Curried Wealth Building
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March 6, 2011
Issue 137  -  Boomer Trouble
2011 marks the year that the first baby boomers turn 65.  This makes it a turning point in our country's history.  One which won't be looked back upon fondly.  The main problem is that as you age, you want to retire, and this just won't be possible for many, many boomers.  The demographics dictate that the boomers will have fewer and fewer workers supporting their lifestyle in their "golden" years.  The reason is that so many fewer people were born after the boomer period ended, that there just aren't enough people to keep the status quo.
Here is a very enlightening chart about the current boomers from 60-62 years old.  62 is when you can first start taking social security.  The benefits are reduced, but I believe people are skeptical of the viability of the system and want to "get theirs", as soon as possible, for fear of not getting anything:
Looking at the chart reveals a few very interesting facts.  First, that most people are going to need social security to supply nearly HALF of their living expenses.  Keep in mind that the social security system was never meant to be a majority of your income.  In fact, it was originally meant only for the truly unfortunate.  Today it is a staple.  Second, remember that defined pension funds are being largely phased out in favor of the 401k.  How is that working for you?  The median 401k plan only has 9,000 in it.  That is woefully inadequate to make up the difference in spending requirements of the boomers.  On a BEST case scenario, this would only produce $7-8000 a year income. (This figure is actually too high, and the $9000 quoted in the chart is just a pipe dream.) This is going to keep folks working much longer than they had planned. Lastly, notice even WITH a defined pension, people do not have enough wealth to create a complete lifestyle switchover.  This is alarming, as these people will be coming to the public trough to try and extract for help, just as the help (U.S. budget) is cratering.
If you think getting a job after retirement will be easy, check out this chart:
This shows a disturbing trend of more and more people dropping out of the job picture.  Why is this happening?   Because there aren't any jobs!  This contributed to the "great" unemployment report.  If you aren't looking, than you aren't unemployed, unemployment rate down.  Of course this flies in the face of common sense.  Some boomers will find no jobs are available.  Don't believe me?  Then why is this chart pointing straight up?
We can't just keep adding people to the country dole.  We are broke and that isn't going to change anytime soon.  How is it possible that almost 1 in 7 people are getting help buying food???  Does that seem feasible and sustainable?  No, it's not, and the sooner we realize this as a country, the sooner we can move forward.  You have to laugh at the budget "battle".  Here we are looking at a $1.5 trillion deficit and the "tough" republicans want to cut that by $100 billion????  WTF??  Seriously?  This is like a family that makes $100,000, has $500,000 on credit cards, and is planning to spend $150,000 next year, debating on whether they should only spend $146,667.  In other words, let's only put $46,667 on the credit card instead of $50,000.  This would mean the family only owed $546,667 instead of $550,000 at the end of the year  .  Does that sound like "reform" to you?
Unfortunately, it gets worse.  Another thing that will be bothering the boomers is the housing market.  NO, it is not improving.  Far from it and don't trust the spin coming from CNBC or our trusted (that's a funny) politicians.  Here is a chart showing a different story:
This chart hasn't been updated since last July, but I can assure you it hasn't improved and may have worsened.  As you can see, the shadow inventory, which consists of the bank owned properties, pending foreclosures, and seriously delinquent mortgaged properties.  This is group of properties that could, or will shortly be on the market, which will increase downward pressure on prices.  As the boomers try to retire and downsize their homes (remember, most people's largest asset is their home) what price are they going to be able to get?  Will it be up to their expectations?  Unlikely.
Another possible strain on the boomers is their kids.  Adult kids are now cohabitating with about 1/3 of all baby boomers.  This trend should continue and probably increase.  Reason?  A lousy economy which has led to a shortage of jobs, which leads to more and more debt.  This trend doesn't help either: (Huffington Post)
"......Meanwhile, tuition is climbing -- it rose 122% at public universities from 1986 to 2006. The average graduate leaves college with $19,300 in student loan debt, up from $9,250 about ten years ago.

And now loan defaults are on the rise. A new federal analysis showsthat about one-quarter of students who took out loans to attend for-profit college defaulted within three years of starting repayment. That rate is also up for public colleges -- at 11%, up 10% from the previous report -- and private nonprofit colleges -- at 8%, up from about 7%. This may come as little surprise with an unemployment rate of 9%. Indeed, while in some ways college graduates are better off than those without a degree, they've still seen the highest percentage increase in unemployment. It can be hard to keep up with loan payments when you can't find a job. And unlike most forms of debt, student loan debt is with you forever -- you can't discharge it in bankruptcy. In fact, "Up to Our Eyeballs" notes that about 9% of Americas aged 45-64 still have student loan debt........"

As with every other aspect of the average American life, college debt is exploding exponentially.  Think about the average student debt increasing 100% in 10 years!  What if that trend continues?  Also from the clip, note that 9% of 45-64 year olds have student debt!  This added burden will weigh on boomers.
What is the solution?  Well obviously gold and silver.  We still have long ways to go in these bull markets.  As I've written many times, the manipulation in these markets has given everyone an incredible opportunity to continue buying at low prices.  Here is remarkable video which details how the silver market is rigged:
This makes it absolutely crystal clear.   The silver market is controlled during the open hours of the U.S. market.  How else to explain that ALL of the gains in silver have come when the U.S. market is closed?  You can't.  There are no coincidences in these markets.
You'll hear many people and pundits arguing that gold and silver are in a bubble.  This is hardly the case.  Comparing the market to 1980, when there actually was a bubble, VERY few people owned gold.  In fact, gold and silver ownership was PROHIBITED in countries such as China.  Today?  (Bloomberg)
Gold Buying in China Jumps as Inflation Flares, Boosting Demand, UBS Says

Gold purchases in China, the world’s largest producer, climbed to 200 metric tons in the first two months of 2011 as faster inflation boosted consumer demand, according to UBS AG, which said the price may gain to $1,500.

“China is the big buyer,” Peter Hickson, global commodities strategist at Switzerland’s largest bank, said by phone yesterday, without giving a comparable figure for 2010. The estimate for the two-month period compares with full-year consumer demand from China of 579.5 tons for last year, according to the World Gold Council, a producer-funded group.

Think about this.  The largest population in the world is buying gold with both hands.  This is an absolute GUARANTEE that the metals go higher.  This demand didn't exist in 1980.  The possible purchasers of gold/silver has increased many fold.  You must have some metal.  Don't worry about the price right now, just buy in over several months and you will be fine in the long run.  You can't afford to wait much longer.  If you have any questions about buying, don't hesitate to email me.
Goro  (closed at $28.60, up $2.98, average price paid, $6.10) 
Mexus Gold  (closed $.26, up $0.025, average price paid, $.20)
There was news this week from Mexus: 
Mexus Gold U.S. Announces Completion of Permits in Mexico
CARSON CITY, Nev., Feb. 28, 2011 (GLOBE NEWSWIRE) -- Mexus Gold U.S. (OTCBB:MXSG - News), a Nevada company, announced today that Mexus Gold Mining S.A. de C.V., has received the final permit from the Mexican authorities and agencies which will allow the Company to commence mining operations at the Ocho Hermanos mine in the State of Sonora, Mexico. With the permitting process completed, the Company has begun the shipment of equipment to the mine site which will be utilized in the ore recovery process.

President Paul Thompson stated, "We have the equipment in Mexico to begin mining operations today and expect to do just that very soon. The processing equipment is in transit to Mexico. The permit process is completed and now we are able to begin mining. "

This is very encouraging news.  Not only will their cable pulling begin within a couple months, but the actual mining of gold and silver may begin even sooner.  If they can start recording revenue, the stock price will rise quickly.  Another plus of the mining revenue is that it is 100% theirs and  won't be subject to a royalty as with the cable.  I still view Mexus as a buy up to 35 cents.
I realize that some of you are getting impatient with the price action of Mexus.  Don't sell!  These things take time and it's better to be early than late.  If the stock becomes an actual producer of significant income, we will see a large "adjustment" in the price.  By that time, buying will be much more difficult.  Get in while the price is boring.
Stocks    (Current status, Long, 100%, 1/3 International, 1/3 small cap, 1/3 large cap, moved back in January 1, 2011)
Physical Gold  (Closed $1,432,  up $22,  average price paid $395)
Physical Silver  (Closed $35.67,  up $2.29,  average price paid $5.31)
The video of the week is a very elaborate practical joke in the old Candid Camera style, have a great week!