In time for Christmas gold has moved up above $1,500 and as of writing is trading north of $1,510.
I had previously written about how gold has been on the receiving end of a severe price drubbing. Not so now.
The fundamentals of gold are very strong. Gold was is a downward channel and this strong move upward could be a continuation of the gold bull market that began at the end of 2015/early 2016.
The $1,450 level looks like strong support. Gold would need to break through the $1,520 and $1,545 levels to retest the six year high set 4 September of $1,566.
In what I describe as an anti-Black Friday sale, Goldmoney announced on the 29th of November a new $10 per month minimum storage fee.
This goes into effect on 1 January 2020.
Goldmoney (formerly BitGold) already had storage fees, but they were proportional. Now, smaller accounts might not make financial sense anymore.
I’ve determined that Goldmoney doesn’t make sense for me anymore.
Goldmoney Fees are Too Darn High
It is always important to understand the fees a financial services company charges, and Goldmoney has plenty. There is a 0.5% gold buy/sell fee and a $20 wire transfer fee for withdrawals (funding can be free with EFT).
Storage fees vary by location and the lowest cost locations are .01% per month (London, Hong Kong, Zurich, Singapore).
However, this new a $10 per month minimum fee is a killer. In order to pay just .01% per month, you’d need to have at least $100,000 in gold stored.
As a simple example, $10 per month fee on $120 worth of stored gold would be equal to the value of the gold stored after just one year.
Some other considerations, which in my view don’t help enough, are that Goldmoney does offset the minimum fee with commissions paid and the accounts are insured.
However, your homeowners insurance or renters insurance might cover your safe deposit box as well.
If you have a larger account, insurance is important to you, or conduct a lot of transactions, Goldmoney might make sense.
Goldmoney Doesn’t Make Sense for Smaller Accounts
I was previously an advocate of this low cost way to store physical precious metals around the world. With this new development in fees I have decided to withdraw my endorsement of Goldmoney.
Because of the smaller amount of Gold I have with Goldmoney, I’ve elected to sell all my gold in their custody. At this time I have no intention of doing business with Goldmoney again.
The insurance is an important consideration, however, a safety deposit box or other secure location is going to be much more cost effective for the small investor.
If you have ever had a stock broker chances are it will soon be Charles Schwab.
Back when I traded more actively I tried different brokers. I had a Scottrade account a Thinkorswim account and I also had a Evertrade account. I never singed up for a Charles Schwab or a TIAA account but I now (or perhaps soon will) have both. TIAA bought Evertrade and Chuck Schwab is in talks to buy TDAmeritrade.
Of course there will doubtlessly be some regulatory hurdles in place to ensure the acquisition won’t go through unless the right palms are greased.
Brokerage Gobbling
There has been a lot of consolidation in the brokerage industry over the years with one gobbling up another. Thinkorswim and Scottrade were both gobbled up by TDAmeritrade (which is an amalgamation of other acquired brokers like TD Waterhouse, Ameriprise, Fiserv and others).
Well there is always a bigger fish and now Charles Schwab is in talks to buy TDAmeritrade.
It isn’t clear how and even if consumers will benefit from all of this consolidation. While TDAmeritrade, Schwab and others recently announced commission free trading, it seems as though once a lot of the competition is eliminated the remaining 3-4 brokers will have more power to charge traders fees with few alternatives.
Stock valutations in the United States are no longer driven by profits, future earnings, productivity or any other free market measure of value. Instead they are controlled, in practice by President Donald Trump trade war tweets and Fed Chair Jerome Powell’s comments about future interest rate levels.
These two economic central planners met on Monday the 18th to talk about “Everything”.
Trump
Trump has already made clear he wants negative rates and more quantitative easing. He mentioned discussing negative interest rates with Powell.
“Trump called the meeting ‘very good & cordial,’ adding that ‘everything was discussed,’ including interest rates, negative interest, low inflation, easing, dollar strength, and its effect on manufacturing, trade with China, the EU ‘& others, etc.'” (Emphasis added)
Powell sounded like a 3 year old parroting some rehearsed line, stating monetary policy will be set to support maximum employment and “stable prices”.
The Fed’s target for price inflation is 2%. Which means that the value of a dollar will be cut in half in about 36 years. This is hardly what I would consider to be price stability.
On the topic of “maximum employment”. The unemployment rate is at a half-century low of 3.6%. To have a lower unemployment rate you have to go back 50 years to 1969.
Do interest rates need to be below the level of inflation in order to support maximum employment?
A Health Person on Life Support
Interest rates are at 1.75% and central bank balance sheet growth has resumed. These are the kind of extraordinary life support measures seen during economic crashes and recessions.
If the economy is healthy, vibrant, growing and strong you don’t need to pump it up with stimulants and preventative measures. Yet these extraordinary measures have been going on for a decade.
Say you have a patient in a hospital. The doctor says they are fine and doing great. However, we’re going to pump them full of antibiotics, keep a morphine drip and IV going, and hook them up to an iron lung, “just in case”.
You would rightfully be suspicious of that doctor. If the patient is fine then why do they need all of those extraordinary life preserving measures?
It seems clear to me the Fed is keeping interest rates low for some reason other than price stability or supporting maximum employment.
Within the past month or so online marketplace sites like eBay and Etsy started collecting sales taxes. This phenomena was a result of a flurry of states passing legislation targeting these types of sites. More states will inevitably follow.
I started noticing back in 2017 that more and more of my Amazon.com purchases have required the payment of sales taxes as well.
Source: https://en.wikipedia.org/wiki/Amazon_tax
But this recent scourge of legislation is tied to a 21 June 2018 supreme court case: South Dakota v. Wayfair, Inc. in which the court changed their mind about state’s ability to collect sales taxes on purchases from other states.
Online Sales Taxes are Bad for Consumers
These online sales taxes are just in time for the busy Christmas shopping season. Among the many benefits of online shopping was that it was normally sales-tax free. Tax savings are partially offset by having to pay for shipping. But in many cases, depending on the price, size and weight of the item being purchased, this was less than the taxes would have been.
Online sales taxes means unhappy consumers
There are fewer and fewer ways to shop online without paying sales taxes.
Online sales taxes are a regressive tax hike on the lower and middle classes who spend a higher percentage of their income on goods and services.
Sales Taxes Saps the Motivation of Producers
Never mind that the company making the sale pays taxes on their profits. Forget the buyer paying for the item is doing so with money on which they paid income taxes. These taxes aren’t enough for states that want to charge sales taxes as well.
There really is no limit to how big a slice of cake the government thinks they should get.
“Online sales taxes are a regressive tax hike on the lower and middle classes who spend a higher percentage of their income on goods and services.“
A person buying ingredients and spending time baking a cake ought to get the most benefit from that labor. At its most extreme, not being able to benefit from the fruits of one’s labor is slavery.
Most people enjoy having goods and services so it makes sense to live in a society that motivates and incentives people who produce to goods and services.
Societies that punish producers of goods and services tend not to have a lot of goods or services.
At a certain point people start to feel that the government is getting too much of the cake. A baker might decide they aren’t benefiting enough from their labor and they stop making cakes.
Bad for Small Business
One of the biggest burdens besides the consumer is the small seller. Companies like Amazon.com have entire legal and accounting teams that can navigate the myriad of state, federal, and local taxes.
Big conglomerates can afford systems that track how much is due based on the location of buyer and seller. Smaller players are less able to manage the complexity the number of tax jurisdictions an online seller would need to be responsible for.
All in all online sales taxes benefit the government and to some extent large businesses. Online sales taxes hurt smaller competitors who are less able to deal with managing tax collection on behalf of the government. It’s bad for consumers and small businesses.
Just One More Problem in the Economy
There were already numerous economic headwinds facing the United States and this is one more. While many States are essentially insolvent, Illinois being one of the worst offenders, it makes sense that they are desperate to increase money flowing into their coffers to offset the unsustainable promises they are obligated to pay out.
However, until there is real reform of government spending, increasing taxes will ultimately hurt the lower and middle class and shrink the economic pie being divided up, resulting in everyone being poorer.
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