Gold, Silver, and How Low Interest Rates Affect You

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:00:00]

BRIAN:  Welcome back to Safer Retirement Radio.  I’m your host Brian Decker.  We’re gonna cover a lot of information today, but basically on two topics.  One is gold and silver.  Things are happening right now that are very important.  We’re gonna talk about that.  And number two, we’re gonna talk about low interest rates and how that affects you.  Because Fed Chairman Powell talked about how low interest rates may be here to stay.  Well, we’ll just say the common sense.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:00:34]

BRIAN:  When a country owes 23 trillion and just added four trillion year-to-date, it’s in their best interest to keep the interest rates as low as possible for as long as possible.  Some of the G7 nations, like Japan and others, have gone negative with their interest rates.  That’s never happened in the United States yet, and it looks like we’re going there.  I shared the stage with Roger Ibbotson last summer when we talked about how this is, for several reasons, the most difficult time to retire ever in the history of our country.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:01:16]

BRIAN:  Because of three reasons.  One is we’re living longer than ever before, which means that you’ve gotta have your money last a longer period of time, but with two, no help from interest rates, because interest rates are getting close to zero.  The 10-year Treasury right now is 0.7.  0.7.  The lowest it was before in the last hundred years was 1940 when it hit two percent.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:01:45]

BRIAN:  We hit two percent a year ago and then we kept going lower.  Now we’re at 0.7.  And I’ll continue that thought.  Third is the stock market is about to enter a flat market cycle.  In the last hundred plus years, stocks move in cycles.  They’ll go up for about 18 years and then they’ll trade flat for about 18 years.  And we are about ready to enter a flat market cycle.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:02:16]

BRIAN:  So, if you are getting no return, like for example, from January 1 of 2000 to, what is it, around October of 2016, the markets were pretty flat.  And so, when you’ve got that long a period where you’ve got no return and you have low interest rates and you’re living longer, you’re in a tough spot to try to get your portfolio to give you the income that you need for the rest of your life.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:02:53]

BRIAN:  It’s unprecedented where we are right now.  So, before we start with gold and silver, I’ll start with low interest rates.  When you’ve got Abraham Lincoln earning five and half percent on a CD, a five or six year CD, that’s what it was like back then.  That was the norm.  Now, seven to 10 year CDs are at 1.2 percent.  How do you live and survive on 1.2 percent?

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:03:22]

BRIAN:  You’ve got some options.  And you’ve got to know what those options are.  As fiduciaries at Decker Retirement Planning, we draw heavily on a database called WINK, W-I-N-K.  It allows us to see what the highest earning principle-guaranteed accounts deliver for banks and insurance companies.  So, for example, on cash, on money markets, right now if you’ve got your money in several banks, the banks are paying almost zero.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:03:56]

BRIAN:  0.0-something.  Credit unions, you’re proud to get 0.7.  Well, we as fiduciaries have done our homework for our clients and want to tell you that there’s seven or eight banks that are earning 1.7 or 1.8 percent.  I just can’t believe.  I gotta pinch myself to think, “Why is that a great rate?”  Well, it is.  It’s a great rate for cash because that’s higher than a 10-year CD right now.  So that’s very important information.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:04:26]

BRIAN:  We also know that on three to five, five to seven, and seven to 10 year investments, that there are investments where you’re able to get a principle-guarantee and still earn, on average, around six percent.  That is very, very important.  This is a reason for you to call us at 833-707-3030.  Schedule a 15-minute call with one of our planners and find out how you can get, on cash, around 1.7, 1.8 percent.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:05:02]

BRIAN:  And on three to five, five to seven, and seven to 10 year principle-guaranteed accounts, to try to get that interest rate back up to where it should be, which is around six percent on seven to 10 year money, and three to four percent on the shorter-term instruments.  You should not be locking in low interest rates, for obvious reasons.  You’re almost earning next to nothing.  But the bigger problem when it comes to lower interest rates has to do with bond funds.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:05:35]

BRIAN:  When interest rates are this low, you have two major problems with bond funds.  One, you’re hardly getting paid anything.  And number two, when interest rates do go up, if they do, you will be losing significant principle when interest rates go up.  Let’s give you an example.  Let’s say that the 10-year Treasury is at 0.7 right now, which it is.  Let’s say that rates for some reason go up to 1.2 percent.  That’s over a 40 percent hit to principle on your bond funds when interest rates go up.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:06:11]

BRIAN:  So, we wanna make sure that if you think that your bond funds are safe, and you’re being told to put your safe money in bond funds, you need to know about interest rate risk.  Interest rate risk is the amount of money that you lose when interest rates go up.  Now I mentioned, just a couple minutes ago, that it’s in the best interest for the United States government and the Federal Reserve to have interest rates go to zero and possibly, like some G7 nations, go negative.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:06:46]

BRIAN:  Fed Chairman Paulson talked about that this week.  And what he said is that short-term rates or low interest rates are here to stay for quite a while.  They’re positioning expectations by saying that, but they’re also trying to talk the dollar, the US dollar lower.  As an export nation, Japan, if they sell cars and they do.  Let’s use Toyota as an example.  And we as an export nation sell cars, and we do.  Let’s use General Motors.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:07:20]

BRIAN:  If we’re selling SUVs, competition head-to-head.  If the Japanese Yen is lower and is going lower and Japan as a country has a strategy to lower the Japanese Yen, then you can buy Toyota SUVs cheaper than the same car from General Motors.  They have a competitive advantage by getting their currency lower.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:07:54]

BRIAN:  The United States has not done that.  So, in fact, we have the US dollar at a very high point right now.  Here we are, Mid-May, and if we can get our US dollar lower, then we can sell anything, widgets, let’s use that example, cheaper than a competitor.  So, it’s in our best interest as an export nation to get the US dollar lower.  Well, now there are dominoes that fall.  Because one of the things that happens with a declining US dollar is commodity prices typically go up.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:08:29]

BRIAN:  Specifically, precious metals.  Now, if you’re right on precious metals, then you can make a lot of money.  For example, look at the price of gold for 2006 to 2008.  During that three year period, gold prices almost tripled.  And you made a lot of money.  But if you bought into gold end of year ’08, so December of ’08, to present, you’ve made no money.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:09:34]

BRIAN:  It’s gone down and then it’s come back up.  So, you need to be right on gold and silver.  There’s several strategies to do this.  One strategy, if we’re right, and by the way, I’ll read some information here about why we think that gold and silver will be going higher.  Many precious metal investors watch gold to silver ratio for clues about the relative price of gold and silver.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:10:09]

BRIAN:  The gold-silver ratio currently sits at 101, meaning it takes 101 ounces of silver to buy one ounce of gold.  That ratio is close to an all-time record high.  Bank of America came out this week and said they expect for gold to go to 3000 dollars an ounce in the next 18 months.  From where it sits right now, about 1700, that’s almost a doubling of price.  So, what happens to silver if gold prices almost double?

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:10:45]

BRIAN:  That means that silver would go and be, if you kept it at 101, around 40, and if we got a better price action out of silver, that would be at a gold to silver price ratio of about 40.  That would be 75 dollars a share for silver for where it sits right now around 16 dollars a share.  Let me say that again.  Silver right now is at 16.  If gold does what Bank of America says it will do, and the Fed keeps rates low, possibly negative, the US dollar goes down, gold and silver go up.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:11:17]

BRIAN:  And there’s a very bullish environment for gold to almost double, but for silver to get much more bang for your buck.  Silver going from 16 to 75 is where you would make a lot of money.  You can buy the precious metals.  There’s three ways that you can do this.  And hopefully do well as gold prices and silver prices go up.  Based on our expectation.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:11:58]

BRIAN:  You can buy the gold and silver stocks.  So, if gold triples, gold stocks do multiples of that.  Gold stocks, if you’re right on the metal, have leverage to where they go up a lot higher.  If you’re wrong, you get stung harder.  If you’re right, you’re rewarded much more.  The third way, which is what we do for our clients, is we use a two-sided strategy.  So, that if gold and silver do what we expect, then computer trend following models will keep our clients in that trend as long as the trend goes higher.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:12:29]

BRIAN:  Let’s say that we’re right.  And there’s a three year bullish period where gold and silver prices do well, and they go up like they did in ’06, ’07, ’08.  We’re very rewarded.  But because we’re using computer trend following models, there is significant risk that after a three-year run, that gold and silver prices drop off like they did from ’08 to present at 2020.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:13:01]

BRIAN:  Rather than have dead money in your portfolio for 12 years, you’re able to do well because the trend in gold and silver goes higher and it goes lower.  Why not make money as gold and silver go up and make money again as gold and silver go lower?  This is new technology, new information to a lot of investors.  These accounts carry less risk.  Let’s define risk.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:13:33]

BRIAN:  Risk is defined as volatility or standard deviation.  Or losing money.  Let’s just call it that.  When you have gold and silver people or investors that haven’t made a dime in the last 12 years, and you’ve got our gold and silver models that are averaging over 20 percent a year net of fees, this is something that we hope that you call us.  Find out about and see if there’s a place in your portfolio for these models.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:14:07]

BRIAN:  Because the stock market is a two-sided market.  It goes up and it goes down.  Gold and silver are two-sided indexes because they go up and they go down.  You have significantly less risk, at least historically, having a two-sided strategy in a two-sided market.  So, if this is of interest, give us a call at 833-707-3030, and see if there’s a fit for the two things that we talked about today.

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:14:37]

BRIAN:  One is risk models and using computer trend following models to get on board for a potential big move in gold and silver.  But if you’re wrong, if we’re wrong, and gold and silver prices go down from here, then using a two-sided strategy in a two-sided market brings that risk a lot lower.  And if Fed Chairman Powell is right, and his focus is keeping interest rates low, why take that hit on your funds?

 

RR S4 E4 GOLD, SILVER, AND HOW LOW INTEREST RATES AFFECT YOU [00:15:16]

BRIAN:  Especially in bond funds where you have significant interest rate risk.  Why not make three times what the CD rate is and find out about these other models that are offering and historically averaging around six percent for principle-guaranteed rates of return?  So those are the two that we wanted to cover today.  Glad you watched and joined with us.  Again, any questions on these, give us a call at 833-707-3030.  This is your host Brian Decker signing off for Safer Retirement Radio.  Have a good day.

 

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