How to Retire a Decade Early

The stock market’s got ants in its pants.  After crashing 326 point on Monday, the DOW jumped up 72 points on Tuesday.  Then, on Wednesday, after dropping 100 points early on, the DOW finished the day about where it started.  Yesterday, it was back to the races…the DOW ran up 188 points.

Watching these wild price swings can put a retirement investor on edge.  Another decline like 2002 or 2008 could mean another decade – or more – of the daily grind.  What a revolting thought.  For what could be worse than another ten years of the corporate slog?

We don’t mean to be gloomy.  But, the fact is, all the fun’s been taken out of doing business these days.  Creativity and gut style management has been replaced with spreadsheets, charts, and margin metrics.

Doing good work, delivering for clients, and earning a profit is no longer acceptable.  Performance must be tracked, measured, and managed in such minute detail that the actual work is a secondary factor.  Do you know what we mean?

There’s a table for everything.  What’s more, there are so many tables…there must be a table of tables to track all the tables.  Moreover, these tables must be constantly updated and contemplated.  Processes must be improved.  Lessons learned bulletins must be blasted out to the whole organization before the roosters’ crow.

Big Bets

It really is crazy how most people’s retirements are predicated on the stock market.  This will undoubtedly result in a disappointing golden years for many.  But what choice do people have?

A regular savings account is continuously eroded by the Fed’s inflation.  Social Security is technically insolvent.  Property investing has its own drawbacks.  Yet people must save and grow wealth somehow…and the 401(k) has become the primary retirement savings for most Americans.

Here at the Economic Prism we encourage workers to take advantage of the 401(k) plans that are available to them.  However, we also believe this shouldn’t be their only means of retirement savings.  Building and growing wealth outside of a 401(k), even if you can only contribute a little each month, is a necessity.

However, you must think differently about the wealth you are growing outside your 401(k).  Buying large, well run dividend paying companies at a good price, and reinvesting those dividends will anchor and grow your stock portfolio.  But a small percentage of your investment money – maybe 10 percent – should be set aside for taking big bets.

What do we mean by big bets?

Well, we don’t mean buying and forever chasing the next big thing.  Nor do we mean day trading in and out of positions.  What we do mean, though, is being patient and always on the lookout for prime mid-term speculations to buy unwanted and unloved sectors at bear market lows.

How to Retire a Decade Early

For example, several weeks ago we alerted you to an apparent anomaly.  We called it the Mother of All Speculations.  The opportunity, if you recall, was junior gold mining stocks…and the setup was described as follows…

Gold’s price cratered over the last several years.  But junior gold miners were obliterated.  Specifically, junior gold mining stocks, as measured by a basket of junior gold stocks (NYSE: GDXJ), fell over 80 percent.  Yet the fundamentals that pushed up gold’s price 645 percent from 2001 to 2011 haven’t changed.

Central banks the world over are continuing to create paper money to artificially suppress interest rates and support the deficits of spendthrift governments.  At the same time the supply of gold has remained relatively stable.  Eventually, this divergence must express itself in rising gold prices.

Conversely, while junior gold mining stocks crash, the broad stock market soared.  Over the last five years the S&P 500 jumped 165 percent.  If the goal is to buy low and sell high, wouldn’t you rather sell an S&P 500 that’s up 165 percent and buy junior gold mining stocks that are down 80 percent?

Year-to-date the S&P 500 has dropped 4 percent while the GDXJ has increased 17 percent.  That’s a 22 percent difference.  Luckily, gold stocks are still incredibly cheap.  There’s still much more room for this to run.

As we noted before, this is purely a speculation…don’t bet the farm on it.  But we think it is a calculated speculation to take with a small percentage of your investment capital.  In fact, it could make the difference between an extra decade at the grind or a quality retirement while you’re still young enough to enjoy it.


MN Gordon
for Economic Prism

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