The Best Way to Save...

"Save a little money each month and at the end of the year you'll be surprised at how little you have"
Ernest Haskins


Welcome to The Golden Sense! It's 2012 and many people have made New Year's resolutions. People often forget about their resolutions by February. I think most folks would just like to have a happy 2012 with as little stress as possible. Stress is the killer.  New research by the American Psychology Association finds the three things that deliver significant stress in peoples lives are money (76%), relationships (55%), and job stability (49%). Is it any wonder, psychologically speaking, that everyone is so stressed given the economic backdrop?


It is easy to understand why money delivers the most stress. I have a friend who lives in New York City and works as a nanny. As you may know, New York City is very expensive. She actually makes good money but in the past she has saved nothing and spent the extra on a nice cocktail, a cute pair of pumps, or trip back to California. She is 27 yrs old and it recently dawned on her that saving a little extra money would give her some comfort. She decided she wanted to save money for retirement. Like everyone else, she has stress in her life. In her life, she came to the conclusion that there are two things that bring relief: a Manhattan martini and a full retirement account.

She already knows where to get a good Manhattan martini. But how could she get a retirement account that she wouldn't touch? She proposed that exact question to me.


Saving is tricky because there is always the temptation to use your saved money on something that "comes up". If the money is easily accessible, then it ends up being spent. So, I gave her two options.


First option, start a Roth IRA for herself.


A Roth IRA is an Individual Retirement Arrangement that is named after its creator, the late Senator William Roth of Delaware. A Roth IRA allows you to save up money that you can use after retirement. The Roth IRA is considered to be the simplest form of retirement account that a person can have because it provides tax-free growth.


So why a Roth IRA?


First, Roth IRAs are good because you pay taxes now as you contribute to your savings. The reason this is good is because the U.S. Government is on a spending binge and has amounted an incredible debt. This raises the likely possibility that the government will raise taxes in the future. Basically, the idea is to pay taxes now while they are still low and enjoy the money later when taxes might be higher.


Second, Roth IRAs have an early withdrawal penalty. This will help defer my friend from taking out money unnecessarily.


Third, many banks and investment firms have accounts where she can invest in stock funds or gold using a Roth IRA. This is important because it allows her to actually invest instead of relying on the small returns that saving accounts or CD's yield.


A Roth IRA can be set up at most banks or investment firms. Once she gets it established she can contribute money at any time. However, there are restrictions on contribution amounts. There are other arcane guidelines and provisions, but these are the basics. The idea could work for her and she could finally feel good about having a retirement savings.


I then gave option two. Buy gold coins and save them in a personal safe or safe deposit box.


Why gold coins? Isn't this method of saving a little barbaric?


No. It's smart.


First, one ounce gold coins have been around for thousands of years and have proven to be the best storage of wealth over time. The world is currently saturated with fiat currency (money backed by only the promise of an indebted government). Almost all investments are losing value when compared to real inflation. As your money loses value, gold consequently goes higher. Gold is retaining its purchasing power while other investments are declining.


 Second, I recommended one ounce gold coins instead of a gold exchange traded fund (ETF) because my friend will be less tempted to go through the process of selling her gold coins through a dealer. With an ETF it is too easy to cash out and press the sell button on her computer. I recommend buying one ounce Maple Leafs or Krugerrands.


Third, gold is transportable and the gold market is out of the hands of crooked politicians and greedy governments. This is important as we are ascending into uncertain times. Many people have a hard time accepting this, but I wanted my friend to at least flirt with the idea of being financially free.


The choice is up to her. Of course, my influence is small. I hope she finds herself sipping on a Manhattan martini, with a full Roth IRA bank account and a pile of gold coins to boot.


I know this would make her smile. And why wouldn't she?


Sincerely,


T. Norman

When asked what predicts financial satisfaction, more people said having an emergency fund, than said paying off a credit card or owning a home according to a University of Georgia study. That is important when you consider many people ignore the advice of having an emergency fund of 3 to 6 months. Studies find in fact that 43% of households have less than $1000 in liquid savings and 28% live paycheck to paycheck without any savings at all. My advice is to have at least $1000 saved up and buy yourself a pure 1 ounce gold coin along with a few pure 1 ounce silver coins. Then you will be set. Nothing will shake you.

Rebecca and I recently took a vacation in Oahu, Hawaii! We stayed in Waimanalo Beach. It's an amazing beach and it is not as crowded as the rest of Oahu. If you are looking at going to Oahu, I definitely recommend Waimanalo Beach. The beach is 3 miles long and not crowded at all. It's a great place for swimming and getting some peace and quiet on the sand.

Santa Barbara is finally enjoying its annual two weeks of amazing January weather. It's a rare occurrence, but I actually hit the beach last weekend. 75 degrees, clear skies, sunglasses and a tank top. Not a bad look for January in SB.


It looks like the new owners of the local luxury resort the Bacara are trying to make a quick $80 million.

The Pacific Coast Business Times reports-

Six months after Ohana Real Estate Investors bought Bacara Resort & Spa for an estimated $104 million, industry sources say the luxury hotel is back on the market.

According to several Santa Barbara hotel operators, a major international hotel chain recently approached Ohana with an unsolicited inquiry to purchase the 360-room Goleta resort. The offer is estimated at between $180 million and $200 million, almost double the price Ohana is believed to have paid in July.

Industry sources said the talks between Bacara's current owner and the prospective buyer are preliminary and no formal offer has been made. There have been no official negotiations between Ohana and potential bidders, the sources said.


Waimanalo Beach:

The Price of Conduct

"About 70% of all jobs are found through networking"

Welcome to The Golden Sense! 2011 has been quite a year. It goes from the magic of Barcelona to the  joke of the Kardashian wedding and on to Katy Perry's spilt with Russell Brand or how about the tortured Syrian protesters or occupy wall street? The public was captured by the Casey Anthony and Amanda Knox trials, we say goodbye to Steve Jobs and Elizabeth Taylor, while the world saw Qaddafi killed and was amazed with the death of Osama Bin Laden.Yes, it's been quite a year. A year for many financial investors to forget. A year where the economy has slipped and Europe has crumbled.


Much of the news seems like random events or just things that happen. Many describe it as an anomaly or an un provoked event. However, I see things a bit different. I have noticed that events around the world often happen as a reaction to prior behavior or conduct. Sure there are earthquakes and tsunamis that are unavoidable, but what I am talking about is human behavior or a whole countries behavior. I'm interested in learning about conduct that allows me to see potential trouble. I want to use behavior to my advantage. I earned a Bachelor of Science in Psychology during my college years. It has always been of great interest to me. I have learned that psychology is sometimes contestable, however it's often very useful.

A great writer by the name Vedran Vuk who works for the Casey Daily Dispatch had an interesting story to tell. One that resonates for everyone on a personal level, professional level, and at the level of national foreign policy.

Vedran grew up in the Deep South, fights were a very regular occurrence at high school parties, football games, and even in hallways. Most folks are familiar with the stereotype of “Southern hospitality,” but constant fights are also a cultural element of the South. Perhaps this tradition grew out of 19^th-century dueling culture. Who knows?

However, in high school one can’t avoid them all. And one night, Vedran got into a fight with another kid named "Jim". Vedran didn’t start it and wasn’t looking for trouble. To make a long story short, Vedran was clearly in the right, and Jim was drunk and in the wrong. Unfortunately for Jim, his inebriation made him quite a poor fighter, and Vedran gave him quite a whoopin’, as the local vernacular puts it.

Justice served, right? Jim was in the wrong and got a beating. Well maybe; but unfortunately, right or wrong doesn’t really matter when it comes to fighting. Three months later, Vedran was at a house party and saw the same guy. Vedran didn't want to start any trouble, so he tried to avoid Jim as much as possible; but Vedran noticed Jim and his friends eyeballing him and whispering. There were three of them, and Vedran's regular crew of close friends was nowhere in sight to back him up. As the party went on, Vedran caught the drift from overhearing a few words here and there: They were planning to jump him at some point.

Vedran figured his chances of avoiding a fight were pretty slim, so he walked up to the guy and said, “Hey man, I heard that you guys want to beat me up. Look, we fought the other night, but I really have nothing against you. In fact, I’ve got a six pack of some good beer. If you and your friends would like to have one, that’d be fine by me.” Jim didn’t see it coming at all and had no clue how to respond at first. Then Jim and his buddies took the offered beers, and they talked for a few minutes and came to peaceful terms. They weren’t great buddies or anything afterward, but the situation was defused.

Vedran had friends in high school who took the complete opposite route – they constantly got into fights. And the more fights they entered, the bigger their problems became. Many of them would win almost every single fight, but it nearly got to the point where they couldn’t attend any social gathering without a situation like the one Vedran faced. Someone somewhere was always looking to beat them up. It created an endless cycle of more fights and more enemies.

A lesson can be learned on a personal level. Fights always bring resentment. Hopefully, your opponent doesn't become a business associate or a potential vendor to your company.

On a business level a lesson can learned. In the past giant companies such as Microsoft and Google have acted like the 500lb Gorilla in the negotiating room and stuck it to companies and potential entrepreneurs rather than work out deals. Today, these two companies face a barrage of attacks by competitors and individuals who want to deal with "preferred" companies such as Apple. Sure, it's the way business goes, but different paths yield different results.

Then there is foreign policy. There’s no doubt the United States has kicked some a$$ in the past, but at what price? Many countries tiptoe around the US, as if afraid to catch the federal government’s military ire, but at the same time they secretly plot to strike in case an opportune moment presents itself. And within the US, people now have to constantly watch their backs, as they’re monitored nearly everywhere, from scanners at airports to wiretaps on phone calls to sifting through email looking for “suspicious” words and phrases.

 This didn’t happen because we’re necessarily wrong – that’s just the way fights work.

The current strategy seems to be to fight everyone all the time and win every single battle. If a government can do that over the next hundred years, then that might be a reasonable security strategy. But anyone who’s been in a high school fight knows that this is a flawed strategy. It leads to either a life of paranoia or eventually being caught outnumbered in a dark parking lot, metaphorically speaking.

It boils down to this: the more people you knock out, the more people will be looking for revenge.

The story above is meant to be food for thought. I have a feeling some of my hawkish friends will jump all over me about this one. It's OK, I wrote it for them.


Until next time,
T. Norman

The year end numbers are in!!!!

 Check below to see how you did.


Actual values are courtesy of Shadow Statistic.

	12/31/2011	12/31/2010	2011
	values	values	gain (loss) %
Gold	$1,566.00	$1,410.25	11%
Silver	$27.81	$30.63	-9.20%
Dow Jones average	12,217.56	11,577.51	5.50%
S&P 500	1,257.60	1,257.64	0%
NASDAQ composite	2,605.15	2,652.87	-1.80%
US$ index	80.58	79.27	1.70%
Euro currency	1.2952	1.3385	-3.20%
10 year T-Note yield	1.87%	3.31%	-43.40%
Commodity index	305.3	332.8	-8.30%
Crude oil (NYMEX)	$99.06	$93.53	5.90%
Official CPI	3.40%	2.60%	30.80%
Actual CPI	6.60%	5.60%	17.90%
Official unemployment	8.60%	9.50%	-9.50%
Actual unemployment	22.50%	22.40%	0.40%

Below are the last day of the year quotes for gold.


2000 -- $273.60
2001 -- $279.00
2002 -- $348.20
2003 -- $416.10
2004 -- $438.40
2005 -- $518.90
2006 -- $638.00
2007 -- $838.00
2008 -- $889.00
2009 -- $1096.50
2010 -- $1421.40
2011 -- $1566.80

Gold has continued its incredible bull market run. I started investing in gold in 2006. The reason I invested in gold back then is exactly the same reason why I bought more this year. Nothing has changed.

Do yourself a favor. Buy gold to retain your purchasing power. The price it's quoted in is irrelevant.
 

References:

http://www.caseyresearch.com/cdd/foreign-policy-lessons-high-school?active-tab=archives