A 2011 report from the National Institute of Population and Social Security Research shed some light on just how fast things could deteriorate from here: The proportion of children under 15 will shrink from 14.6% of the population in 2000 to 12% in 2021, 11% in 2036 and 10.8% in 2050. Meanwhile, those of working age (15-64) amounted to 68.1% of the population in 2000, and their proportion is expected to decline to 60% in 2020, 58% in 2035 and 53.6% in 2050.

The only clear rising trend is the aged (65 and above), who will grow from 17.4% of the population in 2000 to 25% in 2014. The number of elderly will continue to rise while the total population drops so that in 2050 the aged will account for a whopping 35.7% of a population estimated to number around 90 million. Trouble.

The Pew Center has released its annual summary of US pension and retirement health care (under)funding. As of 2010, the total underfunding gap rose by $120 billion from the prior year’s $1.26 trillion deficit to a record $1.38 trillion underfunding. This number consists of $757 billion in pension promises, not backed by any hard cash, representing pension liabilities of $3.07 trillion and assets of $2.31 trillion. In 2000, more than half of the states had their pensions 100 percent funded, but by 2010 only Wisconsin was fully funded, and 34 were below the 80 percent threshold—up from 31 in 2009 and just 22 in 2008. But that pales in comparison to the ridiculous spread between retiree health care liabilities of $660 billion and assets of, drum roll, $33 billion, or a funding shortage that is $627 billion, roughly 19 times the actual assets in the system! Just seven states funded 25 percent or more of their retiree health care obligations: Alaska, Arizona, North Dakota, Ohio, Oregon, Virginia, and Wisconsin. What this means is soon US pensioners will have no choice but to experience not only austerity unlike any seen in Europe, but broken promises of retirement benefits which will never materialize. The response will likewise be proportional.

Sadly, it is only going to get worse.

So what should you do?  Take out a personal savings plan  . .. more details here

Give us a call Banner can help 03 5724 5100

Source

Something we at Banner have been saying for years now . . .

http://youtu.be/jboTeS9Okak

The data from Bloomberg,: “Gold imports by mainland China from Hong Kong climbed 65 percent to a record in April, advancing for a third straight month as investors sought a hedge against financial-market turmoil and an economic slowdown.

And more from Sprott and his latest letter:

There have been key developments in the physical gold market over the last few weeks which we feel are worth highlighting:

1) The Chinese gold imports from Hong Kong in April, 2012 surged almost 1300% on a YoY basis. Total gross imports for the month of April were 103.6 tonnes and the net imports were 66.3 tonnes. It is not the data for April alone which has caught our eye. There has been a stunning increase of gold imports through Hong Kong for export into China over the past 2 years. Between May 2010 and April 2011, China imported a net 66 tonnes of physical gold through Hong Kong. Between May 2011 and April 2012, that number jumped to 489 tonnes. This represents an increase of 640%.

2) Central banks from around the world bought over 70 tonnes of gold in April, 2012. Data from the IMF showed developing countries such as the Philippines, Turkey, Mexico and Sri Lanka were significant buyers of gold as prices dipped.

3) Iran purchased $1.2B worth of gold in April, 2012 through Turkey. As the developed nations continue devaluing their currency at the expense of developing nations, countries such as Iran, China and Mexico are forced to look at alternative stores of value.

4) After twenty years of lackluster returns and stagnant bond yields, Japanese pension funds have finally discovered the value of investing in gold. The $500M Okayama Metal and Machinery pension fund placed 1.5% of its assets into gold bullion-backed ETFs in April in order to “escape sovereign risk”.

5) Bill Gross writes, “Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. Both the lower quality and lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. […] As they (investors) question the value of much of the $200 trillion which comprises our current system, they move marginally elsewhere – to real assets such as land, gold and tangible things, or to cash and a figurative mattress where at least their money is readily accessible”. Is the bond king recommending gold? YES, YES YES!

6) The Gold Mining ETF, GDX, has seen strong inflows in the past 3 months. The number of units outstanding have increased from 162.5M to roughly 187M between March 1, 2012 and May 31, 2012. This represents an increase in assets of almost $1.2B in a span of 3 months. It is worth pointing out that for a majority of this three months period, GDX, and by extension the gold mining companies were experiencing significant declines in their market values.

We believe there has been a material change in the gold investing landscape. The HUI, which is the Gold Bugs Index, is now up over 20% from its lows since May 16th, 2012. The slide in gold equities seems to be subsiding as a foundation for a strong move upwards is set. New buyers, represented by the Chinese, central banks, Japanese pension funds and the Iranians, bought almost 140 tonnes of gold in April alone. To put this into perspective, the annual gold production is approximately 2600 tonnes. China and Russia produce around 500 tonnes of gold annually, which never makes it to the open market. This leaves about 2100 tonnes of gold production annually for the rest of the world.

When buyers representing 140 tonnes of new demand enter a market which only has 175 tonnes of monthly supply, we are left wondering about two things:

1) In a balanced market, where is the source of supply to the new buyers going to come from?

2) How can a new buyer of size get into the gold market, which is already balanced, without significantly impacting the price of gold?

The answer is fairly obvious. When demand outstrips supply, prices move higher. These significant macro changes in the supplydemand dynamic of the gold market should propel the price of gold to new highs.

A month ago we were delighted to counterpoint Charlie Munger’s prior remarks about the level of “civilization” of a given consumer based on their sentiment vis-a-vis gold, by demonstrating that Chinese purchases of gold from Hong Kong rose to a record. To wit: “Imports from Hong Kong were 135,529 kilograms (135.53 metric tons) between January and March, from 19,729 kilograms in the year-earlier period, according to data from the Census and Statistics Department of the Hong Kong government. Shipments in March rose 59 percent from February, yesterday’s data showed.” We have just gotten the April update, and, lo and behold, the country which is now the biggest buyer of gold, having surpassed India, just set a new record: “Gold imports by mainland China from Hong Kong climbed 65 percent to a record in April, advancing for a third straight month as investors sought a hedge against financial-market turmoil and an economic slowdown. Shipments totaled 103,644.5 kilograms (103.6 metric tons) in the month from 62,913 kilograms in March, according to export data from the Census and Statistics Department of the Hong Kong government today. In the first four months, imports were 239,174 kilograms from 27,114 kilograms a year earlier, according to Bloomberg calculations. China doesn’t publish such figures.” In other words: in the first four months of 2012 Chinese purchases have increased by an unprecedented 782% over 2011.

And this is only from Hong Kong! Said otherwise: “Is the PBOC, which officially has just 1,054 tons of the yellow metal, quietly and relentlessly stockpiling gold?” Oh yes.

Expect a formal announcement from the Chinese central bank in the months ahead, indicating the country’s gold hoard has increased by at least 100%. What happens then to the price of gold is rather self-explanatory.

http://www.zerohedge.com/news/hoarding-continues-china-purchases-record-100-tons-gold-april-hong-kong?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29

Banking capital adequacy ratios, once the domain of banking specialists
are set to become centre stage for the gold market as well as the wider
economy. In response to the global banking crisis the rules are to be
tightened in terms of the assets that banks must hold and this is
potentially going to very much favour gold. The Basel Committee for Bank
Supervision (or BCBS) as part of the BIS are arguably the highest
authority in banking supervision and it is their role to define capital
requirements through the forthcoming Basel III rules.

In short, they are meeting to consider making gold a Tier 1 asset for
commercial banks with 100% weighting rather than a Tier 3 asset with just
a 50% risk weighting as it does today. At the same time they are set to
increase the amount of capital banks must set aside as well. A double win
potentially.

Hitherto banks have been much dis-incentivised to hold gold while being
encouraged to hold arguably riskier assets such as equity capital,
currencies and debt instruments, none of which have fared too well in the
crisis. With this potential change in capital adequacy requirements. bank
purchases of gold would drive up its value relative to other high quality
qualifying assets, increasing its desirability for regulatory purposes
further. This should result in gold being re-priced to bring it on a par
with all other high quality assets.

Currently banks have to have core Tier 1 capital ratio of 4% of which will
rise to 6% from the beginning of next year. In addition to its store of
value merits, central to the argument in favour of gold as a bank reserve
is its countercyclical nature to most other assets in that it tends to be
inversely correlated. Gold is ideal as it bears no credit risk. it
involves no other counterparty and it is no one’s liability. It is a
reserve asset diversifier if you like.

This is a treble win for gold – it would be a major endorsement of its
role in preserving wealth and as a store of value from the highest
financial authority, it would lead to significant purchases of gold by
major financial institutions and it would lead to a reappraisal of its
value with respect to other Tier 1 capital such as quality sovereign debt.
Under the new rules gold could become a very significantly larger
proportion of a reserve pool which is about to grow very much larger.

The 2 questions that come to my mind are when and how much metal – on
timing Basel III kicks in from January 2013 with a further tightening in
capital adequacy ratios in 2018. That said, it is not yet clear when
gold’s re-rating to Tier 1 might take place.

With the inevitable talk of further easing from the ECB and the ‘Fed must act soon surely’, this chart via UBS shows the longer-term support channel suggesting, at least for those who follow technical analysis, that gold’s dip may be over…

John Embry, Chief Investment Strategist of Sprott Asset Management. John discusses gold and other major markets, but first, here is what Embry had to say regarding recent derivatives turmoil: 

“This makes me very uncomfortable because I’ve always been very wary of the whole derivative situation. I believe the notional value of the outstanding derivatives is comfortably north of one quadrillion dollars. The Bank of International Settlements changed the definition, so they said there is only $700 trillion worth of them, rather than one quadrillion.”

But it doesn’t make any difference, these (derivatives) are many, many multiples of the world GDP. If these things get in any trouble, and I think the JP Morgan thing may be the first sign of significant trouble again, it’s fantastically important to the whole financial situation. In a rational market the gold price should have been up $100, not down $40 in the wake of this.

I would defer to Jim Sinclair, who I have the utmost respect for on this one. He has said for a long time that the derivative situation ‘guarantees quantitative easing to infinity,’ which is one of the great statements of all-time….

“I think this JP Morgan revelation just confirms that everything Jim’s been saying for a long time on this subject is dead right. The fact that we will have QE to infinity would suggest that an intelligent person would be buying every single ounce of gold and silver he can get his hands on at these prices.

They are trying to sell this idea that gold goes down on the ‘risk off’ trades that we are experiencing now. And that the ‘risk off’ buyers all go running into the US dollar and the US bond market. I think those are two of the riskiest things on the planet. But somehow they are still getting this ‘Pavlovian response’ that when things are bad out there, you should sell your gold and buy US bonds. It’s ridiculous.

It’s important, at this time, that people who have been around, and have a pretty good grasp of what’s unfolding, should express their views to the public just to counteract the propaganda they are receiving from mainstream media. It’s tough enough out there without being lied to all of the time.”

Embry had this to say regarding gold: “What they want to do is keep it (gold) in a range. Right now that range is $1,550 to $1,900. Can it go below $1,550? Sure, in the short-run it could. But the fact is the big move coming from these levels is going to be to the upside.

Trying to pick a bottom is always a difficult thing to do. Put it this way, you’re a lot closer to a significant bottom than you are to a top.”

Sell first and ask questions later. That seems to be the global investment strategy this week. Whether it was JP Morgan’s $2 billion loss, Greece’s possible exit from the euro, or ‘Greece of America’ California’s $16 billion budget deficit, investors found plenty of reasons to sell everything. US dollar cash and US Treasuries rallied, go figure.

I see no reason for gold /silver to be getting hammered this badly, as fundamentally the debt keeps rising by about 100 billion a month in the USA alone. However due to operation Twist this is not showing up now on the Feds balance sheet. Op Twist is where the Fed buys long term bonds and keeps rates at zero for the banks to artificially create a no lose carry trade for themselves.  Banks can buy Short dated bonds and are guaranteed to make 20-30 Basis points with no risk as the Fed has told them rates will stay at zero till 2014  . . .

The only reason for gold to fall is the slight strength in the US$ index.  But the move does not / should not mean gold and silver should be getting this badly whacked! Especially given the multiple issues in Europe and Japan Debt load.

U.S. Dollar Index Daily Chart  

Gold

  The recent price action in gold has been quite ugly and price is resting at key support stemming from an intermediate-term descending channel shown above. Should the lower bound break to the downside a sharp move lower could play out.

It is important to remember that gold is coming off a monster multi-year bull run and it only serves to make sense that a nasty pullback that shakes out the bulls would be forthcoming.

Gold and silver both are starting to become oversold on the daily time frame. While the gold bugs have been feeling pain the past few weeks, the gold miners have been taken out back to the woodshed for a good whipping. The miners have been absolutely crushed in 2012 .

Gold Bugs Index Weekly Chart 

 As can be seen above, the Gold Bugs Index (HUI) has been under considerable selling pressure since early September of 2011. However, note how low the True Strength Index is based on 5 years of price data. We are nearing the same level that we saw back in 2008 which marked a major bottom that ultimately resulted in a monster move to the upside for the gold miners.

I am of the opinion that this chart demonstrates quite clearly that a great buying opportunity for gold, silver, and the miners is likely going to present itself in the near future. I will be watching this price relationship over the next while waiting for a strong entry point for a longer-term purchase. After this pullback concludes, the potential returns that could occur in gold, silver, and the miners could be breathtaking. 

The start of this week has been ugly so we may very well be there this week and with the bottom in place !