We’re Screwed If We Don’t Do the Math

Biden Doesn’t Want You to Put it Together [Morning Reckoning] April 13, 2023 [WEBSITE]( | [UNSUBSCRIBE]( We’re Screwed If We Don’t Do the Math - I know you’ve heard of the Rule of 72, but we’re using it differently here. - But most don’t know the math, and that’s today’s big issue. - While illiteracy is incompetence with words, innumeracy is incompetence with numbers. [URGENT: Exclusive $10 Offer From Jim Rickards]( [Click here to learn more]( Hi, Jim here. And for the first time ever, I want to give you [all of my best secrets… for under $10!]( This is your chance to get all of my moneymaking insights at one affordable price. [Click here for all of the details on my special $10 offer.]( [LEARN MORE]( Asti, Northern Italy April 13, 2023 [Sean Ring] SEAN RING Good Morning Reader, Happy Thursday from Northern Italy! Most economists agree that there’s an inverse relationship between women’s literacy and birth rates. Economists concluded that the more women read (and are educated), the less they want children. I’ve always thought that conclusion didn’t match reality. I believe that the more women can do the math, the less children they want (for lifestyle reasons). That is, numeracy, rather than literacy, drives the decision-making. There are loads of examples of career women who can afford – and have – more children. Sara Blakely, Victoria Beckham and Amy Coney Barrett come to mind. But this column isn’t about demographics. It’s about innumeracy, which we’ll define as incompetence with numbers. It’s what I think society’s big problem is. But instead of whining about the causes, symptoms, and cures of innumeracy, I’m going to give you a few rules of thumb. You can use them to see if your decision-making changes. For my part, these simple equations and rules gave me a target. Specifically, I knew how far ahead or behind I was, and how far I had to go to reach my goal. I won’t bombard you today, as I think the fewer and the simpler, the better. So let’s start with five simple rules to see if they change how you think. [Urgent Notice From Paradigm CIO Zach Scheidt!]( [Click here to learn more]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [LEARN MORE]( The Rule of 72 The Rule of 72 is one you’ve probably heard of. And you might be wondering why I’d even include such a rule. Well, let me first state the rule and then we’ll talk about how to use it. For most people, the Rule of 72 tells them how long it will take to double their money if it’s invested at a constant rate of return. For example, if you’re earning 10% per year on your portfolio, it’ll take 72/10, or 7.2 years to double your portfolio. If you wanted to back out the math, let’s assume you had a $100,000 portfolio. $100,000.00 x (1 + 0.10) ^ 7.2 = $198,622 The Rule of 72 isn’t perfect. But near enough is good enough in this case. If you’ve got a superstar financial advisor earning you 20% per year, then it’ll only take 3.6 years to double your portfolio. Now, let’s use this rule to look at inflation… something Sleepy Joe doesn’t want you to do. Historically, central banks have tried to keep interest rates around 2%. That meant a currency lost half its purchasing power in 72/2 or 36 years. You’d barely notice the loss in purchasing power, as it’d take so long to rear its ugly head. You’d probably go to the grocery store and wonder why eggs are “suddenly” double what they used to cost in 1983. We’ve all done something like that, haven’t we? But with inflation hitting 10% as it recently has, a currency loses half its value in only 72/10 or 7.2 years. Realistically speaking, let’s say Chairman Pow comes out and says, “We’d love rates to go back down to 2%, but that’s just not realistic. We’re now happy with a 4% target.” In that case, the dollar would lose half its purchasing power in 72/4 or 18 years. If you think eggs are expensive now, just you wait until 2041! The Rule of 72 is not only a great way to look at returns, but also at purchasing power erosion. Net Worth Indicator This is a great targeting mechanism, and one I’ve regrettably only just found. It’s from The Millionaire Next Door, by Thomas J. Stanley and William D. Danko. Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be. If you hit this number, you’re an AAW, or average accumulator of wealth. According to the authors, to be considered a PAW, or prodigious accumulator of wealth, you “should” have at least twice this number. What I like about this indicator is that it’s simple to calculate. And it gives you a target. Full disclosure, I’m a UAW, which is an under-accumulator of wealth. But I won’t use this number to feel bad. What I choose to do is to think bigger and get better results. If you’re unhappy with what this number tells you, I suggest you do the same. The 50-30-20 Rule Tweaked This is a great way to allocate your monthly paycheck. And it’s super-simple: - 50% of your income goes to paying your “needs.” These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payment, and utilities. - 30% of your income goes to paying down your debt. Once that’s done, this becomes discretionary entertainment expenses.* - 20% of your income goes to future investment. *In the original formulation, 30% go to your “wants.” That’s fine, but I think paying down your debt to zero takes priority. I couldn’t believe how fast my debt disappeared. It took about six to twelve months. But it was gone and gone for good. I’ve run a monthly credit card balance maybe once or twice in the last twenty years. And it’s thanks to this little system. 3x Rule for Buying a House Another one I love and that would keep many a rich people out of trouble, let alone those of lesser means. Never spend more than three times your gross annual income on a house. I’m in the process of buying a house right now and I’m well within this rule. My down payment is ready and won’t empty my account, and my monthly payments are easily manageable. Far too many people only calculate what their monthly payments would be at the current rate of their mortgage. But if you’ve got an adjustable-rate mortgage, that could easily end in tears. There’s no need to overpay for a McMansion. The Normal Distribution (Bell Curve) Finally, we get to simple probabilities. [chart] Again, this is just a rule of thumb. Nothing in finance is “normal.” But this can help you distinguish investing realism from fantasy. Let’s do an example. Let’s say Stock ABC has earned on average 10% per year. But it’s accomplished that with a standard deviation around that 5% average of 2%. If we assume normal returns – a dangerous thing in finance, but we do it all the time – then ABC has a 68% chance of returning between 3% and 7%. It has a 95.6% chance of returning between 1% and 9%. And it has a 99.7% chance of returning between -1% and 11%. Here’s the thing, though: it certainly can crash far below a -1% return. And it may moonshot 45% on the FDA approving its new drug. But the probability of either of those scenarios happening is very low. Knowing this distribution is incredibly important for setting your expectations as an investor, and for also gauging what the market thinks of your potential investment. If you can adjust your thinking to being more probabilistic, you’ll be shocked at how different the world looks. Wrap Up The absolute last thing I wanted to do was to patronize you. But I also don’t want to assume you know things you may not know. So I hope, at the very worst, this was just a refresher of things you may have put on the backburner. But if there is a lot of new material here, I can’t encourage enough to deploy this new knowledge as early and as often as you can. If this is the sort of thing you’d like to see more of, please let me know [here](mailto:feedback@dailyreckoning.com). And if you found this the least bit unhelpful, do let me know that as well. Have a wonderful rest of your week! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com [Send Me Your Mailing Address!]( [Click here to learn more]( The biggest gold bull market in history has just begun. That’s why New York Times best-selling author Jim Rickards has arranged to send his must-read book on gold to any U.S. citizen with a valid mailing address today. [Click here now to see how to claim your copy of The New Case For Gold](. [LEARN MORE]( In Case You Missed It… 3 Ways to Play Gold’s Explosive Rally Greg Guenthner, Editor [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Gold futures are sneaking toward new all-time highs. The holiday-shortened trading week was relatively quiet for stocks. But while equities are snoozing, precious metals are streaking higher – and serious investors need to wake up and pay close attention to this action… Gold futures continue to build on this reignited rally, gaining as much as 12% off the March lows as the yellow metal finally vaults above the mythical $2,000 mark near its all-time highs. As I noted earlier this year, gold has never posted a monthly close above $2,000. Yes, April is still young! But if this momentum continues, we should watch for gold to finally get over the hump. Evidence continues piling up in favor of a huge, sustained move in precious metals. The US Dollar index remains stuck in a downtrend following its September 2022 blow-off top. The buck turned lower again following a February rally and is fading near 52-week lows. You know the drill: dollar down, gold (and risk assets) up. The recent bank crisis is also helping to shift the market narrative to a pro-gold environment. Silicon Valley Bank headlines gained mainstream traction and we’re beginning to see a narrative shift. Will more investors begin to view the economy as unstable and start to seriously consider safe haven investments? It certainly feels as if the tide is turning. Last week, soft jobs numbers started to get some play in the mainstream media. CNBC is even playing into these bearish ideas, cranking out these amazing, bearish soundbites about the slow-moving recession unfolding in the U.S. Many investors overlook the importance of these storylines as a new trend is developing. But I cannot stress enough the importance of Main Street investors and the media buying into the narrative. Every successful breakout needs a groundswell of sustained support from buyers in order to sustain the move. Grabbing the attention of a relatively small group of goldbugs won’t get the job done… With gold futures retesting $2,000 early this week, we’ll soon get confirmation if this is indeed the first wave of a new secular bull run for precious metals. Now, the question is: What will you do to profit from the move? Physical gold is an obvious choice for the longest time frames, as well as an “insurance policy” against any impending macroeconomic doom. But if we do see an extended impulse move in the metals, you’ll also want exposure to miners and other gold-related names through equities. Parking your money in an index fund isn’t going to get the job done. There is precisely one gold miner in the S&P 500: Newmont Corp. (NEM). If you want precious metals exposure, you have to go out and get it. Here are three ways to get started… [“The Situation Is Getting Worse By The Day”]( That’s what the President of the US Chamber of Commerce just said about the supply chain. If you thought the supply chain issues were over, think again… Things are about to get much, much worse. And everything from your local grocery store to your gas station could be impacted. That’s why I’m urging everyone I can to prepare now… [To see the #1 move to make before this problem gets any worse, click here now.]( [LEARN MORE]( - Mining for Gains The precious metals miners are the obvious choice when it comes to capitalizing on an extended gold run. In fact, I like to think of gold miners as an easy way to buy a call option on gold, as they tend to post faster gains during bull runs. But it’s important to understand what you’re dealing with when you decide to buy miners. For starters, there are less than 50 pure-play, publicly traded gold miners trading on US exchanges. All but seven of these have market capitalizations below $10 billion – so we’re mostly dealing with very small companies. It makes sense. After all, miners have been out of favor for more than a decade. Plus, these are mostly bad businesses, especially as we move down to the smaller players. The best way to gain exposure to the group while limiting your risk to individual earnings blow-ups or other issues is through the VanEck Vectors Gold Miner ETF (NYSE: [GDX](. [chart] GDX is currently consolidating above the critical $33 pivot after rallying 30% off its early March lows. If you’re projected hold time is more than a few weeks, pauses like this above $33 offer excellent buying opportunities. - Leveraging Gold’s Momentum Moves If you’re a shorter-term minded trader, you can add some leverage to your gold trading. Obviously, leveraging up adds additional risks to the mix. For starters, timing is even more critical when it comes to playing momentum moves. Buying too early in anticipation of a big move just won’t cut it. You’ll need to watch the market more closely and go into your trade with a concrete exit plan. Even with the added element of timing, you can still pull off quick gains if you capture the meat of gold’s next big move. We’ve already established that any meaningful extension above this $2,000 breakout will bring a ton of extra attention to gold. That means plenty of new traders piling on to capitalize on the next leg higher. You might want to opt for call options on GDX – or even a breakout miner if you’re feeling frisky. There’s also another option: the Direxion Gold Miners Index Bull 2x Shares (NYSE: [NUGT](. This is a leveraged fund that will move twice as far as the miners index – hence the 2x. The main caveat with NUGT is that it’s for trading purposes only. Do not attempt to buy-and-hold this (or any) leveraged fund! Wait for the next breakout and plan a holding time of a few days to a couple weeks to squeeze the most gains out of your trade. [Biden Caught Red-Handed!]( [Click here to learn more]( Biden, AOC and all of their Democratic cronies were just caught RED-HANDED… Selling YOU and every American patriot despicable LIES about [so-called “green energy”](. This is the biggest “SCAM” in the history of this great country. Not only is “green energy” unreliable and inefficient… It’s also [DANGEROUS in ways you didn’t even KNOW](. Today, one man is daring to speak the truth… And revealing the secret to profiting from Biden’s ultimate blunder. [Click here to discover the TRUTH about Biden’s “Green New Scam”…]( And learn how YOU can profit from its spectacular failure. [LEARN MORE]( - Digital Gold I jokingly referred to Bitcoin as fake gold recently, and a few readers gave me some grief, insisting I should instead refer to the flagship crypto as digital gold. Fine. I see how one can make the narrative connection. No, Bitcoin isn’t gold. But I do think it could benefit from the broader “anti-dollar” narrative shift we’re seeing in the market right now. Although Bitcoin has traded like a tech stock since the bear market began in late 2021, it’s not a stretch to imagine it breaking from this relationship and building its own rally independent of the beaten down tech-growth stocks. The move might have already started. Bitcoin has consolidated at and above $28K for nearly a month following its own explosive breakout above $25K back in March. Believe it or not, Bitcoin entered 2022 just below $50K before surrendering to the bear market and losing more than 60% of its value. Will the next move break $30K and produce another $10K-plus run? It’s possible. Maybe add some digital gold to your pocket just in case… Those are just three ways to play gold’s rally, but there are plenty more opportunities you can capitalize off of in order to profit. Let me know your thoughts on gold (or any other topics you want covered) by emailing me [here](mailto:feedback@dailyreckoning.com). Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. 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