Pension Funds Need Gold before It’s Too Late

https://www.soundmoneydefense.org/news/2017/01/17/pension-fund-gold-000079

Looting the Pension Funds

http://www.rollingstone.com/politics/news/looting-the-pension-funds-20130926

So when you invest your pension money in hedge funds, you might be paying a hundred times the cost or more, you might be underperforming the market, you may be supporting political movements against you, and you often have to pay what effectively is a bribe just for the privilege of hiring your crappy overpaid money manager in the first place. What's not to like about that? Who could complain?

But the idea that these benefit packages are causing the fiscal crises in our states is almost entirely a fabrication crafted by the very people who actually caused the problem. It's like Voltaire's maxim about noses having evolved to fit spectacles, so therefore we wear spectacles. In this case, we have an unfunded-pension-liability problem because we've been ripping retirees off for decades – but the solution being offered is to rip them off even more.

Public Pension Funds Named to Lead ‘London Whale’ Lawsuit

JPMorgan will receive a mere slap on the wrist.  Nothing here.

http://www.bloomberg.com/news/2012-08-21/public-pension-funds-named-to-lead-london-whale-lawsuit.html

Madoff Whistleblower Tells KWN Banks Stealing From Pensions

This is what happens when you put the dumbest guys in the same room (e.g. pension fund managers) as the biggest sharks in the room (e.g. investment bankers).  The sharks have used the opacity of markets to surreptitiously steal from the retirement funds.  The concept of "free" markets on Wall Street is fictitious. 

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/10/6_Madoff_Whistleblower_Tells_KWN_Banks_Stealing_From_Pensions.html

Ireland Seizes $7 Billion From Its Pension Fund To Boost Employment

Coming to a country near you. 

http://www.businessinsider.com/ireland-seizes-7-billion-from-its-pension-fund-to-boost-employment-2011-6

SocGen On Why Japan's Plunging Pension Reserves May "Cause Havoc" To The Japanese Bond Market

I've always said the Japanese bond market--and hence, economy, was in deep feces due to their aging demographics and huge indebtedness.  And I've always said the US could learn from Japan's demise, as we encounter the same head winds.  The earthquakes, tsunamis, and nuclear fallouts--as tragic as they were--are mere sideshows and will only accelerate the economic downdrafts, as Japan incurs more debt in the reconstruction effort.  The implications are far and wide, as they become net sellers, instead of buyers, of US Treasuries.

Just as the Japanese government has force fed their citizens into Japanese government bonds, nearly nil in returns, it would not surprise me to see the US government mandate retirement funds into US Treasuries--again earning negative returns relative to a higher cost of living.  And they'll declare it our patriotic duty to do so.  If you're a 401K, IRA, or pension fund holder, I'd be nervous (I am).

http://www.zerohedge.com/article/socgen-why-japans-plunging-pension-reserves-may-cause-havoc-japanese-bond-market

Treasury Confirms Debt Ceiling To Be Breached Today; Will Tap Pension Funds

http://www.zerohedge.com/article/treasury-confirms-debt-ceiling-be-breached-today-will-tap-pension-funds

It's official: the US credit card has officially been maxed out, just as we predicted on Wednesday, and througout Q1 and Q2. The United States is expected to reach the legal limit on its debt later on Monday and will start dipping into federal retirement funds to give the country more room to borrow, a Treasury official said.

Irish Bombshell: Government Raids PRIVATE Pensions To Pay For Spending

Thanks to Dick for finding this article.  It's something we've been predicting and warning readers about for a few years, and it's coming to the US before you can say "confiscation." 

http://www.businessinsider.com/irish-bombshell-government-raids-private-pensions-to-pay-for-jobs-program-2011-5

Pensions and inflation

Let me just throw it out there.

1) Pension funds are at risk--all of them, some more than others.  If you're under the age of 60, so is Social Security.  I've been saying this for years, despite some very smart people refuting me.  We will see who is right on this, but the chorus of alarm bells is growing in my favor.

2) Inflation will wipe out those on fixed incomes, especially retirees.  Again, the audience has been tone deaf to my exhortations.  Recent price increases point again towards inflation--not deflation.

As the previous blog/article mentioned <click here>, protecting one's purchasing power now requires citizens to become speculators, as the Fed has artificially kept interest rates--and hence bond yields, low.  This helps the Fed's bloated balance sheet, but it destroys the living standards of US citizens on fixed incomes.

As a result, protecting one's purchasing power unfortunately now must include unconventional investment strategies, as the central bank debases the dollar in an unsuccessful attempt to close the huge fiscal gaps.  Our country's debt will destroy its citizens' purchasing power--it's just a matter of time before people realize it, and most people will realize it after it's too late.

The government can fool the majority of the people for only so long.  Declaring inflation is only 2% when it's actually closer to 10% doesn't work when folks see prices at the gas pump increase 100%.  People will eventually realize that unemployment is not the officially calculated 9% but actually 22%--all they have to do is look around.  And now that top government and banking authorities are sounding the alarm bells <click here>, even while Congress hmm's and haw's, it is time to take notice.

With the increasingly corrupt and stringent FDA killing off promising biotech companies, the only growth industries left in America are bankruptcy law and building IPhone apps.  Add to that list oil, natural gas, agriculture, some technology, and precious metals mining companies.  We will see how long Apple, Google, and NetFlix can carry the US economy.  Hint:  not for long.

The Driver for Gold You’re Not Watching

The Driver for Gold You’re Not Watching

Jeff Clark, BIG GOLD

You already know the basic reasons for owning gold – currency protection, inflation hedge, store of value, calamity insurance – many of which are becoming clichés even in mainstream articles. Throw in the supply and demand imbalance, and you’ve got the basic arguments for why one should hold gold for the foreseeable future.

All of these factors remain very bullish, in spite of gold’s 450% rise over the past 10 years. No, it’s not too late to buy, especially if you don’t own a meaningful amount; and yes, I’m convinced the price is headed much higher, regardless of the corrections we’ll inevitably see. Each of the aforementioned catalysts will force gold’s price higher and higher in the years ahead, especially the currency issues.

But there’s another driver of the price that escapes many gold watchers and certainly the mainstream media. And I’m convinced that once this sleeping giant wakes, it could ignite the gold market like nothing we’ve ever seen.

The fund management industry handles the bulk of the world’s wealth. These institutions include insurance companies, hedge funds, mutual funds, sovereign wealth funds, etc. But the elephant in the room is pension funds. These are institutions that provide retirement income, both public and private.

Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion).

We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying.

So, what about pension funds?

  

According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector.

Shayne is head of global research at the Teacher Retirement System of Texas. He bases his estimate on the fact that commodities represent about 3% of the total assets in the average pension fund. And of that 3%, about 5% is devoted to gold. It is, by any account, a negligible portion of a fund’s asset allocation.

Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases.

How much is that? The assets of GLD total $55.2 billion, so this amount of money is 1.7 times bigger than the largest gold ETF. SLV, the largest silver ETF, has net assets of $9.3 billion, a mere one-tenth of that extra allocation.

The market cap of the entire sector of gold stocks (producers only) is about $234 billion. The gold industry would see a 40% increase in new money to the sector. Its market cap would double if pension institutions allocated just 1.2% of their assets to it.

But what if currency issues spiral out of control? What if bonds wither and die? What if real estate takes ten years to recover? What if inflation becomes a rabid dog like it has every other time in history when governments have diluted their currency to this degree? If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward. 

And let’s not forget that this is only one class of institution. Insurance companies have about $18.7 trillion in assets. Hedge funds manage approximately $1.7 trillion. Sovereign wealth funds control $3.8 trillion. Then there are mutual funds, ETFs, private equity funds, and private wealth funds. Throw in millions of retail investors like you and me and Joe Sixpack and Jiao Sixpack, and we’re looking in the rear view mirror at $100 trillion.

I don’t know if pension funds will devote that much money to this sector or not. What I do know is that sovereign debt risks are far from over, the U.S. dollar and other currencies will lose considerably more value against gold, interest rates will most certainly rise in the years ahead, and inflation is just getting started. These forces are in place and building, and if there’s a paradigm shift in how these managers view gold, look out!

I thought of titling this piece, “Why $5,000 Gold May Be Too Low.” Because once fund managers enter the gold market in mass, this tiny sector will light on fire with blazing speed. 

My advice is to not just hope you can jump in once these drivers hit the gas, but to claim your seat during the relative calm of this month's level prices.