We Now Resume Our Regular Programming

Posted On Oct 2, 2017 By Dave Gonigam

  • Your kids are to blame if you’re falling short on retirement
  • How big is the retirement fund of the average 50-something? (You might be shocked)
  • New president, same result: Massacre sets off gun-stock rally
  • Traders say Fed raises rates in December: Rickards tells you why it won’t
  • From rubber bullets to bank freezes — the next step in Catalonia?
  • An even more insistent recession warning… the Playboy mansion after Hef’s demise… the problem with a “one-heart-attack e-letter”… and more!

Just swell. Your editor comes back from a two-week break only to learn of an existential threat to Agora Financial’s business model.

For you, however, it could be the best thing that ever happened to your retirement.

I suppose we should back up a bit: As I was checking email and news yesterday, easing back into the flow of things, I came upon a startling new study…

If you’re falling behind on your retirement plans, blame it on your kids.

The Center for Retirement Research at Boston College is out with a study that reaches the following conclusion: “The bottom line is that households with children would be expected at the end of their work-lives to have less income and lower wealth.”

For parents in their 30s, each child amounts to a 3.7% drop in income and a 4.5% drop in net worth. We’ll spare you the details of how they arrived at that number — trust us, it’ll make your eyes bleed.

The good news: By the time you reach your 50s, the impact is more muted — nearly no effect on income and a 2.8% decline in net worth. Guess the major damage is already done…

On the other hand, numbers like those are meaningless when you consider the average U.S. household ages 55–64 has $104,000 saved for retirement.

That’s as of June 2015, according to figures from the Government Accountability Office. What would that be today, a little more than two years later? Let’s be generous and say that $104,000 was fully invested in an S&P 500 index fund. The S&P is up 20% since then… so we’re looking at $124,800.

Big whoop, right?

A few days ago, we launched a survey among some of our readers. One of the questions we asked is “If you made $464,020 in 42 days, what would you do with that money?” We also asked, “What would that money mean for your retirement?”

(There’s a reason we identified that amount of money and that timeframe. We’ll get back to it momentarily…)

A registered nurse told us she’d pay off $20,000 in debt and invest the rest in land and precious metals. That amount of money would “secure my retirement. Definitely take away the worries.”

A pilot told us he’d build the house in the woods he’s been dreaming of for 20 years. “No house payment — that’s a big deal.”

And a fellow who’s already retired told us he could pay off his mortgage and “be in a position to help family and others financially.”

You can take part in this survey yourself, by the way. Just read this short message to get started.

[About those numbers, and the threat to our business model: Next week, a 42-day market window will open — unlike anything we’ve discussed before here in The 5. When a similar window opened earlier this year, it was possible to turn a $1,000 grubstake into $462,020.

With that kind of money, you might never need another subscription from us.

That would be bad for us. But we also think we’d be doing you a disservice by withholding the startling information revealed by one of our newest market experts. Follow this link and learn just what’s in it for you.]

The major U.S. stock indexes are inching higher into record territory as the fourth quarter gets underway.

At last check the Dow was within 45 points of 22,500. Gold, meanwhile, has shed a few bucks and sits at $1,275 — a level last seen in mid-August.

Go figure: Even with a Republican in the White House, a mass shooting has launched a minor stampede into “gun stocks.”

It became a macabre market ritual under Obama: Some disturbed individual would open fire in a crowded place and the share prices of firearms manufacturers would jump — on the theory that people would snatch up as much of their product as possible before new gun-control measures came into force.

But we’re seeing a similar spike under Trump with the horrendous news from Las Vegas overnight. American Outdoor Brands — which is what Smith & Wesson calls itself these days — is up 6.75% as we write. And Sturm, Ruger is up nearly 6%.

Hmmm… Maybe investors are recalling Trump’s support during the campaign last year for “no fly-no buy” — in which anyone on the federal no-fly list would be barred from buying firearms.

Meanwhile, shares of MGM Resorts — owner of the hotel from where the gunman opened fire — are down 4%.

The data gods have delivered two numbers this morning that couldn’t be more different.

It being the first business day of the month, the ISM manufacturing index is out. Numbers above 50 indicate a growing factory sector. The September number was 60.8, the strongest reading since May 2004.

Once again we caution the ISM is a survey of factory managers — “soft data,” as the wonks like to say. The hard data of sales and such haven’t kept up with the soft data in 2017.

Meanwhile, a reliable recession indicator is flashing yellow even more urgently than it was a month ago.

The Philadelphia Fed State Coincident Index crunches four job numbers from all 50 states. The index runs from plus 100 to minus 100. Numbers below plus 50 have signaled the onset of every recession going back to the Carter administration.

The August number out this morning is plus 18. And it comes on the heels of a revised July number of plus 50.

“The markets and the experts have misread the Fed again,” says our macroeconomic maven Jim Rickards.

This morning traders are pricing in a 72% likelihood the Federal Reserve will raise interest rates at its December meeting. It would be the third increase this year.

Not gonna happen, says Jim — based on the latest inflation figures.

As we’re wont to remind you, the Fed’s favorite measure of inflation is something called “core PCE.” When the Fed talks about its 2% annual inflation target, core PCE is the number they’re talking about.

Unfortunately for the Fed, the number’s been sliding all year — from 1.9% in January to 1.3% in August, the most recent figure revealed three days ago…

Inflation chart

“The Fed’s main inflation metric has been declining steeply all year,” Jim sums up, “and is now a half-percentage point lower than it was last January. Until that reverses, and it won’t be soon, the Fed is on hold.

“As market probabilities catch up with reality, the dollar will sink, the euro and gold will rally and interest rates will resume their long downward slide.”

If brute force can’t keep Catalonians from asserting their independence, maybe freezing Catalonians’ money will.

Perhaps you heard the news from Spain yesterday — an overwhelming vote in the northwest Catalonia region in favor of independence.

The response of the central government in Madrid gives new meaning to the term “heavy-handed.” The indefatigable Glenn Greenwald describes it accurately as “major violent repression of a peaceful, democratic movement by a western/NATO government.” Almost 900 voters were hurt, many by rubber bullets.

Wandile Mtana tweet

But it’s the financial aspect that captures our attention today: Two weeks before the vote, Madrid seized control of the Catalonian government’s finances. (Imagine the feds in Washington seizing control of a state budget.)

“These measures are to guarantee that not one euro will go toward financing illegal acts,” said Spanish Finance Minister Cristobal Montoro. The vote was illegal in Madrid’s eyes; somehow the regional government scraped together the funds to make it happen anyway.

With Catalonia’s leader saying he’s open to a unilateral declaration of independence, is it possible Madrid would squeeze everyday Catalonians by freezing their bank accounts?

It would be an extreme measure, yes… but it wouldn’t generate the kind of images that came from Barcelona yesterday.

Jim Rickards says the mere seizure of Catalonia’s budget smacks of bank shutdowns in Cyprus in 2013 and Greece in 2015 — the “ice-nine” tactics described so vividly in his most recent book, The Road to Ruin. “This action along with the prior crises reveals that your money in the bank is not really yours, it’s the bank’s. Whoever controls the bank, usually a government, controls your money, not you.

“If you want control of your money you need to convert some of it to physical gold.”

[Addendum: The BBC notes that “Public finances are a particularly sore point for Catalans who for years have contributed more to the state budget than they get back in spending on public services.”

In America, this is likewise the case in many “blue states.” The most recent figures from the Census Bureau and the IRS indicate that for every dollar Californians send to Washington, only 87 cents comes back. Something you’ll be hearing more about if any blue-state secession movements gain traction under Trump…]

So… Daren Metropoulos had to wait only 16 months to take full possession of the Playboy Mansion.

We took note last year when Hugh Hefner put the mansion on the block, with an unusual condition on the sale — he could continue to live there the rest of his life. Essentially, Playboy Enterprises was adopting a time-honored method of companies seeking to raise cash — sell the real estate on its books, and then lease it back.

Metropoulos, whose private equity firm rescued Hostess Brands from bankruptcy, stepped forward to buy the five-acre spread for $100 million. He happens to own the property next door.

With Hef’s death at 91 last week, the 34-year-old Metropoulos can carry out his vision described at the time of the sale — “eventually rejoining the two estates and enjoying this beautiful property as my private residence for years to come.”

hugh hefner and models

Does Metropoulos get the collection of smoking jackets, too?

Whether merging the properties is still his plan now, no one is saying…

“Where is The 5?” a reader wrote during my absence. “Enough of the 5-minute commercial with your latest greatest investment ideas. I’m ready to read something interesting again.”

“I like Louis Basenese a great deal,” wrote another, “but I have stopped reading The 5 while he is authoring it. The 5 has devolved down to constant advertisements with no content. Please cease and desist.”

“How can The 5 be so boring?” wrote one of our regulars. “If it doesn’t get any better I will have to cancel.” We know he’s a regular because he said, “I dare you to print this.” Heh…

Rest assured I’m back, and The 5 is back to its usual daily allowance of financial infotainment.

Inquiries like these came up the last time I took a two-week break, in 2014, when we also resorted to a bit of “stunting.” Then, a reader wrote in to say, “At the expense of starting the obvious, it’s never quite wise to advertise you are running a one-heart-attack company.”

Well, we’re hardly a “one-heart-attack company” — we have many people who do far more to keep the lights on at Agora Financial than I do. But to the extent The 5 has been a “one-heart-attack e-letter” the last few years, I pledge to you that I’m working to remedy that.

In August I introduced you to The 5’s new editorial assistant, Emily Clancy. Effective this weekend she’ll be taking over our Saturday “countdown” edition called 5 Things You Need to Know. In a few more weeks she’ll assemble some weekday episodes of The 5 under my supervision. Eventually, she’ll be in a position to take over for me when I take time off.

Or if my ticker gives out, although it and all my other vital organs are doing fine right now, thank you very much.

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Nice work if you can get it: The president of Indiana’s community college system collected a $1 million retirement payout. That’s according to records obtained by the South Bend Tribune.

What makes the figure so astonishing is that the guy retired last year at a time when enrollment had dropped 25% over three years. The effort-to-payout ratio beggars belief.

We can’t promise you that kind of an effort-to-payout ratio from “The 42-Day Retirement Window” referenced above… but you could still make out very well indeed from the strange market pattern one of our top analysts has uncovered.

How well? Answers here.


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