Maximizing Your Social Security Benefits

By Dr. Larry Kotlikoff

Social Security benefits are a big deal, income wise, for most retirees. For 20 percent, it’s the only deal. For 30 percent it’s the main deal. And for another 20 percent, it’s the second biggest deal. So it’s passing strange, to use a Mark Twain expression, that most households, be they poor, middle class, or rich leave tens to hundreds of thousands of dollars in Social Security benefits on the table.

You can be the smartest person in the world and make the dumbest Social Security mistakes. My friend, Glenn Loury, a brilliant economist at Brown University, is an example. Glenn is a widower. His magical wife, Linda, tragically passed at 58 after a distinguished economics career at Tufts.

Glenn and I had dinner one night a few months shy of his 65^th birthday. Somehow we got onto his Social Security plans. Glenn knew next to nothing about widower benefits. When I mentioned them, he dismissed the idea saying he had earned too much compared to Linda.

Glenn was wrong. Within two minutes I made him $120,000. The strategy was simple. Glenn, who was still working, would collect his widower benefit starting at his full retirement age, 66 (when Social Security’s stops applying their their earnings test that taxes the benefits of those still working).

Given Linda’s salary, Glenn’s widower benefit would, I figured, total more than $30,000 a year for four years. Meanwhile Glenn would let his own retirement benefit grow by 8 percent per year through age 70. Since Glenn had been planning on taking his own benefit at 70, the $120,000 was found money. Needless to say, Glenn paid for dinner.

How I Became a Social Security Expert

I learned about Social Security by necessity. I’m an economist at Boston University, but I have a personal financial planning software company, whose website is www.economicsecurityplanning.com. Our goal is to find safe ways to sustain and raise people’s spending power. And there are many such ways, particularly taking Uncle Sam’s best benefit and tax deals.

One of our programs, www.maximizemysocialsecurity.com, sells for just $40. But it considers each of your potentially millions of benefit-claiming strategies, finding precisely the one that will maximize your household’s lifetime benefits. Creating this program required learning Social Security’s rules, which I did at great cost to my sanity.

Social Security has 2,728 rules in its Handbook covering retirement benefits, spousal benefits, child benefits, disabled child benefits, widow(er) benefits, child-in-care spousal benefits, mother (father) benefits, divorced spousal benefits, divorced widow(er) benefits, divorced mother (father) benefits, disability benefits, and parent benefits.

The system’s Programming Operating Manual System has hundreds of thousands of rules about those 2,728 rules. The number of potential benefits, legitimate months for initiating collection of the various benefits, ways in which one spouse’s benefit collection decisions can affect the other’s, and all the rules within rules limiting what you can receive and when you can receive it makes Social Security far more complicated than even the federal income tax. This is why www.maximizemysocialsecurity.com needs to consider so many cases.

Becoming a Social Security Columnist

As a “reward” for learning all the mind-boggling details, Paul Solman, my friend and long-standing economics correspondent at PBS NewsHour, asked me to write a weekly column for the PBS NewsHour’s website answering Social Security questions. Three and half years later, the column is still one of the site’s top draws.

Given the huge thirst for Social Security answers, Paul and I, together with www.money.com columnist, Phil Moeller, decided to write a book describing the best strategies for collecting Social Security. The book, Get What’s Yours – the Secrets to Maxing Out Your Social Security was released in February 2015 and instantly became a #1 NY Times Best Seller.

Unfortunately, the book’s success had untoward consequences. The White House, we learned, didn’t like the idea of our telling people how to get what they paid for. In November, as part of the 2015 Budget Bill, they teamed up with Congress to change Social Security’s rules, taking away certain claiming options for many younger households.

From one day to the next, my company’s software and my co-authored Best Seller were out of date. This was no fun, to put it mildly. But my company’s exceptional engineers fixed our software within two weeks, and my co-authors and I immediately started rewriting our book. Our marvelous publisher, Simon & Schuster, also went into crash mode. They just released Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security.

Three General Rules to Maximizing Your Lifetime Benefits

Our book became a best seller in part because Paul’s is an exceptionally funny writer and because Phil and I pulled no punches in describing Social Security as a bureaucrat’s daydream and a user’s nightmare. But the main draw was distilling Social Security’s gobbledygook into English and providing four central strategies for getting what’s yours.

Rule 1 – Be patient where patience pays.

Take a high-earning 60 year-old couple. Under the new law, they both make too much and are both too young for either to collect spousal benefits from the other. If the lower of the two earners dies first, the survivor can, however, collect a widow(er) benefit. But the immediate issue for this healthy couple is when to take retirement benefits.

If they take their retirement benefits as early as possible – at 62, they’ll receive $1.30 million in lifetime benefits (present valued as of their current age 60). If they wait till 70, the figure is $1.65 million. That’s an extra $350,000! It too represents found money. If the couple takes their benefits at 62 and finds $350,000 hidden in their attic they’d be in the same boat (ignoring federal income taxes). Had the law not changed, the $350,000 in found money would be $410,000. But $350,000 is still a massive bonanza.

Why does patience pay so much? The answer is that Social Security pays much higher benefits if you wait to collect them. For example, retirement benefits starting at 70 are 76 percent higher than those starting at age 62. This is above and beyond the annual adjustment for inflation. And these benefits continue for as long as you live.

Most people view Social Security as an asset, like any other. But it’s actually insurance – insurance against the worst thing that, financially speaking, can happen to you in retirement – you keep living! Dying early and not collecting your benefits entails no financial risk. You are, well, dead. But you’re also in heaven, where everything is free and there are no regrets. In particular, you aren’t sitting around kicking yourself for having not taken Social Security before you died.

No, the real financial danger in retirement is not dying. It’s living — living to the ripe old age of, say, 100. It’s a danger because you have to keep paying for yourself, day after day, month after month, year after year. If the money runs out, things can get mighty unpleasant as anyone who has tasted cat food can attest.

Much of our book’s success involved implanting the following simple thought in our readers’ brains — You can’t count on dying on time. Nor can you analyze Social Security on a breakeven, i.e., play-the-odds basis.

Insurance companies can play the odds. They can pool over their thousands of clients’ death dates. You can’t pool. You have only one life to lose and you could lose it at your maximum, not your expected age of death. As with any insurance, when it comes to Social Security’s longevity insurance you need to consider the worst cast scenario and make sure to get catastrophic coverage. With Social Security, this means, in most cases, waiting till 70 to receive your highest possible retirement benefit.

Many rich investors poo poo treating Social Security as insurance. They are so well heeled they don’t worry about risk, including longevity risk. But if they are smart, they will also wait till 70 to take their retirement benefits unless there is an even better way to maximize their family’s collective benefits (see below). The reason is that even on a pure investment basis, waiting to collect higher retirement benefits is a no brainer. In deciding in the 1970s ago how much to reward patience, Social Security used actuarial tables that are now decades old. They also used a safe internal rate of return that was over 200 basis (2 percentage) points higher than you can now earn on 30-year TIPS (Treasury Inflation Protected Securities). These factors make patience a terrific arbitrage opportunity.

Rule 2 – Understand All Your Benefits

I listed above the 12 different types of benefits you can collect from Social Security. You may be focusing on only one or two of these benefits right now thinking the others aren’t relevant. But you never know what might happen. My 96 year-old mom is my financial dependent. Were I to croak, she could collect 82.5 percent of my full retirement benefit instead of her own lower benefit. I made a special point of telling my siblings this fact. They two are very well educated people (my brother is the Provost of Cornell and a leading scientist), but they had never heard of the parent benefit.

With Social Security there is a host of gotchas. (We list 40 bad news gotchas in one chapter in the new book and 60 good news secrets in another.)  Perhaps the worst gotcha is Use It Or Lose It.

Had Glenn not mentioned Social Security, he’d probably have lost $120,000.  Benefits that aren’t taken on time are gone. (That’s not 100 percent true. In some cases, you collect 6 months of benefits retroactively.) Another top economist, this one at Harvard, called me recently about what to do with Social Security. He hadn’t read the book or run the software. When I explain he’d called three years too late and had lost $35,000 in spousal benefits, he was none too happy.  Then there was a recent email from a 75 year old who was still waiting for Social Security to start sending him his retirement benefit, for which he had never applied.

Let me be clear. Social Security doesn’t know or very much care about you. They don’t know if you are alive or dead, if you are married, if you are divorced, if you are widowed, if your ex is deceased, if you have children, if your kids can collect benefits on your record, and the list goes on. You need to tell them, not ask them what you can collect and when you want to start collecting it.

Rule 3 – Time Your Collection of Benefits

One of Social Security’s worst gotchas is that you can’t take two benefits at once. If you are entitled to collect two benefits simultaneously they will give you either exactly or approximately the larger of the two. To collect two benefits, you need to take one first, while letting the other grow and then take the later benefit when it stops growing. This was the strategy I laid out for Glenn – take widower benefits at 66, hold off retirement benefits, letting them grown by 32 percent between 66 and 70, and then take retirement benefit.

In the case of married couples, the optimal timing of benefit collection often has to be coordinated between spouses. Take a hypothetical couple I ran through maximizemysocialsecurity.com to discover the best strategy. Let’s call the husband, age 64, Ted and the wife, age 60, Joan. Joan is the higher earner. Ted is thinking of taking his retirement benefit immediately and Joan is considering starting hers at 62. Can they do better? They certainly can.

Thanks to the grandfathering provisions of the new law, Ted can collect just a spousal benefit on Joan’s work record between 66 and 70 and take his own retirement benefit at 70. But for Ted to do this, Joan has to take her own retirement benefit at age 62. Yes, this is the opposite of being patient. But at 66, Joan can suspend her retirement benefit and restart it at a 32 percent higher value at 70. Joan will still reduce her own lifetime retirement benefits, but the couple’s combine lifetime benefits will end up $155,053 higher!

Here’s another quick hypothetical example of how timing can matter. Jerry is 61 and just retired after a career as a middle manager. Jane is 45. She’s been a top-paid lawyer, but is retiring to look after their severely disabled son, Charley.  Their optimal strategy is for Jerry to take his retirement benefit at 62 at which point Charley can start collecting a disabled child benefit and Jane can receive a child-in-care spousal benefit. Thanks to the new law Jerry can’t suspend at full retirement age without cutting off Charley and Jane while his retirement benefit remains suspended. So he ends up stuck forever with his age-62 retirement benefit. At 70 Janes take her retirement benefit. At this point Charley starts collecting on Jane’s work record. When Jerry dies, Charley collects a child survivor benefit on Jerry’s record. Finally, when Jane die, Charley starts collecting as a survivor on Jane’s record. This multi-step strateg y can also produce a major gain in the family’s lifetime benefits.

Rule 4 – Tell, Don’t Ask Social Security What To Do

The staff at Social Security are overworked, underpaid, and undertrained. Most are well meaning. But a vast number are arrogant beyond belief. I’ve written about case after case where multiple Social Security staff have told the same person something that was 100 false while claiming they were 100 percent correct. In almost all of these cases, only my threat of writing up their mistake in my column led the staff or Social Security’s top brass to fix the problem. Indeed, I could write an entire book about the nature of Social Security’s “advice,” its failure to comprehend longevity risk, and why I would, were I elected President, fire the Social Security Commissioner on my first day in office.

My advice is read our book. It’s very inexpensive. Buy it from the local bookstore if possible or Amazon or Barnes and Nobles if necessary. Read it, then run the software. Then you’ll know exactly what to order not ask from Social Security.

Fixing Social Security for Real and for Good

My goal of becoming President is, actually, extremely serious as you can see at www.kotlikoff2016.com. Part of my platform, provided on that site, involves replacing the antiquated Social Security system with one that’s solvent and simple, indeed, one that requires not a single government bureaucrat to operate.  Social Security, by its Trustees’ own admission in their 2015 Trustees Report, is in the red to the tune of $26 trillion. That’s far larger than a year’s GDP! Stated differently, the system is 31 percent underfinanced. I.e., it needs a 31 percent immediate and permanent hike in its 12.4 percent FICA tax to pay all promised benefits through time.  Make no mistake. The $26 trillion is a massive bill we are dumping squarely in our children’s laps. It’s part of the far larger $199 trillion present value fiscal gap separating all future projected federal spendin g and all future projected federal taxes. The longer we wait to address our overall fiscal gap and Social Security’s in particular, the greater the economic damage to our children. This is why, It’s Our Children, not Vote for Me Because I’m Rich and Brilliant or Vote for Me Because My Name Ends in Clinton is my campaigns’ one and only sound bite.

Laurence Kotlikoff is a professor of economics at Boston University, a fellow of the American Academy of Arts and Sciences, co-developer of www.maximizemysocialsecurity.com, and co-author of Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security.

Gold hit its high in 2011 at a bit over $1900. The most recent low was $1,045 in 2015 and currently it stands at around $1,250.  Gold Shares have had an even wilder ride with the average gold stock down up to 70% – clearly not for the faint-hearted investor.

No one has a crystal ball and I certainly do not, but the low in gold is close – perhaps this recent rally driven by fear in Europe over the banking sector will not continue past $1,350 and we will see the lows tested one more time before we see the Gold bull market start up again.  We are witnessing the beginnings of the new gold bull market and clearly there is more upside now than downside. The previous two up-legs in gold gained 300% and 177%; the previous two up-legs in gold stocks (basis HUI) put on 1,300% and 325%.  Over the next while, for those who are patient, GOLD is a buy.

There are various ways to get things started just call 03 5724 5100

Japan Pension and who has agreements where you can transfer credits for the basic state pension.

According to http://www.nenkin.go.jp/n/www/english/detail.jsp?id=34  the list of countries with such agreements with Japan are Germany, United Kingdom, Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland.

The Japanese National Pension System, which is the Japanese equivalent of Social Security. In order to get money from that you need to have paid for at least 25 years (might get decreased to 20 for foreigners, but not yet). Also, the amount you get is whopping 65,541 yen per month for 40 years of contributions. Less for under 40 years …
References to numbers are from here:
http://www.nenkin.go.jp/n/www/share/pdf/existing/english/pdf/1.pdf

(1) Old-age Basic Pension

If you have paid the National Pension contributions for at least 25 years and satisfy the conditions, the following amount is paid when you become 65 years old. *1

★Benefit amount = Y786,500 (annual amount in Fiscal Year 2012 for those who have paid contributions for 40 years)  that is only 65,542 per month! 

When you go for the lump-sum payment, you are giving up any benefits, including credit under the agreement. Unless they make a mistake, they will simply delete you from their system after you refund request is processed.  This is based on the first bullet under “Important Notes” on page 5 of:

http://www.nenkin.go.jp/n/open_imgs/service/0000005247.pdf

So depending on the system you are ending up in the credit may be more than the money you get back but that is assuming the system you end up in survives.

From the Japan Pension service website:

http://www.nenkin.go.jp/n/www/english/detail.jsp?id=39

An article from the US Social Security Administration:
http://www.ssa.gov/policy/docs/ssb/v67n3/v67n3p89.html

 

Everyone needs a private personal savings plan. 

On January 31, 1940, the very first Social Security check ever delivered went to Ms. Ida May Fuller, a former legal secretary who had recently retired.

 

Ms. Fuller had spent just three years paying into the system, contributing a total of $24.75 to Social Security. Yet her first check was for nearly that entire amount. Quite a return on investment.

She went on to live past 100, collecting a total of $22,888.92, over 900 times the amount she contributed to the program. Her story is quite the metaphor.

 

If you’re not familiar, Social Security is comprised of two primary trust funds: Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI).

Essentially, all of the taxes paid in to Social Security end up in one of these two trust funds.

The trust funds then ‘manage’ the money to generate a rate of return, and then pay out distributions to program recipients.

Now, the funds are overseen by a Board of Trustees which is obliged to submit an annual report on the fiscal condition of the program. It ain’t pretty.

The Disability Insurance (DI) fund is particularly ugly. In fact, the trustees themselves wrote in the 2015 annual report that

“[T]he DI Trust Fund fails the Trustee’s short-range test of financial adequacy. . .”

 

and,

 

“The DI Trust Fund reserves are expected to deplete in the fourth quarter of 2016…”

In other words, one of the two Social Security trust funds is just months away from insolvency.

When people think about Social Security, they think that all the problems are decades away.

Wrong. This is next year.

The other trust fund, OAS, is projected to “become depleted and unable to pay scheduled benefits in full on a timely basis in 2034.”

Which means that if you’re 47 or younger, you can kiss Social Security goodbye.

Bear in mind, these aren’t my calculations. Nor are they any wild assertions. They’re direct quotes from the trustees themselves.

And, just who are these trustees? The Secretary of the Treasury of the United States of America. The Labor Secretary. The Secretary of Health and Human Services.

Some of the most senior officials in the US government sign their name to an official report stating that these funds are nearly insolvency– one of them even NEXT YEAR.

Not to worry, though. Congress is on the case.

Late last week, several dozen members of Congress introduced the “One Social Security Act”, HR 3150, to solve this problem.

And let me tell you, their solution is bold. Fearless. And brilliant.

HR 3150 attacks the looming insolvency of Disability Insurance by eliminating the fund altogether.

So instead of having two separate funds for two distinct purposes of Social Security, the legislation aims to combine them into one unified fund.

That way, with just one fund, there won’t be any separate reporting about DI’s insolvency.

It’s genius! They make the problem go away by eliminating the requirement to report it.

There’s just one small issue. Legally, they have a word for this. It’s called fraud.

You and I would go to prison if we commingled funds like this. But in the hallowed halls of Congress, this is what passes as a solution.

This is so typical– solving problems by pretending that they don’t exist and destroying any element of transparency and accountability.

This pretty much tells you everything you need to know about government.

Look, it’s a hard reality to swallow. But the government’s own data show that these programs are not going to be there for you.

And the story smacking us in the face right now demonstrates precisely how politicians intend on ‘solving’ the problems.

These people aren’t the solution. They’re the problem.

And don’t think that ‘voting the bums out’ will affect anything. Elections merely change the players, not the game.

The only way forward is to invest in yourself, particularly in your business and financial education. Make plans based on the assumption that Social Security doesn’t exist.

And if, by some miracle, it’s still there by the time you retire, you won’t be worse off for having built a larger nest egg thanks to the financial acumen you developed.

 

http://www.zerohedge.com/news/2015-07-29/congress-proposes-fraudulent-new-law-fix-social-security

According to a new report from Pew Charitable Trusts. States are short $968 billion for their pension systems, an increase of $54 billion over the year before. When debts from local programs are taken into account, the total shortfall tops $1 trillion, according to the report.

http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2015/07/the-state-pensions-funding-gap-challenges-persist

 

You are in a bull market until proven otherwise. We are in a bull market and the question is when is the change coming?

This USA bull run started way back in 2009.

However, on a more current look the last attempt to decline was in Oct. 2014 when the S&P lost about 200 points over about 3 weeks. Then a slight wobble of 100 points in Dec and it has been a slow choppy rise to where we are today at all-time highs.  Will we go higher?  As you can see in the graph below the S&P is in a rising wedge which over time will resolve itself one way other the other.  There is a stronger probability that it will test the October 2014 lows (at worst) and then head back up, we will review if that comes. So, we would wait until this unfolds before entering or adding more to equities.

 

Japan….the economy is in an untenable position. Unless Japan open their borders and embrace change, both unlikely, their hopes to end 25 years of economic malaise rest with Abe-no-mics and massive money printing.  Abe’s three policy arrows have been largely rhetoric and designed to keep the status quo… strange as Abe did campaign on change and the future.  But, bearing in mind 40% of the voters are over the age of 60 why would they want any change quickly? Abe clearly has this in mind and not the future of Japan.  Difficult and costly choices need to be made by the Japanese people as the leaders will not do it.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see in the chart above the Nikkei has taken 25 years to reach the top of its Bollinger band. (This is one of the more popular technical analysis techniques. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market.)

The real problem in Japan is the containment of the human spirt –  Japan needs to unleash this innovation once again — an example is as Richard Katz says “brands like Sony, Panasonic and Sharp continue to dominate in Japan – where not a single new market entrant of any significance has emerged since 1946. In the US by comparison, 8 of the top 21 consumer electronics hardware firms, including Cisco, did not even exist in 1970. In Japan, incumbents keep holding on.”  We believe the bureaucracy of Japan has a huge role in stifling this wonderful country.

A current example of the human spirt alive and well in Japan is the food and restaurant scene now available. Back in 1990 the only foreign food was a limited McDonald’s menu – today Tokyo has more Michelin stars than France. Good thing food bureaucracy is relatively low.

The Japanese market continues to rise but the gains now are very correlated with the direction of the Yen and that “easy rise” in the stock market has happened.  Going forward can companies in Japan make real profits that are not directly linked to the weakening Yen?

 

As a contrast; Australia

Source http://www.tradingeconomics.com/japan/corporate-profits

So what other markets are lined up for a correction?   Seems all are at or not far from mulit-year highs and my guess is the US market will lead, as whatever it does the rest of the worlds markets will follow — some more violently than others.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The chart above shows the US$ index, which is a measure of the value of the U.S. dollar relative to majority of its most significant trading partners.

As you can see from the chart the US$ is correcting downwards but this is a normal correction based on the fact the US has been posting some poor economic numbers but the chart is indicating the US$ index may fall to around 90 then turn back up as the US growth numbers, even poor, look better than the rest of the world.

Dollar/Yen

 

 

 

 

 

 

 

 

 

 

 

Recently we have seen 122 as a high (March 2015) and we have seen 118 (April 2015) as the low. The pair have been stuck in trading range. This reminds me of Jan 2014 to August 2014 when the pair was stuck in a range of 105 to 100.  The BOJ continues to do QQE: the Bank will purchase JGBs so that their amount outstanding will increase at an annual pace of about 50 trillion yen and the BOJ will increase the monetary base at an annual pace of about 60-70 trillion yen. In Addition the Bank will purchase ETFs and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual pace of 1 trillion yen and 30 billion yen respectively. So again we believe the Yen is stair stepping itself higher .. once 125 vs 1$ goes there is little resistance until 147. One should not hold Yen, unless there is a material change in BOJ policy. (Remember a ‘rising’ Yen is a weakening Yen.)

EUR/Dollar

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The fall of the Euro over the last several years from 160 in 2008 to a low of 104 in 2015 — it is only natural to see a bounce but the question is how high can that bounce be 115 or 120?  We doubt anything more than 120 if it can get there — Greece is still a huge issue which leads to Portugal, Spain, Italy and the rest of Europe. These issue have not been resolved and judging by the progress in Greece things can likely only get worse.

GBP

 

 

 

 

 

 

 

 

 

 

 

The Election in the UK produced a small Conservative majority win – this has given the Pound wind in its sails for now. The question is can Sterling keep these gains longer term.

 

AUD

 

 

 

 

 

 

 

 

 

 

 

 

Australia can still cut interest rates. Many believe this will happen especially in the face of falling commodity prices.  However the last rate cut was highly anticipated and factored in as the AUS$ rose after the cut. Australia can take on more debt as the government has low debt levels compared to its peers.  The other wild card for the Aussie is China as any stimulus China does has a direct effect on the Aussie economy of just about 24 million people — about the same as the Shanghai municipality.

The US$ is beginning a long term bull run. Why? Several reasons first the US economy is the only country performing and trying to hold up the world economy. Second, fear in Europe and possibly Japan on higher taxes and possible confiscation of wealth. Third, there has been about US$ 3 trillion borrowed around the world and as the USA stopped QE there are now less US$ being put out there and therefore all the borrows are in effect short US$. This is massive. This is what leads to currency crisis, but NOT in US$  but in emerging market currencies as they borrowed US$.  The capital flows are showing massive movement to US$ and this is also propping up the US equity markets – we suspect a pullback in the US markets – that will provide a buying opportunity and the US markets will go higher into 2015.

Commodities will struggle with the strong US$ but as the Sovereign debt crisis grows there will be a point when commodities rise with the US$ we suspect this to begin in 2016 with the full resumption of the sovereign debt crisis.

Gold: It has been a difficult 3 years for gold as it has dropped further than we had thought it would. Does this bother us? No not really, as we still believe the sovereign debt crisis is just beginning. People will start to notice when the US economy starts to turn down in 2015. This will be the kick off for precious metals – we have said to patiently accumulate – many of you have and it will pay off into 2016~20.  But before that we may see gold actually fall to $1,000 or perhaps a bit under, the tree needs to be shaken and the talking heads on TV need to say gold is dead, we are not far now.  That time will come as the Sovereign Debt Crisis hits the USA and that seems likely around the autumn of 2015 when the US economy starts to turn down. We stand by what we said 3 years ago accumulate gold on a regular basis, the longer term strategy will work gold will rise into 2016~2020.

Bonds, especially government bonds, are DEAD, avoid completely, as they have finished their bull run from way back in 1980!

Europe – avoid as there will be structural changes which can’t be predicted- many now seem to think buying or holding money in Germany will protect them if there is a breakup of the EU assuming they will get Deutschmarks. Too much risk go to US$.

The UK economy is tracking the US far closer than the EU. However the GBP is weak and we expect this to range trade 1.50 -1.70 depending on electoral outcomes.

Asia – China is it an enormous mess? No one really knows the extent and Chinese growth is slowing perhaps more than most people think.

The Yen and the Nikkei: The Yen has almost reached 122 now it is 117.80. The Nikkei came to life in December 2012 and again in October 2014 as the BOJ implemented aggressive monetary stimulus. The initial strength into May 2013 was a ‘true’ increase when measured in any currency.  However, since then any increase has been a reflection of the weakness in the Yen. The Yen is at an important juncture, we see the 50 week moving average is coming into play — perhaps a test of 115?  Before we have a much larger leg down for the Yen, perhaps 140?  Abe walked away with the election as the voters really do not understand what is happening (Abenomics better work, or the Japanese Pensions are toast).  The Bank of Japan now owns bonds worth 60% of the value of the Japans’ GDP and is buying 17% more each year in just over two years they will own more than the annual GDP of Japan — that can’t be good.

Currently there is exhaustion in the Nikkei — all weak Yen driven — a monthly close of under 16,300 would imply more downside in 2015.

So in 2015 continue to accumulate Gold, Commodities and the US Equity markets. Please get it touch if we can assist with your investments.