Guest Post: "Smart Money Is Moving into Gold as Volatility Returns", By Olivier Garret, CEO of Hard Assets Alliance

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Smart Money Is Moving into Gold as Volatility Returns

By Olivier Garret
June 5, 2018

Two months ago, we hosted a conference featuring 25 world-famous asset managers, investment experts, and economists who discussed their economic outlook and predictions.

I’m talking big names like “bond king” Jeff Gundlach, David Rosenberg, Louis Gave, and others.

As you can imagine, these speakers usually don’t talk much about gold. They’re more concerned with stocks, funds, bonds, and the like.

But this year was different.

I’ve never seen so many high-profile investors mention gold as a safety net—and that includes some who were previously hard-core gold bears.

Unfortunately, the reason is not a happy one. All these “in the know” people are very worried about the direction the markets are taking.

This article is a short report that details what five of these well-known asset managers see coming down the pike over the next few years—and why gold is the best hedge against the looming crisis.

MARK YUSKO: Your Purchasing Power Is Being Destroyed

At the conference, Mark Yusko, CIO and CEO of Morgan Creek Capital Management, gave an emotional speech comparing the Fed to a dictator that robs the nation.

He pointed out that despite $20 trillion being injected into the US economy through quantitative easing since 2008, the results haven’t matched the effort...

Everybody's all excited about QE. Everybody's all excited about the Fed, but you realize that in the last 10 years, we had the worst growth in the history of America. Let that sink in for a second... 1.4% real growth for the last 10 years. And we have indebted our future to the tune of $20 trillion for nothing.

This increased money supply, he said, resulted in currency devaluation. “This is what dictators do. They systematically acquire the assets, and then they devalue the currency and boost the price of assets.”

He showed a chart that plots the S&P 500 price in nominal terms (blue line) and in gold (pink line).

https://images.hardassetsalliance.com/images/Image_1_20180604_HAA_OP_OG_SmartMoney.jpg
Source: Mark Yusko

“Gold is money,” he commented. “It's real money. For 5,000 years, an ounce of gold has bought a fine man's suit. So you can see in 2007, we had the housing bubble in nominal terms, but... the value [of the S&P 500] in gold fell. Today, we don't have a bubble. We have a bubble in nominal prices, so this is what dictators do.”

Put simply, he said, record-high valuations in equity markets are the result of a devalued currency and monetary measures that the Fed pursues: “The purchasing power of the currency is being destroyed right before your eyes, and you're just not paying attention.”

JEFF GUNDLACH: Gold Will Break Out in a Big Way

Jeff Gundlach, CEO of Doubleline Capital, provided a more technical forecast for gold. Given the situation in the markets, he thinks it’s only a matter of time before the gold price breaks out:

We're at a juncture in gold, not surprisingly, because it is negatively correlated with the dollar... Now we see a massive base building in gold. Massive. It's a four-year, five-year base in gold. If we break above this resistance line, one can expect gold to go up by, like, a thousand dollars.

Gundlach was reluctant to predict the probability and timing of this massive gold rally, but he thinks that investing in gold at this price is a no-brainer: “It’s a great time to be buying gold... because one way or the other, this baby’s got to break in a big way.”

LOUIS GAVE: Gold Will Shine in the Coming Inflationary Boom

Louis Gave is the co-founder and CEO of Gavekal Research. The main theme in his keynote speech this year was a once-in-a-generation shift from a deflationary boom to the inflationary boom that we see today.

Below is a four-quadrant framework that Gave uses to determine where we are in the cycle:

https://images.hardassetsalliance.com/images/Image_2_20180604_HAA_OP_OG_SmartMoney.jpg
Source: Gavekal Research

According to Gave, these shifts occur every 30 to 40 years, usually as a result of policy errors.

As a method to determine where we are in the cycle, Gave suggested using the gold/bond ratio: “My starting point is always that... over a four-year period, bonds should always outperform gold... When they don't, when bonds underperform gold, that's the market giving you a very important signal.”

He pointed out that gold has been outperforming bonds for the past four years now. “This, to me... means we are moving to an inflationary boom and bust period.”

https://images.hardassetsalliance.com/images/Image_3_20180604_HAA_OP_OG_SmartMoney.jpg
Source: Gavekal Research

If that’s the case, Gave told the attendees, the investing environment will radically change.

He suggested that investors reconstruct their portfolios and get out of bonds as a diversification tool because they are not a good diversifier in periods of inflationary booms.

To prove his point, Gave showed a chart of the performance of gold, cash, and US Treasuries as hedges during inflationary booms (see below).

https://images.hardassetsalliance.com/images/Image_4_20180604_HAA_OP_OG_SmartMoney.jpg
Source: Gavekal Research

In the last inflationary boom, from 1966 to 1980, Treasuries were a horrible choice for investors’ portfolios. Meanwhile, gold and cash shined.

Another positive trend for gold that Louis Gave sees is the growth of emerging markets (EM). That’s because higher purchasing power in EMs tends to translate into higher gold demand: “...for me [gold] is a good proxy for emerging market growth. When people get rich in an emerging market, they buy gold. And the reality is today people are getting rich in emerging markets at an accelerating pace.”

He said that growth in emerging markets combined with rising inflation and a weak dollar create a perfect setup for a gold rally in the coming years: “I think the time indeed has come for having gold in your portfolios.”

GRANT WILLIAMS: A Shift in US Monetary Policy Spells Trouble for Equities

Grant Williams, author of Things That Make You Go Hmmm..., warned investors about the dangerous implications of a shift in US monetary policy—another good reason to invest in gold bullion now.

According to Williams, for the last 40 years, US monetary policy has been built on constant injections of stimulus. Since Paul Volcker’s tenure in the early 1980s, every Fed chair has pushed interest rates lower.

https://images.hardassetsalliance.com/images/Image_5_20180604_HAA_OP_OG_SmartMoney.jpg
Source: Grant Williams

Now QE is officially over and is to be reversed. Williams thinks that this marks a monetary shift, which spells trouble for equities.

He gave a brief rundown on the effects that the Fed’s three rounds of QE had: “Stocks soared. The S&P doubled under the Fed's various QE programs. Gold fared really well because of fears of inflationary effects of money printing. The dollar eventually eked out a small gain. And the yield on the [10-Year] Treasury fell 1.6%.”

The key message for investors is, Williams said, that after nine years of one long, pleasant ride in equities, we've reached the point where the main driver of equity prices is about to reverse.

In the best case scenario, he thinks quantitative tightening will reverse the effect of the Fed’s stimulus measures on the stock market. However, he doesn’t rule out a much bigger sell-off.

Asked what investors should do, Williams joked, “Long the Zambian kwacha versus the US dollar. Ah, who the hell am I kidding—it's gold! Of course, it's gold!”

The reason is that all the trends are pointing to rising inflation, he said. “Gold performs best in a rising inflationary environment, not a high inflation environment. So, we're kind of moving into that sweet spot.”

Williams likens today’s situation to the period leading up to the 1970s recession where a shift from equities and cash to gold could happen unexpectedly fast.

What happened with that late-cycle stimulus that Johnson put in, and what happened to equity markets, bond yields, wage prices, CPI, and gold, going into the late ‘60s into the early ‘70s, we saw these things take off. And these things are cyclical. So to me, if this inflation story gets some traction, then I think you're going to see money move to gold reasonably quickly.

Further, Williams suggested, in periods of quantitative tightening, equities eventually crash. Since gold is inversely correlated to the stock market, this is another reason gold should rise in the coming years.

In fact, history shows that gold has rallied in the last five out of seven recessions.

https://images.hardassetsalliance.com/images/Image_6_20180604_HAA_OP_OG_SmartMoney.jpg

DAVID ROSENBERG: There’s No Better Hedge Against a Weak Dollar Than Gold

Yet another speaker who praised gold was David Rosenberg of Gluskin Sheff.

The biggest reason for Rosenberg’s bullishness on gold is the United States’ protectionism, which he thinks will inevitably push the dollar down:

We'll get a countertrend rally in the US dollar, maybe three to four percent, and then it's going to go right back down again. Because you have a protectionist government, and part of that protectionism, what is a better tariff than just depreciate your currency?

Rosenberg suggested buying gold as hedge against a weak dollar: “Gold is perfectly inversely correlated with the US dollar. If you want to hedge against the US dollar as opposed to inflation... you have to have some gold in your portfolio.”

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31 Comments

Belladonna's picture

I’ll take the gold

1st

Bohemian's picture

Well --

-- being a gentleman and knowing that you're after that gold, I am quite alright with silver. ;-)

silver10sguy's picture

Good Artcle from Big Players

This article is all very positive and glad to hear more of the big players are seeing the future along the lines of our Turdville community. 

Markedtofuture's picture

Remote Viewing The SEC Ether Ruling Crypto Viewing

NW VIEW's picture

Have we been captured into this crowd?

Mental health will be a major factor in the coming days.  Mental/emotional/spiritual sicknesses are invading many of the citizens and the landscape is getting more violent every day. There is always a new concept, a new area of enlightenment, a new right of each individual to seek their mental derangement. Many are focusing on gender neutral pronouns, pangender, their proper identification of their inner being, lost in the fog of deceptions. 

Do our lives really consist within the ups and downs of metals?   Will we jump off a bridge if gold drops to $100 or allow personal depressions to effect our family lives?    It may be time to evaluate some basic foundational truths of life and we may learn a bit from :

>>>>>>>>>>>>>>>>>>>>>>>>>>

H8Fiat's picture

Yea right

How many years now have we heard this and no matter what, the price goes almost no where.   I agree it will someday, but until the world understands once again the rule of law, the crooks with the blessing of Govs will move the price where they want. 

Even if they allow Au say to go to $5,000 or more, do you think they will allow that potential investment income to go un taxed?

Yes, frustrated and exhausted when the Experts say buy and reality is that unless there are some serious publicized delivery failures and scandals, it appears that nothing will change.

Just my humble opinion

H8

RickshawETF's picture

@H8

It's hard to tax an investment vehicle that doesn't leave a digital/paper trail.  If gold goes to $5,000 an ounce, there are plenty of coin/gold dealers out there that would gladly give you $4,500 in fiat for your ounce.  (Consider any "discount" as your "tax"!)  As long as they don't ban cash, you can spend that fiat, and the taxing authorities have no trail to follow.  Of course, you need to stay away from the banking system completely (including using that cash to pay a credit card balance!).  Buying gas and food would make that fiat go a long way . . .

AGXIIK's picture

HOLD THE GOLD

If gold is $5,000 an ounce I would hold it rather take that discount unless it was American Gold Eagle which, when sold, has no 1099   Taking cash is tricky  It is necessary for the LCS to report a large suspicious cash transaction?    Selling $75 silver in smaller portions to keep the transaction off the radar is my bet.  Not only will silver likely show a better bump in relation to gold ASE has not 1099 and any sales under 1,000 ounces does not require a 1099-----at this time

RickshawETF's picture

@AGXIIK

Whether gold or silver, in the amounts we're talking, no 1099 should be required in either case (under current rules).  But, if you sell either metal and the LCS gives you a check, you have a traceable paper trail.  Even if you cash the check for fiat at the issuing bank, you still leave a trail for authorities to follow, if they are so inclined.

My example was an LCS/dealer who would be willing to "bend the rules", if that what it takes to get paid in fiat.  I'm sure you would be able to post on Craig's List "1 oz. Gold Coin 10% under spot", provide a cell number, and get plenty of calls from individuals eager to trade you fiat for your coin!

Joseph Warren's picture

Euro-Poodles

Fred Reed writes another on point, witty article -

http://www.unz.com/freed/trump-to-europoodles-roll-over-bark-begcrawl/

Montross515's picture

Kirkland Lake Gold

For the few members here interested in stacking fiat I hope you heard what Eric Sprott said to Turd on Friday. Production in the second half of the year MAY increase 400% at KL. Reserves at Fosterville have doubled in the past two months!!

You do not need anything like that to get rich. KL went up 6% last week ( while $34 billion of banker stuff sank gold $25 on Friday) and my KL options still went up 29.4% for the week.  That in a week, and each week compounds for your profits. I am being conservative and using low risk options. If I had had all my money in the July 20s—-Wow, that would have made it a 50% plus week.

And this with gold down. Think about gold $1350!

SquibLoad's picture

GOLDEN RULE

Rickshaw, AGXIIK

$5000 Gold? On that day, the Golden Rule will apply:

"He who has the gold makes the rules"

On that same day, at that price, you better have an equal supply of anonymity and Lead.

AGXIIK's picture

Before that time it might be a good idea to start " The Plan"

The Plan is a slow and steady sale of said precious metals when the prices hit a level you've predetermined as your selling price.    Whether one does it without a paper trail or with one,  the size of sales could draw undesired attention. 

With some forward planning it's prudent to set up a network of people who are able to trade the commodities.  $5,000 gold is a high price but only 4 times the present price. If it were to hit $10-25,000 or greater that would be a tipping point where those who never gave gold a second thought begin to view one AGE, now worth the price of a economy car or half a year's pay. If silver hits $100 an ounce that might get the attention of undesireables.  If it hits $500 an ounce, just barely in line with a GTSR of 50 to 1, that is now a whole new era of silver awareness.

If these people  have no gold or silver or even worse, this dramatic rise in PM prices is part of a major economic reset that hurts Average Joe badly,  you'll need more than some lead and the steel with which to deliver said Pb.  You'll need a small army to travel 25 miles to the LCS.  And trading at those prices, whether receiving a check or cash,  that armored truck will be hired round trip.

As I look at the situation of cryptos  It's become one of the most visible Tulip Mania assets in the last 100 years.  I have nothing against cryptos or those who trade them. It's the 'mania' aspect that concerns me.  My only point is that everyone is talking about these and thus driving up the prices by a factor 10,000%   

Unlike trading Apple, Facebook, Google and the like, stocks  with 1,000-10,000% increases in value over the last decade, stocks that trade in the light of day in markets with almost full disclosure of trades with governments, banks and individuals who have access to our trades, I don't see bandits with pistols and guns coming to steal those shares. (Leaving aside the usual suspects like banks and governments whose sole purpose is to steal from investor, but that is another story).

In the last few years Bit Coin has risen in price by 1000%,   rising from $200, hitting $2,000 in July 2017 and another 1,000% to $20,000 by December 2017.   Since then the price as fallen back by 65% to $6,400.  I don't even count the first iteration of price increase from $20 to $200.  Just seeing that makes my head spin.

This sort of appreciation has drawn just about every bad actor in the world. 

BTC's being stolen in $1,000,000 to $100,000,000 lots with little more than a bit of computer stealth, unsecure wallets, porous crypto banks, BTC banks that turn to thievery, governments taking ill gotten gains such as what happened with Mt Gox et al; even tax authorities  turning to asset forfeiture.

Regular banks have gotten into the act,  working overtime to find ways to rig the price while creating trading platforms to remove even more cryptos from private hands with a casino-like rake and toke system

Everyone wants to steal cryptos while they can. It's like a gold rush. It's far too reminiscent of the repeated actions taken against physical gold and silver and even more damage that's been done in the digital and paper markets. 

We've seen NW Mint, Tulving and the Texas bullion company steal tens of millions of client deposits as well as their precious metals.  The theft in the derivative markets is in the trillions.  Many countries are war zones, devastated by armies who marched to steal a nation's gold.

With those situations in mind, anyone holding and stacking has to be extremely careful.  Those people are at risk and have been for a decade. That wont change even if prices are steady.  There's never been a safe time to hold appreciable amounts of physical on premises. People with metal detectors are finding caches of gold and silver coins in fields and near battle fields as people  2,000 years ago dug deep to hide their phyzz.

Selling said items is even more difficult because of the war on cash.  I've dealt with that many times in the last 5 yeras. The rules on selling, whether a dealer issues a 1099 or not, whether selling gives that sale information to the government, the paper trail of checks issued and even the possession of large amounts of cash on the order of low to mid 5 figures or even low 6 figures, makes a person a target for several reasons.  Believe me when I say; planning around these eventualities is a part time job in some venues.

Stealth has never been more important, even when gold is at $1,300 and silver at $17.  Any appreciable increase will bring out the worst in some people. 

Plan ahead.  Even if the dealer sale creates a 1099 and you have to pay capital gains on that sale, a 1000% rise in PM prices still means we are way ahead.  Keeping sales on the down low and sitting on  1,000% gain  while selling for cash is a whole nuther conversation and not on to be had on the boards.  

sam020's picture

This is great news. Gold is on SALE!!!!

Turd

The right side of your multi year bowl is fullfilling its promise and going down to weed out the weak hands...Before the final move to 1500+...ALL ABOARD!!! If gold goes to 1240 I will be a jumping with joy to buy more...

sam020's picture

This is great news. Gold is on SALE!!!!

Turd

The right side of your multi year bowl is fullfilling its promise and going down to weed out the weak hands...Before the final move to 1500+...ALL ABOARD!!! If gold goes to 1240 I will be a jumping with joy to buy more...

SS121's picture

Happy Fathers Day Men

Remember, one of the most highly recommended ways to help your little ones is by example.

AGXIIK's picture

At risk of sounding like a noodge, more on Medicare and SS

Some of you know I've had a running battle with Social Security over a $23,000 clawback they demanded earlier.  After negotiating with the local office, I ended up achieving just about nothing.  Negotiations ended when they took a closer look at my  2016 returns and thought/felt that forfeiture of 12 months of SS payments would be the way to balance the books and close the case for my clawback.  Around $1,940 a month was forfeited until May 2019   While we can afford it, we also necked down our budget to a level where SS payments are a medium sized part of our income  $23,000 is roughly 25% of total taxable income. 

While the forfeiture of SS for 7 months of 2018 and 5 months of 2019 will reduce our taxable income, my plans to date have also been successful in eliminating virtually all federal income taxes, all payroll taxes and any other levies normal for tax payers in 2017  This plan will be implemented with greater vigor in 2018 since any further funds sent east to DC is now another insult to our family.

Medicare also weighed in with a 25% boost in my Part A premiums because the bump in income was 100% attributed to my higher income. It was fortunate this clawback and rise in premiums fell on me because I don't want my wife's SS income and medicare Part A payments affect by my business income.  She paid into the system for 50 years as I did.  

With all this said, it's very important for those of you who are thinking of taking Social Security early at 62 that you factor in several things to your thought process

The first item is whether any income subject to clawback, including business income, job earnings, capital gains or dividends will be counted towards the 3 break points where you start seeing clawbacks.  Do your own research as these change yearly.  

The second item is whether your income is payroll subject to payroll taxes of 15%, paid equally from employer and employee.  If you start taking SS early and find it's clawed back while you are paying into the same system that supposedly is paying you a retirement income, you need to evaluate if it's worth remaining employed.

Making $50,000 a year, your SS payments are around $6,000 (12%)  Medicare is another 3%  If you take your SS at 62 and it comes to, lets say, $1,250 a month, you forfeit 8% a year for every year you take it early before age 66, your full retirement age.  

Your claw back could easily be 100% if you have some nominal income from another source such as capital gains, dividends or a sole proprietorship gig job that 35% of seniors are taking because their pensions and income don't cover personal overhead. Clawbacks start at around $17,000 and climb quickly.  I don't know the exact number in income where 100% is clawback but I think it's around $50,000.  In failing to plan effectively to prevent a clawback, I ended up short $23,000 plus $500 more in Medicare insurance   Maybe $23500 is not consequential to everyone but in my world that 19 ounces of gold or 1,400 ounces of silver.  If that is what you have to sell to make ends meet and its done in a price suppressed market, that is painful   I am not sure if I will ever see that $23,000 back anytime in my lifetime

Something else to consider is whether it's prudent to start taking early.  Most calculations indicate that if you wait to take SS at 66, it takes 14 years to make up the early pension payments that are subject to reduction .  That takes the average American male far to close to his expiration date to make waiting worthwhile

I found a means to reduce or eliminate that clawback and that was by incorporating under Nevada law as a Subchapter S LLC  It provides me with legal barriers of a sufficient degree that I am not longer paying $4,000 a year for E&O insurance.  Net profits from the business are passed through as passive income in a manner similar to trusts, partnerships and other incomes that not only would have completely avoided my clawback provisions but prevented any SS payroll taxes paid into the system for 2016   That payroll tax was $12,000

My mistake became three fold

My SS was and is 100% clawed back for 2018, starting in 2018.

My medicare premiums jumped 25%

I paid $12,000 back into the same system that claw back my income.  I got a notice that my SS payments, when they are restarted, will reflect that $12,000 with a boost of $38 a month   If my math is correct it will take me nearly 30 years to recover the $12,000.  I should live so long

Moral of the story

If you plan to sell PMs that have capital gains attached, be absolutely certain that said sale will not bump you into a new tax bracket.  The IRS regs do say that your capital gains can go at 0 rate if your combined income is under $76,000.   That;s nice of them. But whether SS turns a blind eye to this is another story. 

Your capital gains, plus gig job or day job income plus early SS draws can easily propel you into a higher bracket that creates the claw back, boosts medicare premiums substantially for both spouses and creates capital gains taxes

Be sure to check with your accountant before embarking on any income  that puts you in harms way

We now know that SS trust fund will be depleted by 2034 (much earlier since any government estimates are false and misleading) Medicare is supposed to go Tango Uniform by 2026  Good luck with that.  My use of Medicare this year will no doubt accelerate that by 3-6 months.   

If what I am seeing today is any indication of what will happen when things reach a critical juncture 3-5 years from now, both systems will turn to further asset forfeiture, income determinations and whatever else the government deems is needed to balance the books. That includes asset and income means testing since the government can check every thing you own right down to your stocks, bonds, debt, home values and anything else they need in order to keep the system running

Stay low, stay frosty and keep stacking  That is one asset they cannot find

bp9291's picture

AGX

I have felt for many years and more so the last few years that everything not off book is at high risk, you can lose it in a heartbeat, not only to the broke ass gov. but to lawyers, opportunist, crooks etc.   Paying cash for metal and then keeping off book is the only way I know to protect yourself.   I have never had an asset freeze but know two others that have and it is a real bitch.  I say pay a little higher premium and pay cash,  "so I went to Vegas and lost all that money, I'm an idiot."  Also blanket ins liability I don't use anymore because of a monster distrust of insurance in general and especially if things get tough.  Just IMHO, Joe

PS you got to protect your own stuff but what is new about that, you have always had to protect yourself, your family and your stuff, just going to be more so.

NW VIEW's picture

A few thoughts for AGXIIK

 The "sweet spot" is to take the SS checks at 62, limit your income for no claw backs, downsize into a small retirement home or rental, burn most of your credit cards, pay cash for as much as possible, and learn that we have been a cash cow for decades. 

Your "claw back' funds will pay for all the millions who seek to walk across the borders, get free everything, demand even more without working, have their babies without any fiat costs, and they do appreciate that you are paying for their wants and needs. 

Happy is he who has a stack of PM's, fiat in a tin can, zero debt, a complete departure from property taxes, a large organic garden and also has the insight into the folly of a degenerating culture, controlled by the evil  dreams of greed.   jmo   Jim

Orange's picture

AGX

Thank you for posting that. I turn 60 this year and was thinking of taking SS at 62. This certainly makes me think I need to do some research. 

AGXIIK's picture

A few more thoughts about anything that deal with SS or IRS

Both are collection arms of the US government,   SS is collected via payroll deductions from employer and employee.  I am not sure how the IRS parcels out the separate payroll taxes since my tax payments as a business owner for the last 26 years include both SS, Medicare and Income taxes in a lump sum. There were no specific itemizations  for one or the other unless the 1040 or 1120S direct the funds to one agency or the other. 

My last day job was 1992. Since I retained no pay check stubs etc, I assume my employer sent all payments  for my various fed taxes (SS, FICA, FUTA, Medicare and other minor levies) to the Department of the Treasury, the same recipient's name I've put on all my business taxes paid outside state or property taxes  This leads me to believe all these revenues flow into one vast accounting system with many hands and mouths beseeching a slice of the pie.

This allows all federal agencies to view who gets what share of revenues and also who paid what to whom, including those tiny taxes that appear on your phone or utility bills.  A dime here, a dollar there, these tiny bits of revenue add to billions   Federal asset forfeitures are now into the tens of billions so tracking that revenue stream must be a full time job for a fed agency

The IRS, Social Security and Medicare bring in trillions of revenues.  These vast sums are spent on every agency and department in the federal budget without apparent  thought as to whether the fed budget is balanced or that any department actually have a line item budget that's follow.  If the budget is exceeded, the fed sells more debt.  There hasn't been a federal budget in the last 10 years or so I heard.  

This brings me to my last thoughts

When trillions are at stake all agencies must take a heavy handed thuggish attitude to collections. Collections are handled with force, coercion,  threats and weaponry normally used on the battlefield.  The biggest goon gets the most Franklins.

This heavy handed approach has enormous drawbacks however.  It's generally the large sums that get the most attention, force and coercion.  A small sum is not worth much attention; such as a letter audit from the IRS noting that you didn't include a $65 1099 or a dividend check on your return. The letter notes it and requests you send $15.01 to the IRS with your tax ID number   I've received maybe 2-3 in the last 25 years. BFD.  I also received a $1,000 refund that my CPA said was actually an arithmetic mistake on the part of the IRS.  The check was cashed of course since trying to argue the facts of an IRS error could easily set off another calculation,  not in my favor.  

This tells me that even as tax risky a venture such as mine, a  home based sole prop with independent contractors as my hired agents, with mid to high 5  to low 6 figure deductions embedded in schedule C, I was not the exception to the rule that your chances of being audited are fairly high.  Granted, my CPA was IRS Krytonite but even that doesn't assure you of a life free of audits.

If anything, the chances of being audited, even with a paper audit like my IRS  letters saying I owe $12 due to a missed interest income check, tells me that the IRS is clearly as close to a toothless giant as anything existing in the USA.  With top agents retiring, remaining agents overworked and unable to handle the work load and a computer system that's incredibly inefficient and antiquated, my new philosophy as it applies to the IRS and my business and personal accounting is as follows. The IRS is toothless, worthless and way past it Expiration Date.  If people only knew how little power still remains in the agency, the people of this country would go on tax strike in a New York second.  The IRS is like the Mouse that Roared.  

Just as they use hammers, cudgels and veiled threats to bully people into paying, I use finesse,  scalpel sharp accounting, a microscope fine tuned to finding every loop hole, including some that are nearly invisible.  If the government collections agents want to claw back money I paid over the decades, I will claw back all potential tax revenues, the type most tax payer would end up paying, for the simple reason that not a penny of deductions will be left on the table.

To paraphrase Trump, my clawback is bigger than theirs and mine works

As for income, capital gains, business net profit that moves from my Sub S LLC to line 17 of our 1040, plus any other income from sources known or unknown, these will be  compressed down to the minutest  razor thin amount possible, removing any tax burden from me and mine forever.  

When someone declares  financial war on me;  trying to steal from me; trying to harvest my substance, I war back. 

And I am infinitely more subtle and aggressive in this cause and to this end, aided by highly trained experts in their field who do my bidding because they love the fray as much as I love paying zero taxes.  The gummint don't stand a chance.

There may not be much blood in the streets---yet---but the stakes are just as high.

Now I need to find a way to not pay property taxes to Brian Sandoval, King of Nevada and his quizling mandarins who run Washoe County.   Last time I checked Nevada is not at war with anyone.  Anyone except maybe me.

lakedweller2's picture

IRS

They can arrest you and you cannot arrest them.

Mickey's picture

Social security

the big hits for seniors, and workers is that CPI is understated by 4-6% points since early 1990s. What if the real number was used the last 25 years. Social security average now is 18k a year. I am guessing that would be 80k. 

The person working earning normal amounts is also affected by this. Imagine 8% increases vs 2% for the last 25 years.

then look at treasuries, and we are at NIRP. If real inflation is 9%, then the 30 year treasury  should be a hell of a lot more than 3.1%.

that 6% savings for the govt is 1.2 trillion a year.

add in 75 million receiving soc sec thats already been cut bsckhanded by govt with lower inflation, that trillions more per year meaning we are already fucked on the grand scale.

thank the liberals for driving us in this direction, and the conservatives for letting it happen.

gold should be 5 figures.

My wifes sisters husband had been a corporate CEO , made millions and is well connected and on boards now.

She worked for 5 years or so 40 years ago before kids. She receives 1/2 of his social security and full medicare without really paying into the system. Her husband and I paid the same into the system as I was at max. as was he.

My wifes worked but does not qualify tor 1/2 of mine as her computed soc sec is too much to get 1/2 of mine.

My point is how many people are in the same situation as my sister in law-wealthy but getting a big chunk of soc sec and all medicare, breaking the system.

overall our system for everything is so fubar.

our debt growth this fiscal year wil be around 1.6 trillion, but that was kept down by the tax on the repatriation of corp assets. The real run rate is close to 2 trillion.

we are in deep ship.

abundance's picture

Doogie, clarki posted AZ being bought out, that

one of your names?

Mickey's picture

I had my wife take soc sec at 62

merely because they are going to do something Draconian about it.

roughly 85% of what we receive is deemed taxable income.

Whatever we pay in is kept by govt when we kick the bucket.

We have corrupt morons in control.

AGXIIK's picture

Top of the morning Mickey

I just finished an article on Monetary Metals site that spoke to deterioration of Social Security  It might not have been set up as a pay-as-you-go Ponzi scheme but that is what we see now. One very telling statement in the article was a statement from the Social Security Board of Trustees (trustee is an oxymoron with emph on moron)  that noted the social security is tapping into its Trust Fund (oxymoron) FOUR YEARS EARLIER THAN PROJECTED IN LAST YEAR'S REPORT

WHISKEY TANGO FOXTROT (emph on whiskey)  From 2017 to 2018 the trustees failure to do the basic math went from ass clown to bozo fucktard* They failed to recogonize when SS must start tapping the trust fund was off by four years. That failure calculation took place in one year.

What happens in 2019? 

Will they note, in that dry bureaucratic manner, that the fund is almost certain to go tits up 4 years earlier that the 2034 date projected.  And what happens in 2020?

*Ass clown and Bozo fucktard are highly technical terms applied to situations when bureaucratic drones screw the actuarial pooch.  Not to be used in unprofessional situations without permission of the author.

When I read this it set of a small light, like the one when you open the fridge.

When I requested a 3 year payment term for my claw back, the peckerwoods at SS central decided that I was  given only 1 year abd fuck you very much.    The claw back was not a surprise. I expected it. But being told I have to forgo 1 year of SS payments (my money BTW) was a bit surprising. After reading the lastest glum news about SS incipient  this decision was no longer a surprise. What did surprise me is that we didnt get a visit from the local SS office followed up by an 8 man SWAT blowing the hinges of our front door, invading mi casa and strip mining the place like a hoard of uparmored locusts.

This decision made by some  well fed pasty faced spineless  GS 8 functionary worm sitting in their cube in the guts of the SS building in DC, collecting a nice fat salary plus medical, dental and a government 401K pension that's not going to get clawed back at retirement.  If I had any wish made available before I assume room temp, it's to meet my SS Torquemada and show it how we deal with penny ante grifters and cut purses like it.

In our case we can cover the short fall. But what about the 75% of retirees  who collect SS payments that represent their sole income. 

Maybe this worm thinks we can hold our breath for 1 year. 

We can. 

Most cannot and many now fill the ranks of the homeless.

No wonder the Social Security Administration has 2 armed guards per office,  with Smith M&P 40 caliber pistols strapped to their hips,  mags filled with Winchester Ranger Six ammo.   That's the old Black Talon ammo with a nice new shiny copper wash.  I work the line as a Range Safety Officer when these cucks go in for their PILB security officer requals. 

Trust me on this, these guards barely know which end of their blaster goes bang and can barely pass the shooting accuracy test   But I digress.

abundance's picture

did moving the disability payments to SS

(disability was bk) (and done under o)..really cause the problem for SS much, much sooner?

RickshawETF's picture

Social Security

Anyone have any thoughts on the following:

Which is a better option, considering the money is not needed to live on . . .

A) Delay Soc Sec from 66 to age 70, and get the additional 8% per year bump in fiat for the rest of your life.

B) Take Soc Sec at age 66, but use the proceeds (approx. $1,800 per month) to buy gold.  That should give you a "nest egg" of at least 50 ounces of gold in your possession by the time Soc Sec kicks in at age 70 . . .

Mickey's picture

the problem and solution

seniors are living longer and birth rate in decline. Simple solution is to raise age a bit and start the death squads, ala Sarah whats her name who was right. effectively take away Medicare: they have already intentionally screwed the seniors on Soc Sec (btw--18k a year average soc Sec is less than minimum wage and less than poverty levels.

Zeke Emanual wrote that maybe 20 years ago and it was taken off the internet-I have  it on one of my old disks if I had time and energy to find it. He went a step further saying nominal health care til age 16-anybody with a disease  thats young, let them die. Saves a shitload of money. And no healthcare except pain killers for those over 70 (he actually was saying age 55 20 years ago)

The real social wars start soon as seniors get nailed over and over while immigrants adding nothing to the society, take take take. look at the media mime now--do not separate kids and parents--what we do is enable parents to be assholes not really caring about their own.

His putz brother running chicago into the ground -we were at a fundraiser 4 years ago-he saw me all dressed up in an expensive suit and clean shaven and came up to me to acknowledge me-he did not know who the fuck i was and did not care once he learned I could not and would not  do him any good. I still laugh at that.

AGXIIK's picture

Take the money Tooms. RickshawETF

Famous words of Riddick in his Chronicles. Take the money at 66

Let's say you are 60 and thinking---do I take it at 62 and continue working, only to see the payments claw backed

Do I wait until 66 and get an extra 8% for each of the 4 years I postponed from age 62?

Do I wait and get another 8% for each year postponed until 70

Take the money at full retirement, 66.  It takes an extra 14 years to recover the income forfeited if you wait until 70

But the biggest problem is the rapid depletion of the trust fund. It was just tapped this year in order to make sure all payments are made  in full to all SS recipients.

The trust fund trustees messed up so badly in 2017 they thought it would be 2021 before the trust fund would be tapped.  They missed by 3 years   It started in 2018.  What happens next year?  Will they fuck up and miscalculate when the trust fund is exhausted?  They say it'll be 2034 before the trust fund is exhausted.  That's 15 years from now.

So, you're 60 and think waiting another 10 years before you take SS and get an extra 64% for those 8 years you waited.  In that 8 years you can bank on these fuckers moving your cheese  Bank on it   If you and wifey can make $3,000 a month total, that's $36,000 a year, year over year until 70.   Tell me that $144,000 plus inflation adjustments isn't a sneeze worthy sum.  

The problem is that you and maybe 65-70,000,000 other Dole Geezers will be told that when the trust fund is exhausted you get an automatic 25% reduction in benefits.  That's the law.  You get $2,000 when you are 70.  But a few years later the trust fund goes tits up and you're back to $1,500.  That doesn't take into account the fact that the SS trustees probably eff up again and to their amazement and surprise they calculated that the trust fund is being sucked up so fast it'll be gone in 2030  Just like they miscalculated when the trust fund would need to be tapped    These people couldn't find their ass with radar

I make a prediction today that within 2 years we will hear the bad news that the trust fund is expected to go to zero in 2030. That means everyone who patiently waited for 70 will get royally screwed When those people at 61 hear this news, thinking its safe to wait until 66 or God forbid, 70, they are going to sign up so fast that the line at the local SS office will stretch 20 miles down the highway.

Besides which, it takes 14 years of SS payments at the higher level, whether you wait to 66 instead of 62 or 70 instead of 66 to make up for the income you forfeited by waiting

Patience my aching ass.  I want my money now

Take the money Tooms.

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