I’ve been in Sweden all week, representing HIVE Blockchain Technologies and searching for new expansion opportunities. I can’t wait to share the details with you, so make sure you’re subscribed to Frank Talk by clicking here. In the meantime, I have some sobering news: Social Security is in worse shape than we thought. The program’s Old-Age and Survivors Insurance (OASI) Trust Fund is now expected to be insolvent by 2033, a year earlier than anticipated. According to the annual report, its finances have been “significantly affected” by the pandemic and 2020 recession, not to mention “rapid population aging.” Indeed, the ratio between contributors and beneficiaries has been shrinking for decades. In 1941, there were about 42 workers for every Social Security recipient. Today, that figure
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I’ve been in Sweden all week, representing HIVE Blockchain Technologies and searching for new expansion opportunities. I can’t wait to share the details with you, so make sure you’re subscribed to Frank Talk by clicking here.
In the meantime, I have some sobering news: Social Security is in worse shape than we thought. The program’s Old-Age and Survivors Insurance (OASI) Trust Fund is now expected to be insolvent by 2033, a year earlier than anticipated.
According to the annual report, its finances have been “significantly affected” by the pandemic and 2020 recession, not to mention “rapid population aging.”
Indeed, the ratio between contributors and beneficiaries has been shrinking for decades. In 1941, there were about 42 workers for every Social Security recipient. Today, that figure is around 2.5 workers per beneficiary.
A tipping point will occur in 2034: Americans age 65 and over will, for the first time ever, outnumber those 18 and under, according to Census Bureau estimates.
It’s believed that around 40% of older Americans only receive income from Social Security, and there have been calls to expand the program. I’ll leave that to lawmakers to decide.
For my part, I’ll say that it might make sense just to assume Social Security won’t be there when you’re ready to retire. Either that, or the income will be even less sufficient than it is now—especially if inflation proves not as “transitory” as Jerome Powell insists it is. I think it’s very telling that next year’s Social Security cost-of-living adjustment is expected to be above 6%. That would be the biggest bump since the early 1980s, when consumer price increases were sky high.
I don’t want to insult anybody’s intelligence or preparedness, but if you’re reading this and haven’t been participating in a defined-contribution (DC) plan such as a 401(k), or if you haven’t been contributing to an individual retirement account (IRA), I urge you to get started today.
If you have been doing those things, you might want to consider increasing your contributions. A 2021 survey found that just over half of older U.S. workers have less than $50,000 saved for retirement.
It doesn’t have to cost a lot. Our own ABC Investment Plan is only $1,000 to get started, then $100 per month in a fund of your choice. Want to invest in Amazon but can’t afford the $3,460 share price? With Robinhood, you can buy a fraction of a share if you wish. Plus, it’s commission-free.
Retirement Balances Hit Record High, Retail Trading Volumes Up
Now for the good news. Americans who’ve already been saving and investing for retirement saw their account balances hit record average highs in the second quarter of 2021. That’s according to Fidelity Investment’s analysis of more than 30 million IRA, 401(k) and 403(b) retirement accounts.
Looking just at 401(k) plans, Fidelity found that the average balance was just under $130,000, a new record high. That may not sound like a lot, but this includes everyone with a 401(k), including young people who may have just got started. The overall average balance for employees who have been contributing continuously for the past 10 years crossed above $400,000 for the first time ever, while that of people who have been investing for 15 years exceeded half a million dollars.
Individual investors and traders have also gotten more involved in the market, at least since the start of the pandemic. A recent article in the Economist shows that the number of trading accounts at brokerage firms, including Robinhood, has exploded from 59 million at the end of 2019 to 95 million today. Retail trading has likewise expanded. As a share of total trading volume, retail activity spiked to over 40% in the first quarter of this year, twice the volume from a decade ago. To meet the surging demand for stock and ETF trading, Fidelity is planning to hire as many as 9,000 new employees by year end.
Granted, trading is not the same thing as investing—and certainly not the same as planning for retirement—but I’m encouraged to see interest in personal finance improve among young people.
Only 12% of Americans Own Gold, 15% Own Silver
I believe gold and silver should also be part of a diversified retirement portfolio, but too few Americans are invested. One survey in 2019 found that only 15% of respondents held silver, and a little over one in 10 held gold.
Hopefully people will change their minds about hard assets, especially as we face the after effects of unprecedented monetary and fiscal stimulus measures. I agree with emerging markets investor Mark Mobius, who earlier this week recommended people buy gold in anticipation of “significant” currency devaluation as a result of runaway money-printing.
It appears more and more Europeans are getting the message. I’ve shared with you already that German investors’ gold purchases were highest in the first half of 2021 than in any period since at least 2009. The World Gold Council (WGC) attributes this activity to negative real rates and asset purchases made by the European Central Bank (ECB). As you can see below, euro-priced gold has closely tracked negative-yielding debt.
As always, I recommend a 10% weighting in gold, with 5% in physical bullion and 5% in high-quality gold stocks and ETFs. I also recommend no more than 2% in cryptos, particularly Bitcoin and Ether. Remember to rebalance on a quarterly basis.
I will be speaking on gold and cryptocurrencies at Gold Forum Americas 2021 in Colorado Springs, September 13. For those not attending in person, you can register to tune in virtually by clicking here!
- The major market indices finished mixed this week. The Dow Jones Industrial Average lost 0.24%. The S&P 500 Stock Index rose 0.62%, while the Nasdaq Composite climbed 1.55%. The Russell 2000 small capitalization index gained 0.69% this week.
- The Hang Seng Composite gained 2.83% this week; while Taiwan was up 1.78% and the KOSPI rose 2.14%.
- The 10-year Treasury bond yield rose 1 basis point to 1.323%.
Blockchain and Digital Currencies
- Of the cryptocurrencies tracked by CoinMarketCap, the best performer for the week was Presearch, rising 579.27%.
- Asset manager Franklin Templeton is increasing staff to execute trades for Bitcoin and Ether, writes CoinDesk, according to a series of job postings. According to the listings, at least two crypto-focused jobs were posted this week – one trader, one researcher – to join the growing investments team within the company’s Digital Assets Management division.
- Japanese financial conglomerate SBI Holdings is aiming to launch the country’s first cryptocurrency fund by the end of November, writes Bloomberg, aiming to give individual investors a way to diversify their broader portfolio. According to the article, investors may need to put in a minimum of roughly 1 million yen ($9,100 USD) to 3 million yen ($27,360 USD) and it will primarily be aimed at people who understand risks associated with cryptocurrencies, such as big price swings.
- Of the cryptocurrencies tracked by CoinMarketCap, the worst performing for the week was Liquidity Dividends Protocol, down 99.63%.
- Ever since John Paulson bet against the U.S. housing market more than a decade ago, people keep asking him about his next big trade, writes Bloomberg. His harshest words, the article continues, are for the hottest investments of this era. SPACs, on average will be a losing proposition, while cryptocurrencies are a bubble that will “eventually prove to be worthless,” according to Paulson.
- Federal regulators sued the founder of crypto exchange platform BitConnect, reports Bloomberg, for fraudulently raising more than $2 billion from investors in an offering that wasn’t registered with the U.S. SEC. A complaint filed this week in federal court in New York shows that the SEC sued founder Satish Kumbhani and a promoter for improperly selling securities tied to the company’s purported “lending program” for about a year starting in January of 2017.
- As reported by Bloomberg, FTX.US has agreed to acquire LedgerX for an undisclosed sum, a move that will expand the crypto exchange’s product offerings to futures and options trading in the U.S. “Our longer-term expansion strategy is for FTX.US to offer a wide array of asset classes in regulated markets, and this is our first major step in that direction,” said Brett Harrison, president of FTX.US.
- Ether is off to a blazing start in September, writes Bloomberg, breaking $3,700 intraday on the first of the month and after logging a 36% return last month. The popular digital currency may be running a bit hot, however, as it continues to outperform Bitcoin in a big way this year. The crypto crossed into overbought territory on Monday, the article continues, indicating that investors should be aware of a potential pullback.
- Solana (SOL) started Friday at a new record high, reports CoinTelegraph, as investors continued to bet positively on its success in the DeFi and nonfungible tokens (NFT) sector. “The growth of Solana to $146.28 is steered positively by the increasing demand for the tokens for use in minting thousands of NFTs being launched on the Solana blockchain,” Yuriy Mazur, head of data analytics at crypto exchange CEX.IO told CoinTelegraph via email this week.
- Retirees and veterans living in El Salvador are worried that the government will start paying their pensions in Bitcoin instead of the U.S. dollar, writes CoinTelegraph. The country’s anti-Bitcoiners have expressed discontent regarding the government’s plans to adopt the popular digital currency as legal tender, (retirees in particular) voicing their concerns over its unstable price. “We know this coin fluctuates drastically. Its value changes from one second to another, and we will have no control over it,” Stanley Quinteros, a member of the Supreme Court of Justice’s workers’ union said.
- Former chief U.S. commodities regulator Cristopher Giancarlo (“Crypto Dad”) has resigned from BlockFi’s board of directors after four months, reports CoinDesk. His unexpected departure comes at a critical juncture for BlockFi, as the company faces mounting legal pressure over its flagship interest-bearing crypto accounts. According to the article, multiple U.S. states alleged in July that the company’s flagship BlockFi Interest Accounts (BIA) were unregistered securities, including regulators in BlockFi’s home state of New Jersey.
- Russian cybersecurity firm Kaspersky has detected more than 1,500 fraudulent entities targeting potential crypto investors and miners just in the first half of 2021, writes CoinTelegraph. The firm’s research shows that 0.60% of users from South African countries have already been targeted by malicious crypto miners. The most common methods of duping users, the article continues, involves false advertisements claiming to sell mining equipment and fake websites posing as crypto exchanges.
This week spot gold closed the week at $1,827.73, up $10.16 per ounce, or 0.56%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week higher by 2.05%. The S&P/TSX Venture Index came in up 3.56%. The U.S. Trade-Weighted Dollar fell 0.61%.
|Aug-30||Germany CPI YoY||3.9%||3.9%||3.8%|
|Aug-31||Eurozone CPI Core YoY||1.5%||1.6%||0.7%|
|Aug-31||Conf. Board Consumer Confidence||123.0||113.8||125.1|
|Aug-31||Caixin China PMI Mfg||50.1||49.2||50.3|
|Sep-1||ADP Employment Change||625k||374k||326k|
|Sep-2||Initial jobless Claims||345k||340k||354k|
|Sep-2||Durable Goods Orders||-0.1%||-0.01%||-0.1%|
|Sep-3||Change in Nonfarm Payrolls||733k||235k||1053k|
|Sep-7||ZEW Survey Expectations||30.5||—||40.4|
|Sep-7||ZEW Survey Current Situations||34.0||—||29.3|
|Sep-9||ECB Main Refinancing Rate||0.000%||—||0.000%|
|Sep-9||Initial Jobless Claims||345k||—||340k|
|Sep-10||Germany CPI YoY||3.9%||—||3.9%|
|Sep-10||PPI Final Demand YoY||8.2%||—||7.8%|
- The best performing precious metal for the week was silver, up 2.87%, outpacing gold on the sensitive jobs report update. Gold jumped after a key labor-market report showed the U.S. economy added fewer jobs than forecast, diminishing the possibility that the Federal Reserve will taper stimulus soon. Nonfarm payrolls data showed the U.S. added 235,000 jobs in August, well below economists’ forecasts and far less than the gains seen last month, reports Bloomberg. The dollar sank after the report, boosting gold. Bullion has struggled this year amid a global economic rebound from the pandemic, which has raised the prospect of central banks reining in their monetary stimulus.
- Sales of gold bracelets, pendants, earrings, and necklaces that draw on dragons, phoenixes, peonies and other traditional Chinese patterns and symbols, are flying among consumers, especially those in their 20s and 30s, reports Reuters. The popularity among millennials is helping drive a rebound in gold demand in the country after a pandemic-induced slump. An e-commerce boom and national pride are fueling the rise in demand for what is known as heritage gold jewelry, which requires intricate craftsmanship and can command premiums of 20% or more over conventional gold jewelry, industry executives say.
- Impala Platinum Holdings Ltd. announced a four-fold increase in its dividend after surging platinum prices yielded a record profit. The final dividend of 9.8 billion rand ($680 million) brings the total payout for the year to the equivalent of about 50% of free cash flow.
- The worst performing precious metal was palladium, which finished the week essentially unchanged in price. Australia’s gold production was 157 tons in the first half of 2021, four tons more than China’s output in the same period, according to Surbiton Associates. China’s gold output was adversely affected by accidents and resulting shutdowns, director Sandra Close said in a statement.
- Centerra Gold Inc. is claiming that a Kyrgyz open-pit mine it once ran has flooded and poses safety and environmental risks, reports Bloomberg, although the government-appointed administrator says the water has always been there. There could be at least 40 meters of water at the bottom of the Kumtor central pit, the Canadian mining company said in a statement, citing photos on Kumtor Gold Co.’s website and a company video posted mid-August on Facebook.
- Gunmen attacked a convoy of Iamgold Corp vehicles traveling to the Essakane gold mine in Burkina Faso on Tuesday, reports Reuters, wounding one police officer before being repelled by the convoy’s security detail, the Canadian mining company said. Following the attack, Iamgold has suspended convoys to and from Essakane, which is the company’s biggest operating mine and is near the border with Niger.
- K92 Mining reported its latest batch of assay results from its ongoing drilling program on the Judd vein system at the Kainantu Mine. These 17 holes, part of the initial drill program at Judd, showcase high-grade intercepts over a strike length of 650 meters, thus defining an area of notably high-grade mineralization with solid thickness. Silver X Mining reported channel samples from its Tangana 1 vein of up 70.88 grams per ton gold over 0.95 meters, 1,675 grams per ton silver over 0.95 meters, 7.37% lead over 0.60 meters, and 6.75% zinc over 0.80 meters. The sampling program now extends the mineralized horizon by 120 meters and vertically another 200 meters in depth.
- Veteran investor Mark Mobius says investors should have 10% of a portfolio in gold as currencies will be devalued following the unprecedented stimulus rolled out to fight the coronavirus pandemic. At this stage, “10% should be put into physical gold,” said Mobius, who set up Mobius Capital Partners after more than three decades at Franklin Templeton Investments.
- After 14 years of trailing China, Australia is poised to be the world’s largest gold producer this year. In the first half of 2021, Australia produced 157 tons of gold versus 153 tons in China. Exploration successes like De Grey Mining’s Hemi gold project and Chalice Mining’s Julimar Nickel Copper-PGE project are world class mineral discoveries formed in Australia in recent years.
- Sibanye Stillwater CEO Neal Froneman said palladium could decline to about $1,000 an ounce after 2025, as automakers switch to using more platinum in auto catalysts used to curb pollution from vehicles. “Palladium is somewhat at risk post-2025 and in addition, as the demand drops off, there are a number of new palladium-rich projects coming into production,” he said. “If demand falls and supply increases, the prices will drop, they will probably drop down to levels of around $1,000 an ounce”
- Around 28% of Brazilian gold exports in 2019 and 2020 likely came from illegal mines, a report by public prosecutors and the Federal University of Minas Gerais found, pointing to widespread forging of documents and lack of effective law enforcement. This gold production is unregulated, and mercury is typically used to extract the gold, creating an environmental risk.
- Nevada lawmakers on the final day of the 81st Legislative Session set in motion a significant shift in tax policy toward an industry that has long been scrutinized for having a unique constitutional carve-out protecting it from tax hikes. Assembly Bill 495 was a bipartisan compromise forced by multiple proposed ballot questions aimed at some of the most politically powerful industries within the state. The bill would create a new excise tax on gold and silver mining companies with more than $20 million in gross revenue annually. Gross revenue between $20 million and $150 million would be taxed at 0.75% and gross revenue above $150 million would be taxed at a rate of 1.1%.
September 3, 2021
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors