Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.
Let’s get right to it …
There is no magic wand that can resolve our problems. The solution rests with our work and discipline.
— Jose Eduardo dos Santos
There’s a bit of magic in everything, and some loss to even things out.
— Lou Reed
Credits and Debits
Debit: Don’t look now, but the latest Case-Shiller home price index report shows that aggregate US housing prices have finally surpassed their previous peak, which occurred right before the 2007 housing market collapse. Uh oh.
Debit: It’s too bad that wages aren’t tracking on a similar trajectory to the housing market. In 1986 the median home price and median household income were $92,000 and $51,000, respectively. Thirty years later, the median home price is hovering near $300,000 — while median income is $56,000. Hey … that’s quite a trick, don’t you think? (hat tip: vq1)
Debit: The truth is, today’s skyrocketing home prices are directly attributable to central bank hocus pocus — but instead of waving a magic wand, central bankers simply hit “CONTROL-P” on their keyboards and — abracadabra! — conjure trillions of dollars out of thin air. Then they inject those dollars into the economy, driving up the prices of things we all need to survive.
Debit: Of course, bubbles created by the prestidigitators at the Fed and other central banks eventually burst — usually with devastating results. In fact, over the past several years, soaring rents spurred a furious apartment boom — but that appears to be over now that the rental market is decelerating in Denver. And moderating in Miami. Oh … and stalling in San Francisco too.
Debit: With bubbles everywhere, it’s probably no surprise that the Citigroup Inflation Surprise Index (CISI), which measures unexpected price increases around the world relative to expectations, is at its highest level in more than five years. (Psst. That little trick is how the bankers make our purchasing power disappear.)
Credit: As financial analyst Dave Kranzler points out, the surging CISI is, “A difficult feat, given all of the hedonic adjustments plus other various gimmicks the Government statisticians inflict on the data in order to mute the ability of the index to measure true inflation.” True … but elaborate illusions always take lots of practice.
Credit: You’re deluding yourself if you don’t believe the Fed’s economic magic show isn’t affecting the stock market too. For example, although the Dow is hovering near all-time highs, Wolf Richter notes that total aggregate revenue for the index’s 30 companies was actually — presto change-o! — lower in 2016 than they were for every year between 2011 and 2015.
Debit: Meanwhile, the Chinese bankers are putting on their own display of economic alchemy, which they depend upon with increasing frequency to generate spellbinding GDP figures. After all, as Jim Rickards notes, China’s billion dollar train stations and rail lines count toward GDP whether the railroads ever make money or not. Likewise for their myriad ghost cities.
Credit: Needless to say, the secret to China’s phantom “growth” is lots of cheap credit, but that game can only go on for so long — even for sovereign nations, believe it or not. According to Rickards, “China’s real debt-to-GDP figure is easily 500%. That’s like owing $100,000 on a credit card when your salary is $20,000 per year. That’s a sure recipe for bankruptcy.”
Debit: For now, markets everywhere continue to be completely mesmerized by central bank sleight-of-hand tricks, mistaking debt-fueled bubbles and malinvestment for gains in real wealth based upon honest economic growth. As Rickards notes, “The perception is happy days are here again. But it’s just a matter of time before (markets) are jolted back to reality.” Up to now, the wait has been interminable.
Credit: The good news is, none other than Bank of England
magician Governor Mark Carney admitted this week that “We’re coming to the last seconds of central bankers’ fifteen minutes of fame.” No, really.
Debit: Clearly, the central bank warlocks are only coming clean because they’ve got no more tricks up their sleeve. Hopefully, everyone enjoyed their magic show — because when it’s done we’ll be paying the bill.
By the Numbers
According to Media Life Magazine, “It was a weak year for Super Bowl ads, which featured less humor, lots of celebrities and a few political statements.” I agree — aside from this Skittles ad, I thought they were unremarkable. Here’s a closer look at the big game’s advertisements:
111 Total number of ads run during the Super Bowl game (including four during the overtime period).
4 Ads for online games.
4 Movie advertisements.
5 Ads that could be construed as political statements.
18 Ads featuring celebrities.
0 Ads featuring Budweiser’s famous Clydesdales.
57% Positive feedback for Budweiser’s Super Bowl ads, according to iSpot.tv
27,500,000 Online views for Budweiser’s “Born the Hard Way” ad.
1 Ad whose ending aired online. (84 Lumber.)
6 The total running time, in minutes, of the 84 Lumber ad. Their site crashed when it was overwhelmed by visitors immediately after the ad ran.
Source: Media Life Magazine
Last Week’s Poll Result
Has the winter where you live been colder or warmer than usual?
- Warmer (47%)
- Colder (28%)
- About the same. (25%)
More than 1100 people chimed in for last week’s question and almost half of them say their winter has been warmer than usual. Not here in Southern California. Frankly, I can’t remember the last time we had a winter with so many days that failed to reach 60 degrees F; since December 21st, my city has recorded 24 days that failed to reach that temp. That’s a lot, considering we normally see less than ten sub-60 days here per year — and springtime is still a long way off!
The Question of the Week
Other Useless News
Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. North Dakota (2.34 pages/visit)
2. Maine (2.11)
3. South Dakota (1.95)
4. West Virginia (1.81)
5. Idaho (1.77)
46. Minnesota (1.27)
47. New Mexico (1.26)
48. Wyoming (1.25)
49. Massachusetts (1.24)
50. Utah (1.23)
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Letters, I Get Letters
Every week I feature the most interesting question or comment — assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach out to me at: Len@LenPenzo.com
After reading my article explaining why waterbeds are for suckers, Tom Wipperfurth wrote in to complain about his:
I’m 203 pounds and I hit bottom when getting into bed. I didn’t when the bed was new and I was the same weight.
Tom, before you replace the waterbed, you might want to buy a new bathroom scale.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c