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Bumble

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  1. I think it is worth distinguishing the state pension from occupational pensions. I agree that state pensions will not be affordable either, so the government will raise the eligible age gradually to 70 and will apply a means test to it. But the scary and depressing part is that the government will grab your company pension and your SIPP, or in the USA your 401K and IRA. At that point nearly every person of pension age will be dependent on government handouts.
  2. Some thoughts about the future of pensions. This applies to the UK, but I strongly suspect that other developed countries, including the USA, are in the same boat. We can divide the issue into three points. The first concerns the state of private sector pension schemes, the second concerns the state of public sector pension schemes, and the third is the conflict that is likely to result because of the previous two. 1. Some private sector schemes are of the defined benefit kind, while others have a defined contribution. Many, if not most, defined benefit schemes are hugely underfunded or actually insolvent. This is because highly rated bonds and stocks, which are the staple investment of pension funds, are expensive and have a tiny dividend yield. Pension schemes are subject to actuarial audit, but actuaries are permitted to assume a 7.5% compound annual future return on investment. This is still the standard percentage in use, even though interest rates and levels of economic growth are much lower. A lower and more realistic assumed percentage would result in a huge deficit when compounded year on year over the lifetime of a pensioner. Defined contribution schemes cannot strictly speaking be underfunded, but the problem is similar because a realistic rate of return would show that most people will not be able to afford to retire at the level of income that they expect or need. 2. Most public sector schemes are of a defined benefit kind with inflation linking. Some are entirely unfunded and are in effect just Ponzi schemes. Others are partially funded but typically in the same underfunded state as defined benefit schemes in the private sector. The difference is that the tax payer is liable for meeting these pension obligations. The unfunded or underfunded pension liabilities are not an explicit part of the national debt but are 'off balance sheet'. The scale of the national debt together with these unfunded liabilities is so great (and growing) that it will become unaffordable. A point will be reached when the governments of the developed world will be compelled to default on or inflate away some of their liabilities. Inflation is the softer option, but this conflicts with the inflation linking that is part of pension benefits. 3. This brings us to the coming clash. Price inflation reduces the value of private sector pensions and leaves pensioners with reduced purchasing power. Inflation linking theoretically leaves public sector pensioners with a constant purchasing power, but these pensions are unafforable and have to be paid for out of general taxation. Public sector pensioners will say: we worked our lives in the expectation of receiving this index-linked pension, and it is part of our contract of employment, so we are entitled to it. Private sector workers will say: you have contributed little or nothing to the cost of your pension and we are now forced to pay out of our taxes for you to have a pension that is far better than what we can afford for ourselves. Both parties will be correct. Any attempt to reduce public sector pensions will bring the public sector unions out on strike. Any attempt to seriously disadvantage private sector workers and pensioners will cost the government the next election. I speculate that in order to avoid this conflict, governments will nationalize private sector pensions. Occupational schemes and individual pension schemes will be taken into public ownership in exchange for a promise of pension payments from the government. This will not solve problems one and two. The private sector pensions are still underfunded and by nationalizing them the government will be taking on more liabilities than assets. But the investment assets can be set against liabilities on the balance sheet, bringing down the official government debt, while pension liabilities remain off balance sheet. The government's financial status will look much better. Also, it places private sector and public sector pensioners on the same footing. Both are now dependent on government payments. Both groups are likely to see their benefits reduced to make them affordable, but at least they are not being disadvantaged in comparison to the other, which defuses the conflict.
  3. Gold Monitoring Thread £ only

    The main resistance point seems to be about $1300 or £1010 per Toz. I would wait to see these levels hold for a few days running before calling a breakout.
  4. The euro may be good in the short term because of the strength of the German economy, but Europe faces headwinds at least as strong as those of the US. Europe has an aging population, huge debt, unaffordable welfare programmes, insolvent banks, high unemployment in the PIIGS countries, and a migrant crisis. If you want a model of where Europe, including the UK, is going in the next 20 years, look at Argentina. It was once one of the most prosperous countries in the world; then it caught a bad case of socialism and spent the next 40 years lurching from crisis to crisis, defaulting on its debts, and suffering high inflation and unemployment. I would say if you are looking for relatively safe currencies you are better off with the Singaporean dollar, NZ dollar or Norwegian krone.
  5. Gold Miner Picks

    Novo Resources Corp (CVE:NVO) has been on a tear recently because of rumours that it has hit a large deposit in Australia that might be geologically related to the giant Witwatersrand deposit in South Africa. Their share price has more than trebled in the last three weeks. Here is an interview that discusses it:
  6. Here's a thought I had about how it might be possible to save some tax. It is intended to apply to the UK, but it might well carry over to other jurisdictions. Let me know if you think it might work. To explain it, I'll start with something that doesn't work, then say how my idea differs. Suppose I wish to buy an item in a shop that costs, say, about £270. The shopkeeper is the owner of the shop or at least is empowered to make business decisions. Instead of offering to pay with money, I offer to barter the item for something that I possess. Even if the shopkeeper agrees to the barter, this does not save tax, because under UK tax law the transaction would have to go through the shopkeeper's books on the basis of a fair value being assigned to the bartered item. Of course, the shopkeeper could decide not to record the transaction, but that would be fraudulent. But now suppose instead that I go into the shop and ask the shopkeeper for a discount on the item. I would like him to sell me the item for £1. Why should he offer me this discount? Because if he does, I'll pay with a gold sovereign. (At the time of writing, worth about £250.) A gold sovereign is legal tender in the UK and has a face value of £1. So the shopkeeper can legally put the transaction through his books as having a value of £1. This involves writing down the value of the sold item to £1, which entails making a loss that can be set against other profits. It also avoids the profit that would be made by selling the item at the ticket price. Naturally, the sovereign doesn't go into the till, he just swaps it out for a regular £1 coin. Net result is that if he is paying tax at say, 20%, he is saving himself about £50 in tax and can afford to part with the £270 item in exchange for a coin that he can sell to a dealer for £250. He and I both benefit and the taxman is down on the deal. I don't see how this would be illegal. It differs from the barter case, because I am not bartering the coin, I am offering it for the settlement of a debt at the value set for it by the Bank of England. In effect the scenario is created by the fact that the Bank of England, in issuing both regular £1 coins and gold £1 coins with the same face value, has violated the fungibility of currency.
  7. Cryptocurrencies are a different issue from blockchain technology generally. The reasons to use them are: 1. It cuts out the commercial banks as intermediaries, saving on transaction fees. 2. It cuts out the central banks as issuers of currency, which avoids the debasement suffered by fiat currencies. 3. Transactions are difficult to track. 4. Transactions are irreversible, which is good for merchants accepting payments. Other claimed advantages are not so certain: 5. Cryptos are more secure in some ways but introduce other security problems of their own. 6. Cryptos avoid currency conversion fees, but since there are many cryptocurrencies, converting between them may become an issue. 7. Transactions are claimed to be very quick, even internationally, but this has not held up. Bitcoin has become quite slow. The main drawbacks are: 8. Prices are volatile compared with fiat currencies. This is particularly an issue for merchants wanting to price their goods, but there are services providers starting to appear that will guarantee an exchange rate for a given period. 9. We don't yet know whether cryptos will scale to high transaction volumes. Bitcoin transactions are currenctly a tiny fraction of the volume handled by Visa, for example, and already Bitcoin has become slow. 10. There may be hidden bugs or exploits that could completely kill off a cryptocurrency. 11. There are many cryptos and likely many more to come. We don't know which ones will succeed. 12. Cryptos such as Bitcoin that use decentralised mining are effectively under the control of those miners. Mining mostly happens in countries with cheap electricity. This leads to those countries effectively having considerable influence over the currency. Over 90% of Bitcoin transactions happen in China because electricity is cheap there. If China were to ban Bitcoin the effect would be substantial. 13. Governments may come to regard cryptos as a threat to their own fiat currencies and their ability to debase them. In the same way that governments are making war on cash, cryptos could be next. The pretext will be that cryptos are used for criminal purposes. Cryptos could be banned or regulated so tightly they become useless.
  8. Gold down

    It is nearly impossible to predict the price of gold accurately, particularly on a short timescale. Technical analysts are fond of drawing lines on charts and saying this pattern indicates such and such, but patterns can usually only be recognised after the event. Such analysts tend to say that *if* the price goes up and breaks this resistance level it will continue to go up, and *if* the price goes down and breaks this support level it will continue to go down, and *if* it does neither then it will remain within a channel. Of course this is of no use whatsoever because all possibilities have been covered. It just amounts to saying the price will rise, fall, or stay about the same, which we knew already. Fundamental analysts identify considerations such as rising demand, falling production, rising interest rates, rising inflation, investor risk appetite, geopolitical uncertainty. These have the benefit of being tangible causes of price movements, but they are of little use in timing price moves. Maybe gold is undervalued by all kinds of measures, but who is to say it cannot remain undervalued for a long time or go down even further? The best thing to do with gold itself is treat it as insurance rather than as a speculative investment. Own as much as you reckon it would be helpful to have in the event of a financial collapse and hope you never have to use it.
  9. Jaxx, like Mycelium and others, is a soft (or hot) wallet. It consists of software running on your computer or smart phone. As such it is vulnerable to being attacked over your network link. Also, if you catch some kind of keystroke/screenshot logger, your keys could be compromised. But if you transfer your keys to a hardware (or cold) wallet such as Trezor or Ledger Nano and ensure they are removed from your soft wallet, they are highly secure. Printing the keys out is also good, provided you keep the printout in a safe place. Again, you need to delete them from your soft wallet once you have done this.
  10. The important thing with exchanges is not to leave your BTC there once you have bought it. Always transfer it to a key pair that you have created yourself on a wallet. Once there you can secure it further by moving the keys to a hardware wallet or printing them out. If you don't do this, you are vulnerable to the exchange being hacked or a rogue employee helping themselves to your BTC. It would be like going into a shop, buying some stuff, then asking if they can keep it for you in storage. If they are burgled, or have an untrustworthy employee, you will lose your stuff. It is always better to take it off the exchange, even if it means an extra transaction fee.
  11. Gold Miner Picks

    Congratulations to anyone holding Integra (CVE:ICG) Double kudos to Taylor Dart at Seeking Alpha https://seekingalpha.com/article/4015607-2-gold-juniors-ripe-takeovers for picking this and Mariana as likely takeover targets last October.
  12. Gold Monitoring Thread £ only

    Anyone else think it is odd that gold is going down while bitcoin has risen to an all-time high? Is this just a long-term trend in bitcoin price resulting from the fact that it is still a new currency and its ownership is widening? Or is it that there are no leveraged instruments for shorting bitcoin?
  13. Silver Monitoring Thread £ only.

    If the price goes down, don't fret, just keep buying and benefit from cost averaging. As to why the price is going down: large volumes of sales contracts continue to be made on the futures market, which is where the price is recorded. For what it's worth, the gap between this paper price and the physical price in Shanghai is particularly high at the moment, and has been for about 10 days or so. Large gaps create an arbitrage opportunity, so they do not usually stay large for long.
  14. Gold Miner Picks

    I bought some last August, and some more in January of this year. Now to find the next good candidate. I've recently seen these tipped: CVE:ADZ Adamera CVE:AGB Atlantic Gold TSE:AUG Auryn Resources TSE:ETG Entree Gold TSE:SBB Sabina (This is not a recommendation. DYOR)
  15. Gold Miner Picks

    Congratulations to anyone holding Mariana (LON:MARL). Up 55% following a takeover bid. Kudos to Taylor Dart at SeekingAlpha for picking it as a likely takeover target last October.