You Don’t Plan on Being Retired Very Long, Do You?

Posted on August 20th, 2013

Pension Fund Reductions RetirementBy Dennis Miller

I don’t know which is worse: realizing you cannot keep a promise you made to someone who was important to you, or being the person who relied on the promise when you finally grasp that it is not going to be kept.

In 1973, I was 33 years old, just getting started as a public speaker in a career that would span another 30 years. I was asked to join the National Speakers Association and became a charter member. Our first president was the late Bill Gove. Bill was a terrific speaker and also a great salesman—one of the top life insurance salesmen in the country for many years.

One of his favorite lines was quite telling about selling life insurance. He would ask his prospect, “How much life insurance do you have?” The person would tell him. Bill would pause, get a funny look on his face, and deliver the punch line as a question: “You don’t plan on being dead very long?” Every time I saw him deliver that line, the audience would roar.

Were Bill alive today, he would likely be selling annuities to those same clients. I don’t understand why insurance companies don’t call annuities “enjoying-life insurance.” If they did, they would probably sell more. Somehow I can’t see Bill in front of an audience telling a story of asking a prospect about their retirement portfolio, and then delivering the line, “You don’t plan on being retired very long?” My guess is the audience would shift from one side to another in their seat and perhaps chuckle uncomfortably. What’s the difference? An entire generation would know he is right; we are very uncomfortable about having enough money to truly enjoy retirement.

So what has changed since 1973? Most of us never thought too much about retirement when we were younger. In the 1970s, if you worked for the government, were a union member, or worked for a medium to large corporation, there was a good probability that you were guaranteed a pension if you worked there for any length of time. Couple that with Social Security and you could enjoy retirement. My dad had two pensions—one from the State of Illinois and another from the post office—and he did just that.

During my career, I trained salespeople and managers. One of my teaching points was emphasizing to salespeople not to exaggerate or overpromise to their clients. I told them: “Don’t let your hippopotamus mouth overload your hummingbird ass!” That line certainly got their attention. The adverse consequences of being unable to keep a promise in the marketplace can be devastating. They can include the loss of a client, but also in many cases the loss of your reputation.

The corporate world, many unions, and federal, state, and local governments are all guilty of doing just that. They made pension promises to their employees that they just could not keep. I had a good friend who became a senior pilot at Delta Airlines and was quite proud the day he flew his last flight into Atlanta Hartsfield Airport. They had the customary fire hoses greeting his plane and a big retirement party. Less than two years later, Delta filed for bankruptcy, the government took over its pension obligations, and his pension was drastically reduced. Sad to say, he passed away within five years.

I found it interesting to read the current Employee Benefit Research Institute Retirement Survey. It reported that only 3% of employees in the private sector have a pension plan. The rest now have some sort of savings plan, like a 401(k). individuals Corporate America has successfully unraveled from its pension promises in two ways: either companies bellied up and shifted the pension liability to the government; or they transferred the responsibility back to us as individuals. It is now our job to worry about our own well-being. In effect, companies are now just voluntary administrators of a voluntary savings plans for their employees.

While corporate America made promises it could not keep, at least most companies ‘fessed up to the economic reality, explained that making good on their promises would force them into bankruptcy, and found a way to get out from under those commitments.

Our government is doing the opposite of ‘fessing up. While corporate America is unraveling from economic promises it could not keep, governments big and small are doing the opposite. In addition to their generous pension plans, we all now have health care (even those who are not citizens), food stamps, longer-term unemployment benefits, etc. The list of promises goes on and on. It seems the government has its hippopotamus mouth going full blast in every election cycle, making promises to win elections.

Those who try to speak up (see Ron Paul) and point out that those economic promises are going to bankrupt us all are criticized and ridiculed. Unfortunately, there is one major difference between corporate America making promises and the government doing the same thing: the government is making promises it cannot keep with our money! It is driving us into bankruptcy. When that happens, normally the value of the currency will collapse, destroying the wealth of seniors and savers in the process.

While it may be bleak, it is not hopeless. I recently read John Stossel’s latest book, No, They Can’t: Why Government Fails—But Individuals Succeed. The book outlines our current predicament in very easy-to-understand terms. At the same time, it strengthened my personal resolve. It gave me hope… a funny choice of words, as I think about it.

Every day, more and more people are seeing these promises for what they really are: hollow and illusionary. There is no point in debating whether they were made in good faith or not. Who the hell cares? The real issue is: they are promises that are financially impossible to keep.

John’s book reinforced what I already knew: Americans are a hardy lot, and a lot of us succeed in spite of horrible obstacles placed in front of us. The first step is to pop the illusion bubble, accept the responsibility for our own retirements, and get on with the job.    (my emphasis)

While it will take a lot more than a simple annuity to get the job done, there are always opportunities for educated, take-charge investors to survive when they put their minds to it.

Oh, and to address the question I asked in the first paragraph. Being concerned about having to break a promise you made is only important to those with a conscience—not the kind of people who will just tell folks whatever they want to hear. Guess what? We are on to their game and can thrive without counting on their phony promises.

I was so impressed with Stossel’s book that I invited him to join us for an exclusive discussion on the challenges facing seniors. He’ll be joined by a panel of experts including David Walker, former Comptroller General of the United States, and Jeff White, president of American Financial Group, to give you practical solutions to today’s financial challenges.

Our event, which is titled America’s Broken Promise: Strategies for a Retirement Worth Living, is free and premieres on Thursday, September 5. Click here for all the details and to reserve your spot.

http://www.millersmoney.com/go/vqk3g-2/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Aye, Me Hearties—Why There’s Still Old-Fashioned Treasure Out There

Posted on August 15th, 2013

Investment In Gold As Gold Bullion_9526103

By Louis James, Chief Metals & Mining Investment Strategist

I’ve always wondered why we tend to glorify pirates and treasure hunters: the Indiana Joneses, the Jack Sparrows, the Long John Silvers. I think it’s because most people, while it may not be reflected in their daily lives, are adventurers at heart.

Don’t we all dream of digging a hole because we just know there’s something there, and hearing that telltale clunk of our spade striking the lid of a treasure chest filled with gold doubloons?

Fact is, the precious metals mining sector—although by many derided, as Doug Casey says, as a “choo-choo” industry—is one of the last bastions where wannabe daredevils can still dream big.

Luck—But Not Dumb Luck

Most of the companies my subscribers and I invest in are explorers looking for gold, silver, and other metals.

Of course today there’s a lot of science involved in finding those modern treasure troves. That includes the latest technologies, like XRF guns, to assay rock samples right in the field. And some geologists just have that spot-on intuition about how mineralization twists, turns, plunges, thickens, pinches out, breaks off, and reappears.

However, we can’t—and shouldn’t—underestimate the role of luck in every discovery. Mother Nature likes to hide her treasures well, plant false clues, and bury them deep. That’s what makes the treasure hunt so exciting, difficult, and ultimately (when successful) profitable.

Here’s a secret that most mainstream investors don’t know: There are literally thousands of mineral exploration companies, and MOST of them will never discover anything.

The money these companies raise in the market will be poured into the ground, and chances are that it won’t ever do any good.

This is what makes identifying companies likely to make a significant discovery so difficult—and therefore so enormously profitable when you do.

When an exploration company goes from having nothing to having proven and probable mining reserves of calculable value, share prices can go through the roof… pennies turn into dollars… and dollars into fortunes.

I love being part of the discovery process; especially when the mine gets built and creates new jobs, usually for people who desperately need them—not to mention the metals our civilization depends on.

Windfalls: A Trade of Many Baskets

This is all very exciting, but I would be remiss if I didn’t mention the part stock promoters don’t like to talk about.

The outcome of most exploration projects is binary—it’s either something or nothing, just as one can’t be a little bit dead or pregnant—and the odds of failure vastly outweigh the odds of success.

I’m not going to lie to you: Even when you’re backing the most serially successful people in the business, with good prospects and plenty of money to go after them, there’s no guarantee that every one of their projects will pan out.

So how do legendary investors like Doug Casey hit home runs speculating on early-stage exploration companies?

They do it by adopting a “large basket” approach, speculating on a best-of-the-best selection of early-stage penny-stock picks. Some of these stocks will go nowhere, make marginal gains, or become complete write-offs, but others will double, triple, or yield higher multiples.

The occasional 1,000%-plus gain—what we call a “ten-bagger”—pays for all the rest, and then some.

Obviously they don’t come along every day, but 5,000% and even 10,000% gains are indeed possible by speculating in this way—though you have to be willing to take some losses if you’re going to reach for something so far out on the bell curve.

Lower-Risk Plays: Haves vs. Have-Nots

Mind you, not all exploration companies start from scratch. Sometimes a known discovery that didn’t quite make the cut can later turn into a profitable mine—due to new technology… by combining “splinter deposits” into one project with economies of scale… or simply due to higher metals prices.

Sometimes a new geological interpretation is all it takes, and voila, an old discovery of little consequence magically transforms into a major deposit with very robust economics.

In some cases, even better management has turned a disappointing dud into a highly profitable operation.

And, of course, you can bet on a team that has already made a discovery, proved it up, and is now building a mine… because proof on the bottom line usually results in a rerating that moves share prices up.

You see that there are many ways to speculate on the process of discovering, developing, and exploiting mineral resources.

Naturally, the higher the risk, the greater the reward when successful. If a mine is already under construction, or is in operation but being expanded, the result will be less spectacular but more reliable gains.

Which is a good thing, because it lets you choose which investment style is right for you (or maybe it’s a mix of high and low risk).

Remember, natural resource stocks tend to move in sync with the price of the underlying asset. When gold, silver, or copper jumps 2%, associated stocks will often jump 5% or more—which makes it possible for us to make multiples of our original investment.

Buy Low, Sell High.

Of course the reverse is true as well: when metals and minerals prices drop, share prices in companies that produce them drop even faster, as has been happening for the last two years in the resource sector.

This would be a disaster if we were talking about pet rocks, bell-bottom jeans, or cars with enormous tail fins, but we’re not; we’re talking about things without which life as we know it would be impossible.

No Metals = Stone Age

Even if some genocidal world government were to kill nine out of every ten people alive right now, without the use of metals those left would barely be able to hang on. It’s that simple. And that non-negotiable—regardless of what some environmental extremists may fantasize.

With the population of our planet getting larger every day and unlikely to stop growing anytime soon, nothing short of global nuclear war or a similar catastrophe can stop demand for metals from rising. (And if that happens, we’ll have more important things to worry about than stock prices.)

In other words: Investing in mining companies is, without question, one of the surest long-term bets you can make.

That means times when metals prices “correct”—as they are doing right now—should be seen as buying opportunities. Buy low, sell high.

It’s remarkable how hard it is for even those who understand this simple, fundamental formula for speculation to actually act on it.

When prices are low, there are always those who bought at higher levels warning of what a disaster the given investment is. It’s very hard to put up your hard-earned cash when you don’t know if a market has already bottomed or will bottom in the future.

There’s only one remedy for that kind of ailment: Don’t bother trying to time the market, but focus instead on buying value when you see it.

That’s why I pull on my boots whenever opportunity presents itself, and hop in a Jeep, a helicopter, on a horse, or a rickshaw to go check out an opportunity for our subscribers. Only after checking and double-checking that a company indeed has the goods do I recommend it to our subscribers.

Right now is a great time to jump in… because even top-quality mining companies with proven reserves are currently selling for pennies on the dollar.   (my emphasis) 

And as there’s no way metals prices can stay depressed indefinitely, all you need is some patience to watch the best of the best miners succeed.

It’s my own treasure hunt—and I invite you to join this once-in-a-generation opportunity.

http://www.caseyresearch.com/go/vqmza-2/WIM

© 1998-2012 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Despite Declining Deficit, Foreigners Aren’t Bailing Us Out, So the Fed Will Keep QE Going

Posted on August 1st, 2013

Federal Reserve SealBy Bud Conrad, Chief Economist

The basic imbalance driving our economy is the government deficit, which spun out of control as a result of the Credit Crisis of 2008/9. But the sequester, improving tax base, lower interest rate, and elimination of stimulus spending have caused the big government deficit, while still extreme, to drop to half its previously nosebleed levels.

Federal Deficit Declined to Half of Peak Graph

Even so, the deficits remain well out of proportion for a sustainable future. Projections for future government expenditures, including those related to the masses of retiring baby boomers, are on track to increase exponentially. Especially given that the deficits are actually much worse than generally discussed. Honest accounting would include the growing liabilities for retirees in the current accruals, resulting in deficits running closer to $5 trillion per year.

Foreigners recycling their trade surpluses have been an important source of purchases for US government debt. As you can see from the chart of long-term securities purchases by foreigners, that buying collapsed during the crisis. And, interestingly, it has recently fallen sharply again.

Foreigners Stopped Buying Long Term Securities Graph

Offsetting the reduction in purchases of US debt by foreigners, the Fed has stepped in with multiple quantitative easings (QE), buying government securities itself in order to add liquidity and drive interest rates down. The shift into an accommodative policy is easy to see in the big picture of the holdings of Treasuries at the Fed:

Federal Reserve Buys Treasuries as Part of QE Graph

Simply, the loss of foreign enthusiasm for US government debt would normally be a red flag for our economy. This time around, the slack is being papered over by the Fed, which is creating money out of thin air in order to buy what is, in essence, most of the new debt being issued by the federal government. By filling the gap left by exiting foreigners, the Fed has been able to sustain low interest rates—for the time being.

Foreigners and the Fed Buy Much of Our Deficit Graph

As the American public doesn’t save much, and because foreigners are stepping away from US government debt, the Fed is left as the buyer of last resort and will have to keep up its QE.

Among a number of problems, the money creation required for the Fed to serve as the government’s lender of last resort can be very inflationary once it ultimately bleeds into the economy. For now, most of the new money has been bottled up on the balance sheet of the Fed. With low rates, that is manageable. But if rates rise, as they eventually must in the face of rising inflation and a loss in confidence in the dollar, the interest the Fed pays on deposits rises as well, putting the viability of the institution at risk.

In addition, as rising rates increase the cost of servicing the government’s many debts, federal deficits will also rise. And that has the very real potential to create the equivalent of an economic death cycle as foreigners, and pretty much anyone other than the Fed, rush to the exits on US government paper, causing interest rates to rise further.

While it is impossible to say with any certainty when the US government bond bubble, the largest in history, will burst, the recent up-moves in interest rates should serve as a clear warning shot. From the charts, it looks like the foreigners have taken notice.

For those of you interested in learning more about the coming end to the bond bubble, the latest edition of The Casey Report contains Bud Conrad’s up-to-date report and in-depth analysis on inflation, deficits and interest rates. Your subscription comes with a 100% money-back guarantee… so you have nothing to lose by giving it a try. Click here for details.

By Bud Conrad, Chief Economist

http://www.caseyresearch.com/go/bwW68/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

What Lies Ahead for Gold?

Posted on June 21st, 2013

Investment In Gold As Gold Bullion_9526103By Jeff Clark, Senior Precious Metals Analyst, Casey Research

First, the bad news…

The selling is likely not over. The capitulation process may not be completed. Overall momentum remains down.

How low can gold and silver go? One can view all sorts of chart patterns and technical signals, and while a few will eventually be correct at calling the bottom, we prefer not to base our decisions on this type of strategy, starting with the fact that there are many different interpretations and too much variance in the predictions. What we do know is that given that capitulation is under way, the selling will overshoot to the downside, just like surges can overshoot to the upside. Our response should be to prepare to take advantage of that situation.

Sentiment has shifted to negative. All the headlines and stories about gold are negative and bearish. It will take a while for these investors to reenter the market, especially those who just sold for a loss. This won’t be a years-long process in the making, but it likely won’t happen in a month, either. The implication here is that patience will be required on the part of committed precious-metals investors.

Now the good news…

We’ve seen this before. Remember the autumn of 2008, when gold fell 28%? In the spring of 2006, the price dropped 22%. And as we’ve pointed out before, many proclaimed in 1976 that gold was over when it fell a dramatic 47%.

None of these selloffs dictated the end of the gold bull market. That won’t be the case this time around, either. A panicked shakeout is just that.

The fundamental case for gold is growing, not diminishing. In spite of the downtrend in the price, the conditions that support the long-term bull market are increasing in importance. The US and Japan alone will flood the world with almost $2 trillion over the next 12 months. Europe’s problems have not been solved, and the Eurozone teeters on the edge of a recession. And did you know that not one G20 country currently has a balanced budget? The current fiscal and monetary path of many major countries remains unsustainable, and no amount of selling by traders and hedge fund managers has changed that.

One might argue that these issues now have a diminished effect on the gold market. Regardless of whether that’s true, the effects of these actions have not played out. There is no easy way out of the corner our political leaders have painted themselves into. In other words, the damage has already been done to our fiscal and monetary state. The endgame to our debt situation hasn’t changed. When the ramifications begin setting in, it will be imperative that we all have meaningful exposure to gold.

In the end, fundamentals always win. In spite of the selloff, the long-term trend is still intact. Keep your eye on the big picture.

A lifetime buying opportunity is shaping up. We’re not exaggerating by stating that. Given the waterfall decline in both precious metals and equities, investors with the courage to act and the cash to deploy will not just be rewarded, but could very well change their financial futures. The chance for enormous gains will be remarkable.

As a result, some of you reading this will, frankly, get rich, especially those who have exposure to the best junior gold stocks. Sadly, not all will realize this level of profit; while there are a lot of reasons for that, the biggest is because they won’t have the two Cs – cash and courage. I hope you will be among those in the first camp.

I’ll leave you with a quote from one of the most successful fund managers in the US, which was made while gold was in the midst of its dramatic selloff. It captures exactly how we feel about the current situation – and I hope yours:

“You should love this if you’re a long-term holder of gold, or a believer in gold as a currency – you can buy your insurance cheaper,” said Mark Fisher, CEO of MBF Clearing Corp. “A long-term buying opportunity is near.”

Recent market actions have left many staunch gold advocates uncertain about what’s ahead… not to mention how to invest wisely for both the short and long term. What gold assets are the best to buy? Should investors be buying today or holding for further drops?

These questions and others will be addressed in a free online webinar from Casey Research and TheStreet. Featuring legendary contrarian speculator Doug Casey, Sprott Chairman and founder Eric Sprott, TheStreet founder Jim Cramer, and others, GOLD: Dead Cat or Raging Bull? will give you information you need to set your portfolio up for life-changing gains.    (my emphasis)

Conditions are setting up for a rare opportunity to reap astonishing profits. Don’t miss out: register today for the webinar, which premiers Tuesday, June 25 at 2:00 p.m. Eastern Time.

By Jeff Clark, Senior Precious Metals Analyst, Casey Research

http://www.caseyresearch.com/go/bxjhi/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Benefits Cuts and Higher Taxes for Seniors in Obama Budget: Are We Really Surprised?

Posted on May 30th, 2013

Doomed Boomers by David Fitzsimmons, The Arizona Star

By Dennis Miller

Some people claim that our Social Security system isn’t broke. Technically, they’re right. The Old Age and Survivors Trust Fund (OASI) currently holds $2.5 trillion in special government Treasuries that can be redeemed at any time – in theory of course.

But here’s the catch. What happens when the OASI needs those trillions of dollars to pay out benefits? Essentially, the government has to find the money to pay the face value of those Treasuries. So from that standpoint, Social Security is broke. The Treasury IOUs are not backed by any cash surplus, only by faith that the US government will somehow come up with the cash… probably by indebting itself further or by raising taxes.

I Want You Uncle SamSocial Security was created by the Federal Insurance Contribution Act (FICA) and sold as a government-managed insurance program. We pay “premiums” to the OASI during our working years (actually the government just snatches money from our paychecks), which are supposed to be invested and provide retirement income for the rest of our lives. Our retirement is supposed to come from the income on those investments.

After taxing baby boomers for decades, the OASI is huge. But now that millions of those baby boomers are retiring, it’s time for our government to tap into that fund to keep its promises.

The problem is that our government claims it can’t – or won’t – honor its commitment… no surprise there. In a nutshell, it recklessly spent the money it grabbed from our paychecks… money it was supposedly holding as a custodian. Rather than be honest or have the courage to raise other taxes to support its spending, the politicians stole money from our retirement insurance premiums to pay the bills for all sorts of other programs. If folks in private industry raided their employees’ pension funds and spent that money, they would be in jail. Well, if the shoe fits…

Here are the three items in President Obama’s recent budget proposal that are designed to address the issue:

  1. Chained Consumer Price Index (CPI);
  2. Raising the income cap on the Social Security tax;
  3. Additional contribution caps for IRAs and 401(k)s, and targeting those savers who have accumulated $3 million or more.

While each proposal seems different, Gary D. Halbert recently penned an article alluding to the fact that all three are related. He wrote:

Liberal Democrats oppose the switch to chained CPI and demagogue it as a ‘war on seniors,’ while Republicans feel it’s a way to save Social Security as we know it. Democrats prefer eliminating the cap on salary subject to Social Security taxation (read: increase taxes) to using chained CPI, which they view as a cut in benefits. It seems that only in a politician’s mind can a slower rate of increasing benefits be called a ‘cut.'”

So, expect your Congressional representatives to say something like, “These were the choices, and I fought hard to protect you.” In the end, they will reach a theoretical compromise and the public will get fleeced once again.

Well, how about “NONE OF THE ABOVE?” All three of these proposed solutions would do more harm than good.

Chained CPI

Let’s cut to the core issue of the CPI. It’s supposed to track prices of a consistent basket of goods that parallels the cost of living. In theory, when the CPI goes up, your cost of living adjustment should increase at about the same rate. But when the government attached benefit rates to the Index, it started to play games with the numbers.

The official CPI is a joke. It is continually manipulated and just doesn’t match reality for most people. That’s because keeping the CPI lower than the true rate of inflation benefits the government in many ways.

  • It decreases benefit payments to government retirees and Social Security recipients.
  • It reduces the cost of Treasury Inflation Protected Securities (TIPS), which are tied to the Index.
  • It is a de facto increase to the income tax, since tax brackets are adjusted for inflation.

And of course, the politicos love it too. They do not have to face voters and cop to cutting benefits or raising taxes. Perhaps that explains why the credibility rating of politicians ranks below that of used car salesmen.

When the Bureau of Labor and Statistics started fiddling with the numbers, the phrase “constant level of satisfaction” entered the picture. Alan Greenspan, in an attempt to justify the new substitution-based inflation formula, was credited with saying, “If the price of steak got too expensive, consumers may switch to hamburger.” No kidding. He is such an intellectual.

A chained CPI would just be another boost to the numbers manipulation game. CNN released some disturbing statistics on the damage a chained CPI would cause:

“Someone who started collecting the average Social Security benefit for a retired worker in 1999 would receive $12,972 in 2012. But let’s say the Social Security Administration had already been using chained CPI – that person would get only $12,336 this year, according to the National Academy of Social Insurance. That’s nearly 5% less.

“The difference gets bigger over time. According to the National Women’s Law Center, a retiree who was collecting $17,520 last year would see 6.5% less, or $1,139, by age 85, if chained CPI were in effect. A decade after, their payments would be 9.2% smaller, or $1,612.”

The CPI should be renamed the “Consumer Payment Index.” It has little to do with a constant basket of goods. If it measures the cost of living at all, it’s only the cost of mere survival. What happens when the price of hamburger gets too high? Do we switch to chicken? Where does it end, dog food? We need to call the CPI what it is – an index concocted by the government to hoodwink voters because none of our elected officials have the courage to tackle the problems honestly.

The chained CPI will probably continue to make a lot of headlines. One political party will accuse the other of wanting to mess with the formula even further and reduce Social Security benefits; and one will accuse the other side of pushing for a tax increase.

Here is what will likely happen. We will be hammered by the politicians trying to strike fear into our hearts. At the last minute, the “Mighty Mouse” politicos will come in to save the day and “rescue” us from the Chained CPI. The real motive is to make the other choices sound like a fair compromise.

Raising the Income Cap on the Social Security Tax

The next proposal is to raise the cap on income subject to the Social Security tax. This will be sold as a way to reduce the deficit and save an underfunded program.

Can anyone remember a tax increase sold to the public as a way to reduce the deficit that actually did just that? Regardless of the party in power, the deficit just keeps growing.

This would be a simple 6.2% tax increase on income over $113,700 for both employees and their employers. For folks who are self-employed, the tax rate is 12.4%. High-income baby boomers already fear being “retired early” by employers looking to replace them with less expensive, younger workers. This would add another incentive for employers to cut out their highest wage earners.

It’s the same old crap. One political party will scream that this is a tax increase, while the other will say the rich don’t pay their fair share. They will argue over the amount, then claim to come to a bipartisan compromise.

Additional Contribution Caps on Tax-Preferred Retirement Accounts

Obama’s budget would “limit an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year.” According to Matthew Hiemer’s back-of-the-envelope calculation in a MarketWatch post, this would affect around 100,000 American households.

This looks like pure politics to me. These 100,000 families won’t get much sympathy from regular folks. Any politician who opposes this proposal risks being labeled an elitist, and those who support it will crown themselves the champions of the poor… just as an election is coming up.

This is just another unwarranted attack on the rich who were successful enough to build up more than $3 million in their retirement accounts.

Money in a traditional IRA or 401(k) is nothing more than tax deferred. When it’s withdrawn, the government still gets its ever-increasing share. And there are mandatory withdrawals once a person reaches 70 ½ years old, so that money will be taxed eventually. The government sounds like a petulant child, screaming, “I want it now!”

What Should We Expect Next?

Over the course of the summer, political emotions will rise as both political parties take their stands. Then, at the last minute when all the hype has been milked, they will strike a convoluted compromise. Both parties will tell their constituents it was the best they could get, and ask for contributions so they can fix the mess after the next election.

“NONE OF THE ABOVE” won’t be seriously considered, and more wealth will be stolen from hard-working Americans, many of whom would never consider themselves wealthy to begin with.

In an attempt to limit any political hate mail, I offer this. I don’t want to hear a word about “fairness” until all elected federal officials scrap their retirement programs and put themselves under Social Security like the rest of us. Opensecrets.org reports that the average net worth of a Senator is $13.9 million and that of a member of the House is $6.5 million. Why should we pay for their fancy retirement and healthcare programs?

What Should You Do Now?

You’re probably thinking you want to contact your elected officials and let them know how you feel about this. I sure have, but I’ll leave that up to you; politics is not my area of expertise. However, managing my retirement finances and sharing my knowledge and strategies with my fellow seniors are exactly what I do. I’m one of you, a retiree who wanted answers.

I spent the bulk of my career teaching adults, and I know that complicated information can be taught in simple, easy-to –follow ways. You may feel differently, but all the geek talk we’re bombarded with just frustrates me. That’s why in articles like this one and in my Money Forever service we explain matters in plain English, so you won’t need to go out and get a Ph.D. in economics or finance to follow along.

I’m sure we have all told our children and grandchildren that an education is one thing that can never be taken away. In our case, a financial education can keep us independent and in the game, and in this case, protect us from the shenanigans of politicians.    (my emphasis)

I’d like for you to consider taking a look at Money Forever, it’s written by a senior (me!) for seniors. The current subscription rate is affordable – less than half that of a typical morning newspaper. The best part is you can take advantage of our 90-day, no-risk offer. If for some reason you find it’s just not for you, you can cancel for any reason (no questions asked) within the first 90 days to get all your money back and never be billed again. Period. But as you might expect, our cancellation rates are very low, and we aim to keep it that way.

http://www.millersmoney.com/go/bwkE4/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

If Cyprus Is the Bellwether, then Canada Is the Red Flag

Posted on May 29th, 2013

Cyprus’ bank savers by Paresh Nath, The Khaleej Times, UAE

By Jeff Thomas for Internaional Man

An intriguing article titled “Canada Includes Depositor Haircut Bail-In Provision for Systemically Important Banks in 2013 Budget” was recently published in SD Bullion.

The somewhat lengthy title offers all the information necessary, but for those who – quite understandably – may not be able to accept that they have just watched Canada tumble down the Cypriot rabbit hole, here is a bit more detail from the approved budget itself:

“The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.”

Customer deposits could certainly fall under the label of “certain bank liabilities,” and converting them into “regulatory capital” without permission is just a gentle way of describing confiscation. Though Canadian officials have denied that the term “certain bank liabilities” includes customer deposits, we must note that the government in Cyprus also promised that customer deposits would not be touched, only to renege on that promise at the onset of the crisis. Remember lesson #1 of the Cyprus debacle: “Do Not Trust Politicians.”

As the recent events in Cyprus have been unfolding, each iteration has seemed to me to be not only logical, but almost predictable. As Jim Sinclair has recently been stating frequently, the EU has run out of options… The next step is confiscation.

There will, of course, be endless rhetoric and debate, followed by minor adjustments in method and percentage taken, but, ultimately, the powers-that-be have reached the confiscation stage. That is now carved in stone.

But at this point, if we are watching the horizon, we will spend less of our time mourning the fall of Cyprus and more of it anticipating which countries will be next in line.

Here, I confess, I have been surprised. There were quite a few countries that, logically speaking, might have been next. Canada was not even on my personal radar. This is not to say that it would not also be in the queue – only that I would have predicted its position in the queue to be quite a bit further back.

Those observing recent developments may have understandably been saying to themselves, “I realize that we live in difficult times and that, if I am to look after my family’s future, I need to face up to the fact that we may be seeing dramatic change. But there are some things I can’t accept, and one of those is the possibility that my savings could be confiscated by my bank. My government would never allow it!”

For those who very understandably may find this latest realization to simply be beyond the pale, it would be well to take a moment out to rise above the clouds for a bit of an overview at this juncture.

In most countries of what we grew up calling the “Free World,” there has been a steady deterioration, particularly with regard to corporatism (the merger of state and corporate powers). One facet of that deterioration has been increasing legislation that allowed financial institutions to create Ponzi schemes with regard to lending, in which the bank goes broke in the end but the cost for the failure is passed to the taxpayer in the form of a bailout.

Put more simply, this means that after the fox has raided the henhouse, the government advises the public that the only way to save the situation is for the government to confiscate more hens from the farmers and give them to the foxes.

The public, desperate to return to “normal,” will accept whatever the government says at this point, in the hope that it will all somehow turn out all right. Only a tiny percentage will be prepared to say, “We’ve been systematically raped and robbed by both our government and our banks, in full complicity with each other. It’s high time I put what I have left in a sack and find a way to protect it on my own.”

Those few who do so will turn to safe havens for wealth (however much or little that wealth may be). They may invest in overseas properties that cannot be confiscated by their own governments, buy precious metals and store them privately, and so on.

The objective will be simply to make it as difficult as possible for their governments to confiscate their wealth.

While there may be no guarantee that they will succeed, they would know that at the very least, they will not be the low-hanging fruit when their government enters the orchard to begin the picking.

However, as history shows, the great majority of the people of all countries will fail to act. They will watch in confusion as events unfold, as the banks continue to come up with schemes to further bilk the public of their wealth, while the governments assure the public that, “It’s an emergency situation. We have to be willing to sacrifice a bit more to save the system, or we’ll really be sorry.” In the end, the majority of people will comply.

Cyprus is a bellwether of what is next for the world in general. A term has even already been coined for what is coming – a “bail-in.” An event in which the public must accept that, in order to save the banks from collapse (which they have been told since 2008 is the absolute worst possible outcome), they must accept that they must make their “contribution” – confiscation of their deposits by the banks. First, it will be, say, 5%, then it will be announced that 5% didn’t solve the problem and another transfusion will be needed. Then another.

Some people will figure out along the way that they are being robbed by both their government and the banks, working in concert, but most will regard that reality as impossible, as it has never happened before and surely can’t happen now.

If Cyprus is the bellwether, then Canada is the red flag, showing that Cyprus is not an isolated situation. The damage wreaked by monumental debt is systemic, and it has taken place throughout the First World and beyond.

This latter statement will very likely be the most difficult to accept as reality. If so, here is something to consider: Canada has approved its bail-in on a national level just one week after a final decision was made in Cyprus. As we all know, the wheels of governments worldwide move slowly. The reader might ask himself whether he believes that the Canadian government has, in short order, approved its own bail-in, in reaction to the events in Cyprus. If this possibility is simply too far-fetched, he must accept that the plan for Cyprus has been known to the Canadian government for some time and that a similar bail-in for Canada has been in the works for a while. It was simply agreed that Cyprus would go first – to act as the litmus test.

If the reader finds himself agreeing that it is likely that the Canadian government had foreknowledge of the events in Cyprus, his next logical conclusion would be that other nations had the same foreknowledge and have very likely been getting their own ducks in a row.

Most countries in the First World have gone down the same road of monumental debt and have found that that road has led to a precipice. At this point, they have no other option left in their bag of tricks. They are all in the same boat and will play their last option – confiscation of wealth.

While many First World citizens think that events like those unfolding in Cyprus could never happen in their home country, the truth is precisely the opposite – and actions like the Canadian government’s send a strong signal that the time to protect your wealth from governmental grabs is running out.

There are a number of diverse steps you can take to protect yourself and your wealth from being milked by your home government. Whether you’re looking to stash some cash or precious metals in another country, interested in setting up an offshore LLC, or wanting to go completely international with your life and your assets, the comprehensive information in Going Global 2013 will provide you with sound strategies and trusted options for securing your financial future. Learn more and get started protecting your wealth today.

http://www.caseyresearch.com/go/bwmog/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Doug Casey on Second Passports

Posted on April 22nd, 2013

The Cover of Irish Electronic Passports as of late 2006By Doug Casey

Louis James: Doug, a lot of our readers have asked about getting a second passport. I realize this is a large and complex issue – several issues, actually – but would you care to go over the basics of where to go and what to do? And for those not already thinking about this, why?

Doug Casey: Sure. We’ve talked quite a bit about the increasing urgency of getting some of your assets out of your home country, especially if it’s the United States. We’ve talked about having stores of precious metals in safe places abroad, and setting up bank and brokerage accounts abroad as well. I’ve said that safest way to store wealth abroad is to buy property, which can’t be seized by your home country without an act of war. The purchase of real estate solves several issues all at once.

But that’s all about protecting assets; to protect yourself, getting a second passport is unfortunately very important.

LJ: Why unfortunately?

DC: Because you shouldn’t have to need government papers to live as you please. It used to be that a passport was a document that a ruler of one country would give to a traveler to ask the rulers of other countries to assist him in his travels. Now, instead of a convenience, it’s become a required permit for travel. It’s degrading and actually runs counter to the whole idea of the thing. The original purpose of a passport has been turned upside down.

LJ: Passports are becoming a world ID card – and they will be, once the governments all link up their databases.

DC: That’s exactly what they are, and I’m sure it’s going to get worse. It’s funny the way people treat these things like some sort of holy relic, or magical object – they are nothing but another government ID. But since they are necessary in today’s world, you ought to have several of them, for your own convenience. If nothing else, it prevents any one government from basically placing you under house arrest by taking your passport away from you.

LJ: Do you really think of it mostly in terms of convenience? Or do you sometimes think about the potential for physical danger, should you find yourself in an Achille Lauro-type situation in which violent people who hate Americans select US passport holders for abuse?

DC: That’s definitely a good reason for Americans to have a second passport, and increasingly for others, now that the war with Islam is under way. If you ever get caught in harm’s way, it helps that nobody starts by shooting all the people from countries they’ve never heard of.

LJ: Round up all the Uruguayans!

DC: Right – that just doesn’t happen. Another reason – certainly if you’re an American – is that nobody anywhere in the world wants to open a bank account or a brokerage account for you. It ranges from impossible to hard and inconvenient. It’s a subtle and indirect form of exchange control that the US has already imposed. I have no doubt controls will become much more formal and serious in the near future.

LJ: Are you saying that if I go to Switzerland, and I look and sound like an American, but have a Mexican passport, they’ll open a bank account for me?

DC: It depends. Here in Uruguay, where I’m still hanging out on the beach, I went with a friend from South Africa to open a bank account, using her South African passport. I didn’t say a word, so I could have been a South African too, for all they knew. Still, the bank officer asked her: “Are you also a US citizen?” and “Are you resident in the US?”

LJ: The long arm of Uncle Sam keeps getting longer.

DC: It really is getting harder and harder. Banks really don’t want the aggravations that come with dealing with “US persons” and their bullying government. Of course, it’s all going to eventually backfire on the US, but in the meantime it’s going to get worse.

LJ: Yes – I don’t like it when they ask for my passport at hotels, and I hate it when they say they have to keep it.

DC: As well you should, for all kinds of reasons. You never know how good the security at the hotel is, and the inconvenience of a lost or stolen passport is substantial. I’d say a second one is a good thing to have, just on principle. An alternative would be to get documents from some of those people trying to set up new countries, like Sealand, the WWII gun platform off the coast of England taken over by Roy Bates. I spent an afternoon with him once, but foolishly never signed up as a citizen. Oh well… Other outfits sell reproduction passports of defunct or renamed countries like Rhodesia and British Honduras.

LJ: I shudder to think of what “inconvenience” means to a man who finds it amusing to argue with immigration officials in back rooms in flyspeck countries… But at any rate, mentioning purveyors of passports from defunct countries underscores the importance of telling our readers that there are a lot of scams out there, and that it pays to be very skeptical of websites that claim to be able to set you up with documents, corporations, and bank accounts overseas. There are freelance thieves to worry about, and worse – governments trying to entrap so-called tax evaders and money launderers. There’s no need to take such risks when you can go to any of the many countries that encourage immigration and permanent residency, and acquire government-issued documents legally.

DC: Yes, these are indeed shark-infested waters. You really have to do things in a totally correct and proper way. For instance, there always seem to be people running around who have passports stolen from the issuing agency, and some fools buy them, not realizing they’ll not only lose their money, but might wind up in jail besides. But, even among perfectly legitimate documents, not all passports are created equal.

LJ: Why would that be?

DC: The defining characteristic of a “good” passport is how much visa-free travel it allows. And by that I really mean visas that have to be applied for, and approved, before the trip begins, as opposed to those issued at the border. Avoiding those is the real key value.

In spite of its reputation, a US passport is by no means the best one to have. First, if you have one, you’re a US taxpayer, which is very inconvenient, but it also means you need visas for a lot more countries than you would with some other passport. Argentina, Chile, and Brazil, for instance, all charge Americans about $150 to issue a visa. It’s a perverse form of reciprocity, as that’s what the US government charges their citizens. It’s the same kind of thinking that starts trade wars, and I expect more of it in the years to come – but that’s another subject.

Speaking of South America, two passports that are relatively quick and easy to get are those from Uruguay and Paraguay. Both countries are members of the Mercosur group of South American countries, which offers some additional advantages to their nationals.

One of the best, I’m given to understand – and this is constantly changing – is a Singapore passport. I also understand that Singapore has a number of ways to become a citizen in a relatively short period of time.

LJ: What are some of the shortcuts to second citizenship?

DC: One of the best is if you have parents or grandparents from a country that will give you citizenship on that basis. Ireland and Italy are known for this. It’s true, under some circumstances, for the UK as well. Saint Kitts is a relatively easy place to get a passport quite quickly, but it involves a significant investment that adds up to a couple hundred thousand dollars. Selling IDs is a significant source of income for the island.

And of course, in a number of countries you can obtain citizenship, and hence documents, relatively easily by marrying a national. Brazil is one, and a Brazilian passport is not a bad one to have.

There’s information on this out there, but there have been scam reports done on this subject and many other sources that are simply unreliable, so watch out. I don’t think there’s ever been a truly definitive study done on all the ways, in all the 200 or so countries in the world. I believe my book The International Man was the first to really explore the ground – but it’s long out of date. Even if there were a current book, it would have to be updated monthly to be of real value – governments are always changing their rules. And when it comes down to the particulars of a given situation, you’ll want to hire a tax attorney and maybe an immigration one as well, to make sure everything is done correctly.

It’s generally better not to try for shortcuts, but to move to a place you like living in, at least part of the year. Operating through the established, legally recognized channels, you can get a passport in two to five years.

LJ: Okay. And, to be clear, the US allows second citizenships?

DC: Yes. Many countries don’t, and are strict about it. Others don’t, but look the other way. You may feel you want to keep your US documents for various practical reasons, but remember that keeping your US citizenship means remaining a US taxpayer, which is most undesirable.

LJ: I read that if your income is less than $100,000 per year and you live abroad, it’s not taxed, so maybe the tax issue is less important to people who earn less than you?

DC: That’s true, but that exemption only applies only on income earned outside the US You still pay capital gains taxes, and taxes on US-sourced income. I also understand that under current law, until 2013, there’s a $5 million exemption on appreciated expatriated assets. That means there’s a window closing soon on some of the benefits of getting rid of your US citizenship.

LJ: Any reasons other than taxes you’d want to get rid of your US citizenship? If I were young enough, I’d worry about conscription, for example.

DC: That’s a very good reason. More generally, as long as you’re a citizen of a country, that country’s government is going to treat you like its property. So, if you are going to be a citizen of any place, which is unfortunately necessary, it’s better to be a citizen of a small and backward country, or one that just doesn’t have the ability or interest to monitor all of its citizens like prison inmates, as the US does.

LJ: I hear that. It’s such a pity that America the beautiful has turned into the United State and is rapidly marching down the road to serfdom… I really loved America.

DC: Nothing lasts forever, Lobo. It’s suicidal to let sentimentality blind you to reality. But, eternal optimist that I am, it’s always good to look at one of the major bright sides of the ongoing financial and economic collapse. Namely that the governments of most advanced nation-states are bankrupt. There’s a chance that some of them will be forced to cut back on their most noisome activities. There’s even a chance that one or two will be completely hollowed out and will exist mostly in theory, like Rome in the late 5th century.    (my emphasis) 

It’s very hard to predict what will happen, so it’s best to have a Plan B. And a Plan C. Unfortunately, most people have a medieval serf mentality – although they don’t know it, and probably wouldn’t admit it even if they did – and have no plan at all, because they think everything is fine.

LJ: I agree. And you know I’m diversifying out of the US as well. Any other essential points?

DC: Yes, remember that getting a second passport is just part of a larger “permanent traveler” strategy. The ideal is to live in one place, have your citizenship in another, your banks and brokers in other jurisdictions, and your business dealings in yet others. That makes it very inconvenient for any one government to control you. You don’t want all your eggs in one basket – that just makes it easier for them to grab them all. I understand it may not be easy for most people to structure their affairs that way. That’s exactly why most serfs stayed serfs; it was hard and scary to think of anything other than what they were told they should do.

LJ: Understood. Thanks for the guidance.

The more of your wealth you have in your home country, the greater the risks to your capital. That’s why it’s critical to start protecting your assets by moving them abroad as soon as possible. To help you do just that, Casey Research is hosting a web video event at 2 p.m. EDT on Tuesday, April 30. Internationalize Your Assets features investment experts Doug Casey, Peter Schiff, Mike Maloney, and more. This must-see webinar will reveal offshore strategies you can easily implement to protect what’s rightfully yours. Click here for details and to register.

By Doug Casey

http://www.caseyresearch.com/go/bwFH6/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC

The Coming Water Wars

Posted on March 8th, 2013

Horseshoe BendEDITOR’S COMMENT: We have featured numerous articles and comments about the coming water scarcity previously, but not recently. Here, is a very complete and informative analysis of this looming crisis, which will affect almost everyone. I found some of the factual comments to be most interesting and most concerning. You may not have a great interest in this issue with its profound implications at this time. But, you will eventually, so like most important issues, BECOME INFORMED NOW!

By Doug Hornig and Alex Daley, Casey Research

Water is not scarce. It is made up of the first and third most common elements in the universe, and the two readily react to form a highly stable compound that maintains its integrity even at temperature extremes.

Hydrologist Dr. Vincent Kotwicki, in his paper Water in the Universe, writes:

“Water appears to be one of the most abundant molecules in the Universe. It dominates the environment of the Earth and is a main constituent of numerous planets, moons and comets. On a far greater scale, it possibly contributes to the so-called ‘missing mass’ [i.e., dark matter] of the Universe and may initiate the birth of stars inside the giant molecular clouds.”

Oxygen has been found in the newly discovered “cooling flows” – heavy rains of gas that appear to be falling into galaxies from the space once thought empty surrounding them, giving rise to yet more water.

How much is out there? No one can even take a guess, since no one knows the composition of the dark matter that makes up as much as 90% of the mass of the universe. If comets, which are mostly ice, are a large constituent of dark matter, then, as Dr. Kotwicki writes, “the remote uncharted (albeit mostly frozen) oceans are truly unimaginably big.”

Back home, Earth is often referred to as the “water planet,” and it certainly looks that way from space. H2O covers about 70% of the surface of the globe. It makes all life as we know it possible.

The Blue Planet?

However it got here – theories abound from outgassing of volcanic eruptions to deposits by passing comets and ancient crossed orbits – water is what gives our planet its lovely, unique blue tint, and there appears to be quite a lot of it.

That old axiom that the earth is 75% water… not quite. In reality, water constitutes only 0.07% of the earth by mass, or 0.4% by volume.

This is how much we have, depicted graphically:

World Water in Mass or Volume

Credit: Howard Perlman, USGS; globe illustration by Jack Cook, Woods Hole
Oceanographic Institution (©); Adam Nieman.

What this shows is the relative size of our water supply if it were all gathered together into a ball and superimposed on the globe.

The large blob, centered over the western US, is all water (oceans, icecaps, glaciers, lakes, rivers, groundwater, and water in the atmosphere). It’s a sphere about 860 miles in diameter, or roughly the distance from Salt Lake City to Topeka. The smaller sphere, over Kentucky, is the fresh water in the ground and in lakes, rivers, and swamps.

Now examine the image closely. See that last, tiny dot over Georgia? It’s the fresh water in lakes and rivers.

Looked at another way, that ball of all the water in the world represents a total volume of about 332.5 million cubic miles. But of this, 321 million mi3, or 96.5%, is saline – great for fish, but undrinkable without the help of nature or some serious hardware. That still leaves a good bit of fresh water, some 11.6 million mi3, to play with. Unfortunately, the bulk of that is locked up in icecaps, glaciers, and permanent snow, or is too far underground to be accessible with today’s technology. (The numbers come from the USGS; obviously, they are estimates and they change a bit every year, but they are accurate enough for our purposes.)

Accessible groundwater amounts to 5.614 million mi3, with 55% of that saline, leaving a little over 2.5 million mi3 of fresh groundwater. That translates to about 2.7 exa-gallons of fresh water, or about 2.7 billion billion gallons (yes billions of billions, or 1018 in scientific notation), which is about a third of a billion gallons of water per person. Enough to take a long shower every day for many lifetimes…

However, not all of that groundwater is easily or cheaply accessible. The truth is that the surface is the source for the vast majority – nearly 80% – of our water. Of surface waters, lakes hold 42,320 mi3, only a bit over half of which is fresh, and the world’s rivers hold only 509 mi3 of fresh water, less than 2/10,000 of 1% of the planetary total.

And that’s where the problem lies. In 2005 in the US alone, we humans used about 328 billion gallons of surface water per day, compared to about 83 billion gallons per day of water from the ground. Most of that surface water, by far, comes from rivers. Among these, one of the most important is the mighty Colorado.

Horseshoe BendHorseshoe Bend, in Page, AZ. (AP Photo)

Tapping Ol’ Man River

Or perhaps we should say “the river formerly known as the mighty Colorado. That old Colorado – the one celebrated in centuries of American Western song and folklore; the one that exposed two billion years of geologic history in the awesome Grand Canyon – is gone. In its place is… well, Las Vegas – the world’s gaudiest monument to hubristic human overreach, and a big neon sign advertising the predicament now faced by much of the world.

It’s well to remember that most of the US west of the Mississippi ranges from relatively dry to very arid, to desert, to lifeless near-moonscapes. The number of people that could be supported by the land, especially in the Southwest, was always small and concentrated along the riverbanks. Tribal clusters died out with some regularity. And that’s the way it would have remained, except for a bit of ingenuity that suddenly loosed two powerful forces on the area: electrical power, and an abundance of water that seemed as limitless as the sky.

In September of 1935, President Roosevelt dedicated the pinnacle of engineering technology up to that point: Hoover Dam. The dam did two things. It served as a massive hydroelectric generating plant, and it backed up the Colorado River behind it, creating Lake Mead, the largest reservoir in the country.

Early visitors dubbed Hoover Dam the “Eighth Wonder of the World,” and it’s easy to see why. It was built on a scale unlike anything before it. It’s 725 feet high and contains 6 million tons of concrete, which would pave a road from New York to Los Angeles. Its 19 generators produce 2,080 MW of electricity, enough to power 1.75 million average homes.

The artificially created Lake Mead is 112 miles long, with a maximum depth of 590 feet. It has a surface area of 250 square miles and an active capacity of 16 million acre-feet.

Hoover Dam was intended to generate sufficient power and impound an ample amount of water, to meet any conceivable need. But as things turned out, grand as the dam is, it wasn’t conceived grandly enough… because it is 35 miles from Las Vegas, Nevada.

Vegas had a permanent population in 1935 of 8,400, a number that swelled to 25,000 during the dam construction as workers raced in to take jobs that were scarce in the early Depression years. Those workers, primarily single men, needed something to do with their spare time, so the Nevada state legislature legalized gambling in 1931. Modern Vegas was born.

The rise of Vegas is well chronicled, from a middle-of-nowhere town to the largest city founded in the 20th century and the fastest-growing in the nation – up until the 2008 housing bust. Somehow, those 8,400 souls turned into a present population of over 2 million that exists all but entirely to service the 40 million tourists who visit annually. And all this is happening in a desert that sees an average of 10 days of measurable rainfall per year, totaling about 4 inches.

In order to run all those lights, fountains, and revolving stages, Las Vegas requires 5,600 MW of electricity on a summer day. Did you notice that that’s more than 2.5 times what the giant Hoover Dam can put out? Not to mention that those 42 million people need a lot of water to drink to stay properly hydrated in the 100+ degree heat. And it all comes from Lake Mead.

So what do you think is happening to the lake?

If your guess was, “it’s shrinking,” you’re right. The combination of recent drought years in the West and rapidly escalating demand has been a dire double-whammy, reducing the lake to 40% full. Normally, the elevation of Lake Mead is 1,219 feet. Today, it’s at 1,086 feet and dropping by ten feet a year (and accelerating). That’s how much more water is being taken out than is being replenished.

This is science at its simplest. If your extraction of a renewable resource exceeds its ability to recharge itself, it will disappear – end of story. In the case of Lake Mead, that means going dry, an eventuality to which hydrologists assign a 50% probability in the next twelve years. That’s by 2025.

Nevadans are not unaware of this. There is at the moment a frantic push to get approval for a massive pipeline project designed to bring in water from the more favored northern part of the state. Yet even if the pipeline were completed in time, and there is stiff opposition to it (and you thought only oil pipelines gave way to politics and protests), that would only resolve one issue. There’s another. A big one.

Way before people run out of drinking water, something else happens: When Lake Mead falls below 1,050 feet, the Hoover Dam’s turbines shut down – less than four years from now, if the current trend holds – and in Vegas the lights start going out.

What Doesn’t Stay in Vegas

Ominously, these water woes are not confined to Las Vegas. Under contracts signed by President Obama in December 2011, Nevada gets only 23.37% of the electricity generated by the Hoover Dam. The other top recipients: Metropolitan Water District of Southern California (28.53%); state of Arizona (18.95%); city of Los Angeles (15.42%); and Southern California Edison (5.54%).

You can always build more power plants, but you can’t build more rivers, and the mighty Colorado carries the lifeblood of the Southwest. It services the water needs of an area the size of France, in which live 40 million people. In its natural state, the river poured 15.7 million acre-feet of water into the Gulf of California each year. Today, twelve years of drought have reduced the flow to about 12 million acre-feet, and human demand siphons off every bit of it; at its mouth, the riverbed is nothing but dust.

Nor is the decline in the water supply important only to the citizens of Las Vegas, Phoenix, and Los Angeles. It’s critical to the whole country. The Colorado is the sole source of water for southeastern California’s Imperial Valley, which has been made into one of the most productive agricultural areas in the US despite receiving an average of three inches of rain per year.

The Valley is fed by an intricate system consisting of 1,400 miles of canals and 1,100 miles of pipeline. They are the only reason a bone-dry desert can look like this:

The Valley

Intense conflicts over water will probably not be confined to the developing world. So far, Arizona, California, Nevada, New Mexico, and Colorado have been able to make and keep agreements defining who gets how much of the Colorado River’s water. But if populations continue to grow while the snowcap recedes, it’s likely that the first shots will be fired before long, in US courtrooms. If legal remedies fail… a war between Phoenix and LA might seem far-fetched, but at the minimum some serious upheaval will eventually ensue unless an alternative is found quickly.

A Litany of Crises

Water scarcity is, of course, not just a domestic issue. It is far more critical in other parts of the world than in the US. It will decide the fate of people and of nations.

Worldwide, we are using potable water way faster than it can be replaced. Just a few examples:

  • The legendary Jordan River is flowing at only 2% of its historic rate.
  • In Africa, desertification is proceeding at an alarming rate. Much of the northern part of the continent is already desert, of course. But beyond that, a US Department of Agriculture study places about 2.5 million km2 of African land at low risk of desertification, 3.6 million km2 at moderate risk, 4.6 million km2 at high risk, and 2.9 million km2 at very high risk. “The region that has the highest propensity,” the report says, “is located along the desert margins and occupies about 5% of the land mass. It is estimated that about 22 million people (2.9% of the total population) live in this area.”
  • A 2009 study published in the American Meteorological Society’s Journal of Climate analyzed 925 major rivers from 1948 to 2004 and found an overall decline in total discharge. The reduction in inflow to the Pacific Ocean alone was about equal to shutting off the Mississippi River. The list of rivers that serve large human populations and experienced a significant decline in flow includes the Amazon, Congo, Chang Jiang (Yangtze), Mekong, Ganges, Irrawaddy, Amur, Mackenzie, Xijiang, Columbia, and Niger.

Supply is not the only issue. There’s also potability. Right now, 40% of the global population has little to no access to clean water, and despite somewhat tepid modernization efforts, that figure is actually expected to jump to 50% by 2025. When there’s no clean water, people will drink dirty water – water contaminated with human and animal waste. And that breeds illness. It’s estimated that fully half of the world’s hospital beds today are occupied by people with water-borne diseases.

Food production is also a major contributor to water pollution. To take two examples:

  • The “green revolution” has proven to have an almost magical ability to provide food for an ever-increasing global population, but at a cost. Industrial cultivation is extremely water intensive, with 80% of most US states’ water usage going to agriculture – and in some, it’s as high as 90%. In addition, factory farming uses copious amounts of fertilizer, herbicides, and pesticides, creating serious problems for the water supply because of toxic runoff.
  • Modern livestock facilities – known as concentrated animal feeding operations (CAFOs) – create enormous quantities of animal waste that is pumped into holding ponds. From there, some of it inevitably seeps into the groundwater, and the rest eventually has to be dumped somewhere. Safe disposal practices are often not followed, and regulatory oversight is lax. As a result, adjacent communities’ drinking water can come to contain dangerously high levels of E. coli bacteria and other harmful organisms.

Not long ago, scientists discovered a whole new category of pollutants that no one had previously thought to test for: drugs. We are a nation of pill poppers and needle freaks, and the drugs we introduce into our bodies are only partially absorbed. The remainder is excreted and finds its way into the water supply. Samples recently taken from Lake Mead revealed detectable levels of birth control medication, steroids, and narcotics… which people and wildlife are drinking.

Most lethal of all are industrial pollutants that continue to find their way into the water supply. The carcinogenic effects of these compounds have been well documented, as the movie-famed Erin Brockovich did with hexavalent chromium.

But the problem didn’t go away with Brockovich’s court victory. The sad fact is that little has changed for the better. In the US, our feeble attempt to deal with these threats was the passage in 1980 of the so-called Superfund Act. That law gave the federal government – and specifically the Environmental Protection Agency (EPA) – the authority to respond to chemical emergencies and to clean up uncontrolled or abandoned hazardous-waste sites on both private and public lands. And it supposedly provided money to do so.

How’s that worked out? According to the Government Accountability Office (GAO), “After decades of spearheading restoration efforts in areas such as the Great Lakes and the Chesapeake Bay, improvements in these water bodies remain elusive … EPA continues to face the challenges posed by an aging wastewater infrastructure that results in billions of gallons of untreated sewage entering our nation’s water bodies … Lack of rapid water-testing methods and development of current water quality standards continue to be issues that EPA needs to address.”

Translation: the EPA hasn’t produced. How much of this is due to the typical drag of a government bureaucracy and how much to lack of funding is debatable. Whether there might be a better way to attack the problem is debatable. But what is not debatable is the magnitude of the problem stacking up, mostly unaddressed.

Just consider that the EPA has a backlog of 1,305 highly toxic Superfund cleanup sites on its to-do list, in every state in the union (except apparently North Dakota, in case you want to try to escape – though the proliferation of hydraulic fracking in that area may quickly change the map, according to some of its detractors – it’s a hotly debated assertion).

Superfund Cleanup Sites

About 11 million people in the US, including 3-4 million children, live within one mile of a federal Superfund site. The health of all of them is at immediate risk, as is that of those living directly downstream.

We could go on about this for page after page. The situation is depressing, no question. And even more so is the fact that there’s little we can do about it. There is no technological quick fix.

Peak oil we can handle. We find new sources, we develop alternatives, and/or prices rise. It’s all but certain that by the time we actually run out of oil, we’ll already have shifted to something else.

But “peak water” is a different story. There are no new sources; what we have is what we have. Absent a profound climate change that turns the evaporation/rainfall hydrologic cycle much more to our advantage, there likely isn’t going to be enough to around.

As the biosphere continually adds more billions of humans (the UN projects there will be another 3.5 billion people on the planet, a greater than 50% increase, by 2050 before a natural plateau really starts to dampen growth), the demand for clean water has the potential to far outstrip dwindling supplies. If that comes to pass, the result will be catastrophic. People around the world are already suffering and dying en masse from lack of access to something drinkable… and the problems look poised to get worse long before they get better.

Searching for a Way Out

With a problem of this magnitude, there is no such thing as a comprehensive solution. Instead, it will have to be addressed by chipping away at the problem in a number of ways, which the world is starting to do.

With much water not located near population centers, transportation will have to be a major part of the solution. With oil, a complex system of pipelines, tankers, and trucking fleets has been erected, because it’s been profitable to do so. The commodity has a high intrinsic value. Water doesn’t – or at least hasn’t in most of the modern era’s developed economies – and thus delivery has been left almost entirely to gravity. Further, the construction of pipelines for water that doesn’t flow naturally means taking a vital resource from someone and giving it to someone else, a highly charged political and social issue that’s been known to lead to protest and even violence. But until we’ve piped all the snow down from Alaska to California, transportation will be high on the list of potential near term solutions, especially to individual supply crunches, just as it has been with energy.

Conservation measures may help too, at least in the developed world, though the typical lawn-watering restrictions will hardly make a dent. Real conservation will have to come from curtailing industrial uses like farming and fracking.

But these bandage solutions can only forestall the inevitable without other advances to address the problems. Thankfully, where there is a challenge, there are always technology innovators to help address it. It was wells and aqueducts that let civilization move from the riverbank inland, irrigation that made communal farming scale, and sewers and pipes that turned villages into cities, after all. And just as with the dawn of industrial water, entrepreneurs are developing some promising tech developments, too.

Given how much water we use today, there’s little doubt that conservation’s sibling, recycling, is going to be big. Microfiltration systems are very sophisticated and can produce recycled water that is near-distilled in quality. Large-scale production remains a challenge, as is the reluctance of people to drink something that was reclaimed from human waste or industrial runoff. But that might just require the right spokesperson. California believes so, in any case, as it forges ahead with its Porcelain Springs initiative. A company called APTwater has taken on the important task of purifying contaminated leachate water from landfills that would otherwise pollute the groundwater. This is simply using technology to accelerate the natural process of replenishment by using energy, but if it can be done at scale, we will eventually reach the point where trading oil or coal for clean drinking water makes economic sense. It’s already starting to in many places.

Inventor Dean Kamen of Segway fame has created the Slingshot, a water-purification machine that could be a lifesaver for small villages in more remote areas. The size of a dorm-room refrigerator, it can produce 250 gallons of water a day, using the same amount of energy it takes to run a hair dryer, provided by an engine that can burn just about anything (it’s been run on cow dung). The Slingshot is designed to be maintenance-free for at least five years.

Kamen says you can “stick the intake hose into anything wet – arsenic-laden water, salt water, the latrine, the holding tanks of a chemical waste treatment plant; really, anything wet – and the outflow is one hundred percent pure pharmaceutical-grade injectable water.”

That naturally presupposes there is something wet to tap into. But Coca-Cola, for one, is a believer. This September, Coke entered into a partnership with Kamen’s company, Deka Research, to distribute Slingshots in Africa and Latin America.

Ceramic filters are another, low-tech option for rural areas. Though clean water output is very modest, they’re better than nothing. The ability to decontaminate stormwater runoff would be a boon for cities, and AbTech Industries is producing a product to do just that.

In really arid areas, the only water present may be what’s held in the air. Is it possible to tap that source? “Yes,” say a couple of cutting-edge tech startups. Eole Water proposes to extract atmospheric moisture using a wind turbine. Another company, NBD Nano, has come up with a self-filling water bottle that mimics the Namib Desert beetle. Whether the technology is scalable to any significant degree remains to be seen.

And finally, what about seawater? There’s an abundance of that. If you ask a random sampling of folks in the street what we’re going to do about water shortages on a larger scale, most of them will answer, “desalination.” No problem. Well, yes problem.

Desalination (sometimes shortened to “desal”) plants are already widespread, and their output is ramping up rapidly. According to the International Desalination Association, in 2009 there were 14,451 desalination plants operating worldwide, producing about 60 million cubic meters of water per day. That figure rose to 68 million m3/day in 2010 and is expected to double to 120 million m3/day by 2020. That sounds impressive, but the stark reality is that it amounts to only around a quarter of one percent of global water consumption.

Boiling seawater and collecting the condensate has been practiced by sailors for nearly two millennia. The same basic principle is employed today, although it has been refined into a procedure called “multistage flash distillation,” in which the boiling is done at less than atmospheric pressure, thereby saving energy. This process accounts for 85% of all desalination worldwide. The remainder comes from “reverse osmosis,” which uses semipermeable membranes and pressure to separate salts from water.

The primary drawbacks to desal are that a plant obviously has to be located near the sea, and that it is an expensive, highly energy-intensive process. That’s why you find so many desal facilities where energy is cheap, in the oil-rich, water-poor nations of the Middle East. Making it work in California will be much more difficult without drastically raising the price of water. And Nevada? Out of luck. Improvements in the technology are bringing costs of production down, but the need for energy, and lots of it, isn’t going away. By way of illustration, suppose the US would like to satisfy half of its water needs through desalination. All other factors aside, meeting that goal would require the construction of more than 100 new electric power plants, each dedicated solely to that purpose, and each with a gigawatt of capacity.

Moving desalinated water from the ocean inland adds to the expense. The farther you have to transport it and the greater the elevation change, the less feasible it becomes. That makes desalination impractical for much of the world. Nevertheless, the biggest population centers tend to be clustered along coastlines, and demand is likely to drive water prices higher over time, making desal more cost-competitive. So it’s a cinch that the procedure will play a steadily increasing role in supplying the world’s coastal cities with water.

In other related developments, a small tech startup called NanOasis is working on a desalination process that employs carbon nanotubes. An innovative new project in Australia is demonstrating that food can be grown in the most arid of areas, with low energy input, using solar-desalinated seawater. It holds the promise of being very scalable at moderate cost.

The Future

This article barely scratches the surface of a very broad topic that has profound implications for the whole of humanity going forward. The World Bank’s Ismail Serageldin puts it succinctly: “The wars of the 21st century will be fought over water.”

There’s no doubt that this is a looming crisis we cannot avoid. Everyone has an interest in water. How quickly we respond to the challenges ahead is going to be a matter, literally, of life and death. Where we have choices at all, we had better make some good ones.   (my emphasis)

From an investment perspective, there are few ways at present to acquire shares in the companies that are doing research and development in the field. But you can expect that to change as technologies from some of these startups begin to hit the market, and as the economics of water begin to shift in response to the changing global landscape.

We’ll be keeping an eye out for the investment opportunities that are sure to be on the way.

While profit opportunities in companies working to solve the world’s water woes may not be imminent, there are plenty of ways to leverage technology to outsized gains right now. One of the best involves a technology so revolutionary, its impact could rival that of the printing press.

By Doug Hornig and Alex Daley, Casey Research

http://www.caseyresearch.com/go/bvRHZ/WIM

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Who’s Living Large in Retirement?

Posted on March 1st, 2013

Retirement wordcloudBy Dennis Miller

Who fares better in retirement, pensioners or folks who saved up their own respective nest eggs? If you look at the numbers, you might be surprised to learn who’s really “living large” after retirement.

Regardless of how you made your money, what determines if you’re rich when you retire? Frankly, it isn’t how much money you made, but how much you accumulated that counts. So who are the real rich people?

Retirees generally fall into one of four groups: folks who retired from the private sector with a 401(k), IRA or a lump sum payout in lieu of a private pension; those with a government pension; self-employed folks who saved their own respective nest eggs; and finally, those scraping by on Social Security alone.

The U.S. Census Bureau reports that in 2010 the top 10% had a median net worth of $1,864,000. If you’re worth that much or more, 95% of the population thinks you’re rich. But are you?

When my wife and I were first married we had a negative net worth. No silver spoons for us! By our late 50s we were successfully self-employed and in the top income tax bracket. And yet, once we paid federal and state income taxes, plus Social Security and Medicare, about 50% of our gross income went to taxes. We raised a family with what was left.

Once the children left the nest, we were in the race to the retirement finish line. For us, like most folks, that’s when we really began to accumulate wealth for retirement. Here was our challenge.

For a self-employed person to end up in the top 5%, with a net worth of $1,864,000, he would have to earn a spare $3,728,000 before taxes. Now that sure sounds rich, but is it?

Assuming this person lives in a paid for home worth $564,000, that leaves $1,300,000 in his portfolio for retirement. And let’s assume he and his spouse receive $35,000 a year in combined Social Security payments.

Today the best rate for a FDIC-insured CD is 1.1%. If the entire portfolio was in CDs, it would pay $14,300 in interest. Add that to their $35,000 in Social Security and they earn just under $50,000. Remember, 95% of the population thinks they’re rich. Their retirement income is likely no more than 40% of what they earned when working.

And the winner is…

Firefighters in Contra Costa County, CA have a state law protected pension; many receive over $100,000 annually. (Their department is also closing four stations to make budget.) I have several friends who retired from the government who’ve received a large increase the last couple of years, bumping their pensions to well over 80% of their former salaries. Many regularly risked their lives, and I don’t begrudge them a dime.

But it would take a self-employed person $2 million in earnings to net $1 million, which could fund an $11,000 pension. It would take just over $9 million for a person in the private sector to fund the pension equal to a Contra Costa County firefighter.

So who is living large?

Those who are fortunate enough to have sound government pensions are living very well compared with those in the private sector.

So what do I tell baby boomers in the private sector? First get out of debt. The quicker you can start accumulating wealth, the better. If you have any type of tax-deferred retirement plan like a 401(k) or an IRA, strive to maximize your contributions.

Once you have maximized tax-deferred accumulation, move on to the next phase. Start accumulating wealth long before your nest is empty. Even saving just $20/week beginning at age 50, with a modest 4% growth rate, will turn into $31,573 by the time you are 70. Through the magic of compounding, $20,800 saved over 20 years will earn $10,773 on top. Start the process and watch it grow; it will make you want to save more.

Don’t rush out and join the fire department. Whether you are in the government or private sector, the combination of tax-deferred retirement income, savings and prudent investing, and most importantly—having an easy to use plan that you’ll actually follow—is what will help you enjoy your “golden years.”    (my emphasis)

In our Money Forever letter we recently developed a monthly income plan using some of the safest dividend stocks on the market. The plan is easy to follow, doesn’t require an extensive background in investing or even that you start with a lot of money; you just need a willingness to learn and a desire for reliable monthly income.

By Dennis Miller

http://www.millersmoney.com/go/bvMCx/WIM

© 1998-2012 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

 

 

The Herd: Wrong About Alaska, Wrong About Gold

Posted on February 25th, 2013

Investment In Gold As Gold Bullion_9526103By Louis James for Casey Research

My message lately has been very simple: buy low.

And do it now.

The essential formula for investing, as you know, is to buy low and sell high. So easy to say, so hard to do.

It takes real mettle to be a successful contrarian, and it’s precisely because so many investors are so nervous about our market today that it’s a buyer’s market.

Let me digress for a crucial, relevant sliver of history.

Seward’s Folly

It was literally a deal done in the dead of night: 4:00 a.m., March 30, 1867. The US Civil War was a recent and very raw wound; the South destroyed and desolate, the North broke and bleeding, urgent needs of the people beyond counting. We’ll never know the full truth of how the purchase of Alaska came together, but I suspect the true motives of those involved would weave a story worthy of a season of Deadwood: corruption, expropriation, murder… I’m sure it was all there.

Why else would the war-torn USA agree to spend desperately needed funds on a frozen wasteland you had to cross potentially hostile British territory to reach, and was full of hostile natives bristling with weapons once you got there? All the more reason not to pay for a territory so remote and useless that the Russians were willing to sell it for two cents an acre.

Even the British, who were busy settling British Columbia (now the Canadian province between the US states of Alaska and Washington), didn’t want Alaska and turned down a Russian offer on the territory. An initiative by then US Secretary of State William H. Seward would eventually seal the deal. This is why the purchase of Alaska became known as Seward’s Folly, a name that stuck for many years.

Something interesting happened during the formal transfer of Alaska. A blacksmith named Ahllund witnessed the handover, recounting that the Russian flag got stuck on the pole as it was being lowered. A soldier was ordered to climb the pole and retrieve the flag, but couldn’t. A second tried and failed. The blacksmith offered no details on why the flag got stuck or why the pole was so hard to climb. My romantic heart has to wonder if the sharp-eyed eagle of Russia, the imperial symbol of the monarchy, knew its masters were giving away an enormous wealth in minerals for too small a price. Be that as it may, a third soldier succeeded where his comrades failed, and that was the end of it.

It took 31 years, in fact, until gold was discovered in the Klondike, setting off the famous race to prospect, sometimes called the Klondike, Yukon, or Alaska gold rush. The discovery is close to the Yukon/Alaska border, and the deposits, of course, pay no heed to the boundaries drawn on maps by men. Plenty of gold was discovered – and more than 100 years later is still being discovered – on both sides of that imaginary line.

Mountain Hike

Famous image of the treacherous Chilkoot Pass, which prospectors had to scale as they headed to the Klondike to seek their fortunes.

My point, however, is not the independence of geology and politics, but the vision of whoever was really pulling Seward’s strings and hence truly responsible for the purchase of Alaska. “Vision” may be the wrong word. I doubt that the interests behind the deal envisioned the gold rush to come decades hence and were placing their bets early. What I’m sure they did see were the Russians being squeezed by their creditors (the Rothschilds), and an opportunity to buy a huge tract of land even cheaper than the three cents per acre Jefferson had paid for the Louisiana Purchase in 1803. In both cases, the sellers had to sell and potential buyers were few – a classic contrarian setup.

The Wall of Worry

People who buy low – especially contrarians who nail the bottom of a market – are frequently called fools at the time, and for very good apparent reason: all the forces that explain the sell-off are well known. Arguments against the contrarian’s folly are numerous and backed by recent experience and facts that most find too compelling to ignore. This is what makes the “Wall of Worry” phase of a market cycle so… worrisome.

I see this in the precious-metals market today, with rising mining costs, taxes, royalties, regulatory hurdles, and more, erecting not just walls, but fortresses and citadels of worry. All the reasons why Doug has called mining a “crappy, choo-choo-train industry” keep getting worse. The fact that recent experience for most speculations on mining stocks has been painful, even with high metals prices, makes it even harder to buy low and charge the fortresses of worry.

Imagine trying to convince one of our hunting/gathering ancestors, whose only experience with fire was terror and devastation, that fire would become his or her best friend. That might actually be easier than trying to convince a person who’s just lost a fortune on commodities that buying commodities is a great idea. Depending on the timing, it would be true precisely because commodities had just wiped many people out, and the demand for commodities never goes away. It wouldn’t matter, though; the prejudice based on painful recent experience is entrenched, the battlements of worry too fiercely defended.

The current market for precious-metals stocks is not quite so bad, in terms of devastation, but it’s almost as good, in terms of investor disgust and clear opportunity. That stems from investors placing too much emphasis on their recent experience, rather than on understanding the fundamentals driving the market.

Consider the chart below that shows that relative to the underlying commodity – gold – gold stocks are, on average, about as cheap as they get. They are as cheap as they were at the beginning of this cycle (an opportunity only a few visionaries like Doug were willing to take), and even as cheap as they were during the crash of 2008 (an opportunity few were brave – or liquid – enough to take).

Gold Mining Companies vs Gold Graph from Casey

Of course, most of the companies in the Casey Research International Speculator portfolio have outperformed the average; some have been great wins, even while the market has fallen. This emphasizes that just because there’s an opportunity to buy low, that doesn’t make indiscriminate buying a good idea. Focusing on the best of the best also sets the stage for maximizing gains going forward.

In that context, it’s particularly important to remember that after the crash of 2008 it took the market half of 2009 to regain momentum. Yet, the best of the best mining stocks rebounded even before the end of 2008.

All of which is to say that today we are in a classic Wall of Worry trough. It’s not an intercycle bottom, but it is an excellent intracycle opportunity for those with the guts and vision to be contrarians – or at least those who recognize a chance to buy on the cheap when they see one.

How Can I Be so Sure?

I see the current market as one of great opportunity because I look at more than the joy or pain of recent experience. You could say that I’m a fundamentalist when it comes to markets. You don’t need me to repeat all the arguments we’ve made time and again in our Casey Research publications. Let me instead just highlight one key, recent development that really underscores the solidity of the trend we’re betting on: Japan’s incoming government is promising to run the money-printing presses at full speed and print its way into prosperity.

This alone is inflationary; but of course, Japan is not alone. The EU, in spite of the austerity talk, has also pretty much said it will do whatever it takes to prop things up, and the US has thrown caution to the winds with its open-ended QE4-ever. The skids on the slippery slope are fully greased, the slide has begun, and there is no one and nothing on the global scene with the strength and the will needed to stop it.

The crash will come. Maybe not next month, and – if recent economic figures from the US government are to be believed – maybe not this year. But come it will.

As that becomes increasingly apparent, the resulting stampede into gold and gold stocks should exceed even Doug’s “trying to pass the contents of the Hoover Dam through a garden hose” expectations.

Everything I see in the global economy today points that direction. Nothing I see convinces me that the governments of the world can succeed at borrowing and spending their way into prosperity – at most, they can delay judgment day a little longer. At most.

So yes, I’m that sure of what’s ahead. Only the timing is uncertain. People may call it Casey’s Folly now, but I don’t think we’ll have to wait 30 years – or even three years – for our own “Klondike Moment,” when we’ll be cashing in on some extraordinary profits on our own investment prospects.

I’ll leave it to bigger fools or knaves to declare when the next gold rush will commence. What I can say is that I don’t want to be short when it happens.

By Louis James for Casey Research

http://www.caseyresearch.com/go/bvMdk/WIM

Louis James serves as chief metals and mining investment strategist for Casey Research, as well as editor of Casey International Speculator, which features junior mining companies Louis has identified as having huge upside potential. The current issue is loaded with buy recommendations – over 30 as of this writing – making now one of the best times ever to leverage precious metals to potentially life-changing gains. Learn more about Casey International Speculator and the strategies Louis uses to pick winning junior miners.

© 1998-2013 by Casey Research, LLC.

The Casey Research web site, Casey’s Investment Alert, Casey’s International Speculator, BIG GOLD, Casey’s Energy Confidential, Casey’s Energy Report, Casey’s Energy Opportunities, The Casey Report, Casey’s Extraordinary Technology, Conversations With Casey, Casey’s Daily Dispatch and Ed Steer’s Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC’s proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

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