Bob’s Journal

October 24, 2024

Some Notable Events That Grabbed My Attention This Week

Gold Miner Stocks Join the Gold Rally

Gold set a series of record price highs in 2024, and my recommended portfolios have been along for the ride.

But, as I pointed out in the Aug. 29 Bob’s Journal, stocks of gold mining companies had been lagging and looked like an opportunity.

The prices of gold and gold miner stocks typically move in the same direction, and the stocks usually have higher percentage moves than the metal. But that wasn’t the case for most of gold’s recent rally. Gold miner stock prices increased, but not as much as the price of gold.

Recently, the gold mining stocks started to catch up.

Gold was up seven days in a row and set six consecutive record closing highs as of Tuesday’s close. That follows a similar run at the end of September.

In 2024, gold set at least 45 new closing highs. The annual record for gold is 57 new closing highs in 1979.

Gold is up 3.26% in the last week, 4.85% in the last four weeks, 14.54% over three months and 33.03% so far in 2024.

The gold mining stock ETF, iShares MSCI Global Gold Miners (RING), is up 7.78% in the last week, 19.82% over four weeks, 19.82% over three months and 49.32% for the year to date.

An index that is limited to larger miners listed on Canadian and U.S. exchanges, Sprott Gold Miners (SGDM), is lagging global gold stocks: 7.57% in the last week, 7.85% for the last four weeks, 16.64% over three months and 36.36% so far in 2024.

As I said in August, it’s likely returns of the gold mining stocks will exceed the returns of gold, as long as the gold rally continues and more investors become interested in gold.

IRS Sets Inflation Adjustments for 2025

The IRS announced the changes for 2025 in more than 60 provisions of the tax code that are indexed for inflation. Here are some highlights.

The lifetime estate and gift tax exemption will increase to $13.990 million per person from $13.610 million in 2024.

The annual gift tax exclusion jumps another $1,000 to $19,000 in 2025.

The standard deduction for married couples filing jointly increases by $800 to $30,000. For single taxpayers, the standard deduction will be $15,000, a $400 increase.

The top income tax rate remains at 37% and will be imposed on taxable incomes above $751,600 for married couples filing jointly and $626,350 for single taxpayers.

The 35% tax rate will hit taxable incomes above $501,050 for married couples filing jointly and $250,525 for singles.

Sliding down the tax rate table, the 22% rate will hit married couples filing jointly with taxable incomes above $96,950 and singles with income above $48,475.

For long-term capital gains, the 0% rate will apply to married couples filing jointly with incomes up to $96,700, and the 15% rate will apply to incomes up to $600,050. For singles, the income levels are $48,350 and $533,400.

The full list of inflation adjustments for 2025 is on the IRS web site here.

Don’t Rely on AI for Your Social Security Planning

Is artificial intelligence dumber than a cat, as the scientist known as the godfather of AI said?

Apparently, it is in at least some areas, such as planning your Social Security benefits.

Lawrence Kotlikoff, who helped design the software at MaximizeMySocialSecurity.com, said he asked Google’s AI five questions about claiming Social Security benefits.

The AI delivered answers that Kotlikoff said not only were wrong but “horribly wrong.”

Of course, the biggest error was in the advice given to a widow who was trying to decide whether to claim her own retirement benefits or a survivor’s benefit based on her husband’s earnings record. This is such a complicated area that the Social Security Administration frequently gives wrong answers.

The best answer when the surviving spouse is younger than full retirement age often is to use a strategy available only to surviving spouses. In the scenario in Kotlikoff’s question, the highest lifetime income came from claiming the survivor’s benefit first and at age 70 switching to her own retirement benefit.

Google’s AI said to take whichever benefit was higher at the time she was claiming and didn’t mention the ability to change benefits later. The cost of this advice, according to Kotlikoff’s calculations, would be $353,238 over the widow’s lifetime.

AI’s answers to the other questions also were not ones you’d want to follow.

I’ve seen other research that used various AI tools to answer tax questions and other financial questions. AI tended to have the same level of accuracy, or inaccuracy, as in Kotlikoff’s test.

AI processes information that’s already on the internet. It supposedly learns from that information and develops correct answers faster than a person could.

But there are a few problems with this process when AI is used to answer financial planning questions.

One problem is that AI has trouble distinguishing facts from opinions, made up or wrong information. It also doesn’t know when it’s learning from an incomplete discussion of a topic.

Another problem is that the correct information changes frequently. That’s particularly the case with tax law and other areas involving laws and government regulations that change over time.

An AI model is likely to give priority to the internet post that has the most views. It often can’t tell that the rules changed and the information in that post no longer is valid.

The bottom line is that, while AI is very helpful in certain areas, it isn’t ready to help with your financial planning.

The Data

The Leading Economic Index from The Conference Board declined by 0.5% in September to 99.7 after declining 0.3% in August.

The Conference Board reported the index continues to indicate growth will be low for the next six months but that a recession isn’t imminent.

Retail sales increased in September by 0.4% after rising 0.1% in August. Over 12 months, sales were up 1.7% through September and 2.2% through August.

Retail sales increased 0.7% in September (0.3% in August) after excluding auto dealers, food services, building materials and gasoline stations. This measure is considered a good indicator of core consumer spending and reached its highest level in three months in September.

The Philadelphia Fed Manufacturing Index increased to 10.3 in October from 1.7 in September. Most segments of the index, including growth expectations for the next six months, improved.

The Richmond Fed Manufacturing Index improved to negative 14 in October from negative 21 in September.

Existing home sales declined 1% in September after declining 2% in August.

New home builders were a little more optimistic in October. The Housing Market Index from the National Association of Home Builders (NAHB) rose to 43, the highest level since June, from 41 in September.

Housing starts fell 0.5% in September after rising 7.8% in August. Starts of multifamily homes declined, while starts of single-family homes increased.

Industrial production dropped 0.3% in September following a 0.3% increase in August. Production declined 0.6% for the 12 months ending in September and 0.2% for the 12 months through August.

Manufacturing production fell 0.4% in September after rising 0.5% in August. Over 12 months, manufacturing production was down 0.5% through September after being flat through August.

New unemployment claims fell by 19,000 to 241,000 in the latest week.

Continuing claims, which lag a week behind new claims, increased to 1.867 million from 1.858 million.

The Markets

The S&P 500 rose 0.61% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 0.45%. The Russell 2000 lost 0.81%. The All-Country World Index (excluding U.S. stocks) fell 0.22%. Emerging market equities advanced 0.69%.

Long-term treasuries lost 2.73% for the week. Investment-grade bonds fell 1.57%. Treasury Inflation-Protected Securities (TIPS) dropped 0.70%. High-yield bonds declined 0.28%.

In the currency arena, the U.S. dollar advanced 0.86%.

Energy-based commodities increased 1.13%. Broader-based commodities rose 1.80%. Gold gained 3.26%.

Bob’s News & Updates

A recent review on amazon.com of my latest book said, “Carlson is a unique national Asset while alive! Get the book, dude!” Look for “Retirement Watch: The Essential Guide to Retiring in the 2020s” (Regnery Capital: 2023) at amazon.com, barnesandnoble.com, booksamillion.com, and regnery.com.

My previous book, “Where’s My Money: Secrets to Getting the Most out of Your Social Security,” is receiving mostly five-star reviews on Amazon for telling you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on amazon.com or Regnery.com.

The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. You should sign up because I make in-depth presentations of key retirement finance topics. You can watch these online seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Series, click here.

A recent five-star review of my book, “The New Rules of Retirement” on amazon.com said, “A complete retirement guide! One of the best books on this topic!” Click for more details about the revised edition of “The New Rules of Retirement.”

If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.

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