The Power of Gold

“It glitters and shines, it badgers and blinds” – Dan Fogelberg.

Lately, I can’t get gold out of my mind. Perhaps it’s from the unrelenting barrage of gold commercials on the tube, in the print media and almost every time I pull up an app. And I wonder if William Devane really does buy gold.

Here are some thoughts I’ve jotted down about gold.

Jot #1 – Why is gold so valuable? Gold is one of the heaviest elements found on earth right up there with platinum, uranium and silver. But, gold and the other heavy elements weren’t made on earth. Until recently astronomers and astrophysicists believed these heavy elements were forged in the death throes of a huge dying star (super nova) where the temperature was approaching a hundred billion degrees. It had to be that hot for the atoms of lighter elements to fuse into the heavier ones. Can’t happen on earth. The explosion of the super nova flung gold and other elements far out into the universe where they eventually became part of the formation of the earth’s crust. New theories now suggest that gold was formed when two super hot neutron stars collided. Whatever the circumstances these cosmic events only lasted a few seconds so there wasn’t a vast supply of gold created, thus, making it extremely rare. In an article in Forbes earlier this year Warren Buffett said the world’s entire gold stock would fit comfortably within a baseball infield if melded together to form a cube. Others say that all the gold mined from the earth could be stored in three Olympic sized swimming pools. Who knew! Scarce and valuable.

Jot #2 – What’s the best way to own gold, you ask. This is a no-brainer. Physical ownership. My first choice would be on your property in a very heavy safe. Perhaps at a nearby bank in a safety deposit box, maybe. Your gold should also be in a manageable form – one ounce pieces whether coins or bars. Leave the heavy bullion to Auric Goldfinger. In a futuristic “Water World” scenario those one ounce coins could come in handy. Don’t ever own a paper certificate that states you own gold stored elsewhere.

Jot #3 – Is it a good idea to have gold in an IRA? This is a tough call, and there are strict rules. You can have physical possession of certain types of gold coins in a self-directed IRA, but bullion must be placed with a qualified custodian, bank or trust company. I still like the idea of physical possession. IRA ownership is too complicated.

Jot #4 – Most everyday people who buy gold, keep it, and the gold ends up with the next generation. Remember the news article earlier this year about the deceased gentleman in Las Vegas with millions of dollars of gold coins in his seemingly modest home? His mother had lived with him before she died and probably bought most of the coins. Why would you want to sell a rare & shiny element anyway?

Jot #5 – I read an article about gold is being used more and more in a variety of high tech products in addition to Rolex watches and jewelry making gold a “consumable” as well as a medium of exchange. This certainly would drive the price of gold up in the future.

Jot #6 – For my next birthday I want a custom solid gold iPod with the complete Beatles library on it. No other tunes. 24ct, please which is 99% gold. None of the 18ct. stuff which is 75% gold.

OBAMACARE – Thoughts Leading Up to October 1st

Good Morning!

I was thinking about the fast-approaching October 1st enrollment date for ObamaCare and the implications for individuals with private healthcare policies or no health insurance at all. I jotted down some quick thoughts. Here they are:

Jot 1 – Enrollment in the health insurance marketplace (exchanges) can be accomplished either online, by mail or in-person.

Jot 2 – If you decide not to purchase health insurance, you will pay the piper a minimum penalty on your 2014 Form 1040 of $95 but no more than 1% of your total income. Let’s say the penalty is $95. This is the penalty for the whole household regardless of the number of people in the household. It’s not $95 per person. There are some exceptions.

Jot 3 – If you do buy an insurance policy for yourself and family, you will get a refundable tax credit on your 2014 Form 1040 which could be as high as $5,548 but will average $2,672. You will get a check. I have pulled these numbers from various studies. But, keep this in mind. If your total income is greater than $94,200, you are out in the cold. There will be no tax credits, no nothing for you. Yes, the premiums on your policy are going to be higher. Sorry for the bad news.

Jot 4 – Be logical in the assessment of adequate insurance coverage you need to protect your family. At a minimum you should have some type of catastrophic health insurance policy to cover the terrible and unexpected happenings.

Jot 5 – While I’m at it, depending on your age, it’s not a bad idea to have some type of disability and long-term care insurance policy to help pay the medical costs of nursing homes or incapacitation. These policies can be reasonable if you are in good health.

My comments are just a roadmap to give you the mindset for exploring your options. It’s a whole new world out there.

Pension Plan Liabilities

I’ve noticed that many cable news channel reports as well as reports in print media have been using the term “unfunded” to describe pension woes of municipalities. There are actually two terms that should be used to describe the pension liabilities:  “unfunded” and “underfunded”.

An unfunded liability does not mean that the plan is underfunded.  There is nothing intrinsically wrong with having an unfunded liability.  Unfunded liabilities are a natural component of municipality funding, similar to a mortgage on residential or business property.

Underfunded means that the pension plan sponsor of the municipality has not made sufficient contributions to fund the present and future liabilities of promised benefits.  In other words the municipality has not been making the “required annual contribution” to the plan perhaps for several years, or has increased benefits without appropriate funding.

Any comments?