Sep 28

## The Craziest Gold Forecast

Gold is now at \$1600 per ounce. I’ve stated before, I believe it’s in bubble territory but there are those who think gold is going higher, not just a bit higher, but to \$57,000 per ounce. I don’t want to link to such forecasts,  just google ‘gold to \$57,000’ and you’ll find a number of articles on this.

Let’s look at how such a forecast isn’t just absurd, it’s mathematically impossible.

The total wealth in the world is approximately \$125 trillion. This number is a few years old, but close enough for our purposes.

The total amount of gold mined to date is approximately 5 billion ounces, or \$8 trillion at today’s price. If gold were to go to ‘only’ \$25,000 per ounce the value of gold alone would be as much as everything else in the world. All stocks, cash, bonds, real estate, etc. Would it make sense that such a thing could be possible? Yet, these people sound so convincing, one wonders if they believe what they are saying, or if they are just scamming us all. Have they done the math?

written by Joe \\ tags: , ,

Jan 13

## Equity Indexed Annuity #Fail

In the past, I’ve written about Variable Annuities and how I don’t care for them for many, many reasons.

Another product I put into a similar category is the Equity-Indexed Annuity. These are products that claim to provide “equity-like returns” with no possibility of loss. Really? Years ago, I analyzed the prospectus for one such product and found that what they called an Equity-Like return was anything but. The calculation for a given year’s return was taken by adding the 12 monthly returns, with a maximum credit of 2% in any one month. Then, if the year was positive, this was your return. The seller of this product said that in good years you could make as much as 24%, but with zero risk on the downside.

Now, in the two years, 2009 and 2010, you would think that since the index (S&P 500) rose 52% you’d have seen at least in the mid to high teens in your account, right? Hardly. You see, 13 of the 24 months were more than 2% up. In fact, four of those 13 months were over 7% to the positive, so that these 13 months of highest gain averaged 6%/mo. Since each of these months’ returns gets cut to 2%, that’s 4% * 13 or 52% skimmed off the top. The punchline is that in two excellent years, the EAI return was zero based on the crediting equation used. Now, you may ask, what about 2008? Well, zero there as well, of course. Which prompts the question – with high fees, 2%/yr or greater in most cases, and zero returns in stellar years, why botther with these products at all? Why not just stick to treasuries if you are market-phobic? Why, indeed.

Joe

written by Joe \\ tags: , ,

May 27

## Money Merge Account Analysis Pt 34

Joe

** Eventually, it did come down. Some of the messages I left were removed, but others chimed in, and with no comment back to us, it was simply removed.

written by Joe \\ tags: , , , ,

Mar 03

## Money Merge Accounts

My March feature article discusses Money Merge Accounts. This system came to my attention a few months back in the form of a question on a usenet newsgroup. Since then, I’ve gotten as much information as I’ve been able to uncover and am staying with my gut reaction, that if one has the money and desire to pay their mortgage off early, they would be best off doing it on their own. I’ve also spent some time and created an MMA spreadsheet which will let you enter your own number and decide for yourself. Add a comment to request a copy. If it helps you save \$3500, please donate \$35 to your favorite charity in my name.

In other feature articles, I’ve discussed Bi-Weekly Mortgages, and the general topic of pre-paying one’s mortgage. The larger message here is that there are many approaches to take, but whatever you choose to do needs to be in the larger context of the rest of your financial situation.

Note: I’ve added a page on the sidebar with links to sites that discuss MMA in greater detail.

JOE

written by Joe \\ tags: , , , , , , , ,