and the 3 Ts, and his predictions on sectors that address an aging baby boomer cohort, as well as world’s energy and carbon challenges.

FP: Is The Investment Environment Of Today Different To When You First Started Investing?

Michael Lee-Chin: It has always been complex.

When I first started as an advisor, I was looking around for a methodology that made sense to me, that I could practise consistently, and that really, if I adhered to the methodology, to the frameworks, the only outcome would be wealth.

A framework that has guided me throughout my life is if you want to be successful at any endeavour, this three-step formula will always work: 1. Identify a role model and choose the most eminent person in that field; 2. Get the recipe; 3. Don’t change the recipe.

Back in the late 70s to early 80s I identified Warren Buffett as my role model. Starting in 1982 I would attend his annual general meetings and I got the recipe.

It doesn’t matter what the investing environment is doing, all of those external factors in the long run mean nothing.

FP: What Advice Would You Have For Young Investors Today?

MLC: When you invest, you have to have some framework that guides you so that you have consistent behaviour. It’s not just arbitrary.

I’m going to tell you the eight characteristics of great investors — those that created their wealth (the first three are what we call the three Ps):

Predict: These people made a prediction about the future;

Plan: They planned for their prediction;

Persevere: They persevered with their plan;

These people also own a few high quality businesses;

They understand their businesses;

They ensure these businesses are in long-term growth industries;

They use other people’s money prudently;

They also hold on to these businesses for the long run.

Whether you’re a beginner, you manage a family office, you’re a professional investor — those eight characteristics are the essence of investing … and of creating wealth. Anything else is speculation.

This brings me to the ten qualities of high quality businesses. These are laws if you want to create wealth. This is our religion. This is our value system.

TO READ MORE:  https://www.yahoo.com/finance/news/billionaire-michael-lee-chin-18-110053318.html

America Is Now On “The Second Half Of The Chess Board”

America Is Now On “The Second Half Of The Chess Board”

Notes From the Field By James Hickman / Simon Black October 10, 2024 

Over fifteen centuries ago, according to an ancient Sanskrit legend, a mythical Hindu priest named Sissa was ordered to invent a new board game to entertain the king of Taligana.

Sissa labored over the task for quite some time, but he eventually brought the King a military strategy game with a 64-square board and beautifully hand-carved pieces. Today we call this game chess. And according to the legend, the King was absolutely enamored with it.

So enamored, in fact, the King offered Sissa any reward he desired. So, the priest asked for a single grain of wheat to be placed on the first square of the chess board. Then two grains on the second square. Four grains on the third. Eight grains on the fourth. And so on.

The King of Taligana thought the request to be humble and cheap. After all, a little bit of wheat was nothing compared to the endless entertainment of this new game. So, he ordered his men to bring in the grain.

But as they continued counting, the numbers began to grow quickly.

One-quarter of the way through the board (sixteen squares), Sissa was owed around 131,000 grains-- roughly four kilograms of wheat. No big deal.

But with every square the amount kept doubling. Halfway through the board Sissa is owed over 8 billion grains-- about a quarter of a million TONS of wheat. And it keeps doubling from there.

By the final square, the amount of grain owed is far more than all the wheat that the world can possibly produce.

This is known in mathematics as exponential growth, i.e. when something grows at a faster and faster rate. Sort of like my kids. Or more ominously, the US national debt.

According to data just released by the federal government, interest on the national debt for Fiscal Year 2024 (which just ended last Monday, September 30) was roughly $1 TRILLION.

That’s just the interest bill.

And while that number itself is simply astonishing, it’s even more important to put it in context. $1 trillion is significantly more than the government spends on virtually EVERY other line item, including the military and Medicare.

In fact, Social Security is the ONLY federal program whose budget exceeds interest on the debt. For now. But within the next 5 years, interest on the debt will surpass even Social Security.

Just going back to FY 2020— which started pre-pandemic on October 1, 2019— the interest bill that year was “only” $345 billion. And in FY21, it only rose to $352 billion. That was just a $7 billion, or 2%, increase. No big deal.

But in FY 2022, it took a more significant jump to $475 billion. Then $660 billion. And now a TRILLION dollars.

So not only is the interest bill increasing, but the rate at which it is increasing… is increasing.

Just like grains of wheat on a chessboard, this is an exponential problem. At first it looks manageable. Even paltry. But around halfway through the chessboard, the problem starts to spiral out of control very quickly.

Technologist and author Ray Kurzweil actually refers to this phenomenon as “the second half of the chess board”, i.e. the part of the exponential growth model where the problem becomes too big to solve.

How did the most powerful nation in the history of the world reach this point?

For starters, a complete lack of discipline when it comes to federal spending. For decades now, the government has spent money as if there were no limit and would never be any consequences to increasing the debt.

This was most noticeable during the pandemic when they (and the media) engineered widespread fear and hysteria, shut down the economy, and then spent trillions of dollars to keep everyone afloat.

The national debt skyrocketed as a result. But at the time, interest rates were practically zero. So, the government’s borrowing costs were pretty negligible. That’s why the annual interest bill barely moved between FY2020 and FY2021.

But as you probably recall, rates soared in 2022. And so did the government’s interest bill.

Each year, in fact, much of the existing national debt matures; money that the Treasury Department borrowed five or ten years ago becomes due and must be paid back.

Naturally, the Treasury Department doesn’t have any money to pay back its lenders. So instead, they issue new debt to repay the old debt.

The problem, of course, is interest rates. The money they borrowed years ago was at 0% or 1%. Today it’s 4%.

Just this past Fiscal Year (2024) the Treasury Department refinanced roughly $5 trillion in debt at significantly higher interest rates… in ADDITION to the $2 trillion in NEW debt that they borrowed.

This means that NEXT YEAR’s interest bill will likely be even HIGHER.

You can see how this problem can quickly become a crisis. Again, five years ago the annual interest expense was $345 billion. Five years from now it could easily be $2 trillion.

Sure, the government’s overall tax revenue is also increasing. A bit. But the interest bill is growing much faster-- at an exponential rate. You can’t have linear growth in your revenue and exponential growth in a major expense and expect to survive.

It appears that the US government has crossed the proverbial Rubicon into the second half of the chessboard. And their options are extremely limited.

On one hand, the government could slash spending, reform entitlement programs (like Social Security, welfare, etc.), and engage in a massive deregulation effort to boost economic productivity. But I’m not holding my breath.

Their other approach will be to increase taxes and print tons of money to keep interest rates artificially low.

This is already starting to happen.

The government released its new inflation data just this morning showing that core inflation is STILL on the rise. Inflation is not beat by a long shot. And yet the Federal Reserve is going full steam ahead in its rate cutting cycle.

Fed officials aren’t stupid. They know that 0% interest rates are the only hope for the US government’s financial survival.

And the chief consequence, of course, will most likely be some pretty nasty inflation.

This is why we keep saying that real assets make so much sense, i.e. crucial materials like metals, energy assets, and productive technology that are (1) useful and critical in the economy, and (2) cannot be created out of thin air by central banks or governments.

Historically, real assets perform extremely well and hold their value during inflationary times.

And the added benefit is that, right now, many of the businesses which produce real assets are at historically cheap levels. We’ll show you a great example tomorrow.

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

https://www.schiffsovereign.com/trends/america-is-now-on-the-second-half-of-the-chess-board-151643/

5 Essential Books and Resources for Financial Planning Enthusiasts

5 Essential Books and Resources for Financial Planning Enthusiasts

Laura Bogart  Wed, October 9, 2024   GOBankingRates

You might think that you need an expensive education, or at least hours of formal training, to become knowledgeable about financial planning. And who has time for all of that, especially if you’re locked in to your current job, your family life and your other responsibilities?

However, you don’t have to spend hundreds of dollars on financial planning certifications, or even head back to school to learn more. After all, you’re reading this GOBankingRates article, hoping to learn more about personal finance issues that are relevant to you and your loved ones and explore the worlds of smart saving and growing your wealth.

There are myriad resources out there that can help you boost your own financial literacy at very little personal cost, from books you can check out from your local library to podcasts that will inspire you on your next long walk.

GOBankingRates talked to some financial planners and professionals to get their recommendations for the books and resources that are essential to your financial growth.

Earning passive income doesn't need to be difficult. You can start this week.

‘The Total Money Makeover’ by Dave Ramsey

Tyler Meyer, CFP, founder of Retire to Abundance, recommended this popular title by Dave Ramsey as a terrific entry point for people who need a plainspoken and practical approach to money management. This book focuses on paying off debt, building an emergency fund and living on a budget.

“His ‘Baby Steps’ strategy breaks personal finance down into easy-to-follow stages, making it less overwhelming for people who are just starting out,” he said. “While his advice is more rigid than some other approaches, especially when it comes to debt, the fundamentals of disciplined budgeting and saving are timeless.”

 ‘Simple Wealth, Inevitable Wealth’ by Nick Murray

Meyer also suggested that people hoping to rethink their relationship with wealth and money check out this title by Nick Murray. According to Meyer, the book is powerful because it emphasizes the mindset behind wealth building rather than just the financial strategies alone. The author focuses on a message that long-term investing and staying the course are important, as is understanding that accumulating wealth is all about patience and perseverance.

“His insights into human behavior and how it impacts investing make this a must-read for anyone serious about growing their wealth. It’s particularly relevant for those nearing or in retirement, as it helps readers see the bigger picture of how time in the market creates success,” Meyer said.

TO READ MORE:  https://finance.yahoo.com/news/5-essential-books-resources-financial-180234829.html