Baby Boomer Trend Update: Social Insecurity
One of the great Ponzi Schemes in the U.S. is Social Security, a system that from the start was designed to inevitably fail. The Roosevelt administration made a big deal about Ida Fuller, who was the first recipient of the Social Security program. She paid a whopping $24.75 in order to receive her benefits of $22,888.92. Talk about a return on investment, she saw a gain paid for by other taxpayers of 92,380%. This is typical of any pyramid scam. The people at the top put very little in and receive the most in return, the returns get smaller for future generations, however it “works” up until the point that there are too many people at the top. Social Security isn’t there yet, however we did recently cross a line, currently a married couple retiring will have put in a lifetime amount of $598,000 in Social Security taxes during their careers. What they can expect to collect though is about $556,000 in benefits, not exactly the kind of return ole Ida Fuller saw.
Editors Note: Many government stooges will try and claim that Social Security isn’t a Ponzi Scheme, to that, we respond with…You’re right, Charles Ponzi NEVER forced anyone into his scheme, all of his victims volunteered, he never demanded a percentage of their paychecks or threatened to put them in jail if they didn’t comply with giving him money.

Looking at the U.S. Federal Budget for 2011, revenues were $2.3 trillion and spending was $3.6 trillion. However, here is the kicker, mandatory spending, things like Social Security, Medicare, and other mandatory programs the government has promised to pay, came out to $2 trillion. As you can see from the chart below, nearly all of the actual revenues in the U.S. were used to fund mandatory spending. Social Security currently takes up 20% of our budget, Medicare & Medicaid 23%, and other Mandatory programs 13%. But remember, we are borrowing over 40 cents for every dollar we spend. If you look at money in and money out, Mandatory Spending uses up 87% of U.S. revenues.  

According to Boston University, as well as many other credible sources, the actual U.S. debt isn’t $16 trillion, it is around $200 trillion.

The difference between now and all previous downturns is that we are starting from a much weaker position. Imagine in the near future if we have a crisis, war, or some other national emergency, the people will demand government aid as they have been conditioned to think this way, the government will respond as the politicians have been conditioned to believe this is their role, only they will respond with a government that already has $200 trillion in commitments and $17 trillion in official national debt. The next President, no matter who it is, will see the official national debt cross $20 trillion. In fact, by the time they run for re-election in 2016, we are looking at $23 trillion in debt. believes we are approaching some key psychological numbers here, and with the baby boomers entering their golden years, the pressure to the system may become overwhelming. As tax revenues fall from them reducing their spending and retiring out of higher income positions, entitlement spending will soar. We are clearly nearing a time where the market will have to accept reality. 
The Force of the Baby Boomers and Government Response Creates an Epic Opportunity for those Awake
We believe this will create new opportunities for trend investing and short term trading. You will also see many opportunities in real estate rental properties (especially 55 and older communities), hard money lending, and the desire for alternative investments like gold.
Right now we are very bullish on the mining sector, agriculture industry, water companies, energy, health-care (focused on the elderly) and physical precious metals. For those looking for a good time to buy the metals, we think now is a great time, there are a few catalysts that we see coming in the next few months:
    1. More QE
    2. Printing from China and Europe
    3. U.S. Credit Downgrade
There are also some wild card events out there like a new war with Iran, Greek default, or a physical silver shortage.
When it comes specifically to the beaten down mining stocks, we believe you need to be a stock picker. The over all sector is looking at a 6-18 month depression where more than 75% of them will likely not even exist. Just last week we were speaking to a mining CEO who told us that he is receiving calls everyday from juniors who want to sell for less than their land and equipment are worth. 
We encourage all to take this advice from the book Security Analysis written by Benjamin Graham and David Dodd.
“Our search for definite investment standards for the common-stock buyer has been more productive of warnings than of concrete suggestions. We have been led to the old principle that the investor should wait for periods of depressed business and market levels to buy representative common stocks, since he is unlikely to be able to acquire them at other times except at prices that the future may cause him to regret.”