It’s time to sit back, relax and enjoy a little joe …
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 …
Life is a constant oscillation between the sharp horns of dilemmas.
— H.L. Mencken
The worst choice you can make, is no choice at all.
— Nicholas Stoller
Customers can have a car painted any color that they want, as long as it is black.
— Henry Ford
Credits and Debits
Credit: This week, President Trump maintained his pledge to restore Glass-Steagall. That was one of America’s most important laws — a post-Depression mandate that prohibited banks from commingling their profits with customer deposits for speculative purposes. Unfortunately, it was repealed back in 1999 at Wall Street’s request — and Main Street has been paying for it ever since.
Debit: Needless to say, bank stocks promptly responded to the Glass-Steagall restoration news by tumbling. Hmm. Why do you think that happened, you ask? Yeah … I wonder.
Debit: Speaking of stocks, the market is looking eerily similar to the way it was in 1999, just prior to the dot com crash. In 1999, the Fed was hiking rates, inflation was rising, and stocks were going parabolic. You know … just like today. Meh. I’m sure it’s just a mad coincidence.
Debit: By the way, the soaring stock market belies the fact that desperate mall owners are looking for tenants by recruiting any businesses they can find, including grocers, doctors’ offices — and high schools. Yikes. How would you like to be an alumni of “Galleria High”?
Debit: Of course, as ZeroHedge observes, those malls — most of which are now practically empty and sitting on prime real estate — are struggling thanks to “shifting consumption patterns, years of underinvestment by mall owners and a spate of retailer bankruptcies.” Yes, but I suspect the biggest culprit is the Internet. Thanks, Amazon!
Debit: Then again, maybe there’s yet another cause. For example, thanks to a floundering economy — the latest job figures notwithstanding — most Americans are so broke that they have little discretionary income anymore, as evidenced by the fact that half of all Americans can’t afford to write a $500 check. Yes, half. No, really.
Credit: According to financial analyst Andy Hoffman, “(America’s) rapidly dying economy is forcing the Fed to make a Hobson’s Choice: raise rates to maintain credibility, but destroy both the economy and America’s competitive position — or do nothing, and watch markets start to discount the hyperinflation that must inevitably arrive.” I think it’s obvious: the Fed will go with the first option … or the second.
Credit: Hoffman also points out that the Fed’s decision to continue raising rates in the face of a struggling US economy is an “insane, suicidal gambit” that will only hasten the onset of the next financial crisis. He’s right, you know.
Credit: Meanwhile, Hugo Salinas Price points out that America has a catch-22 of its own: “The US cannot have it both ways — it can’t issue the world’s money, and indulge in economic protectionism.” That’s because the latter will ultimately result in the US dollar losing its reserve currency status — and a lower standard of living for most Americans. At least temporarily.
Debit: One thing is certain: Reality is officially in short supply now that a single bitcoin is worth more than an ounce of gold. That’s right; an upstart abstract purely-ethereal cryptocurrency with no intrinsic value whatsoever is currently more valuable than real-life precious metals.
Credit: Frankly, bitcoin being more valuable than gold makes as much sense as a screen door on a submarine — or an ice machine for an eskimo. You choose.
Credit: Finally … You know America’s day of reckoning isn’t too far off when even billion-dollar bond-king Bill Gross is admitting that the jig is up. In fact, in his most recent newsletter, he urged us to be more concerned about the return of our money than the return on our money because, “Our financial system is a truckload of nitroglycerin on a bumpy road.” Uh huh. Hey, Bill … Welcome to the club.
By the Numbers
Here are a few facts on the US Navy’s newest and most technologically-advanced warship ever built, the USS Gerald Ford. It’s the first new carrier design since the Nimitz-class, which was commissioned in 1975:
$12,900,000,000 Cost to build the aircraft carrier, making it the most expensive warship ever.
200,000 Gallons of paint required to cover the ship; that’s enough to paint the White House 350 times.
$4,000,000,000 Amount the US Navy will save over the ship’s 50-year lifetime due to reduced maintenance requirements.
90,000 The final weight of the Ford in tons, equivalent to 400 Statues of Liberty.
10,000,000 Feet of installed electric cable, enough to reach the International Space Station 7.6 times.
4,000,000 Feet of fiber optic cable, enough to reach the International Space Station 3 times.
4,000,000 Pounds of weld metal used to build the ship.
5000 American shipbuilders involved in building the Ford.
4500 Sailors who will call the USS Gerald Ford home
5200 Sailors required to operate older Nimitz-class aircraft carriers.
Source: ABC News
Last Week’s Poll Result
How much money do you usually withdraw at an ATM?
- More than $100 (39%)
- I don’t use ATMs (34%)
- $100 or less (27%)
More than 1400 people chimed in for last week’s question and fully one-third of them say they don’t use automated teller machines. I don’t either — when I need cash, I ask the Honeybee. Hey … I’m not the household CFO — she is! And although the Honeybee uses an ATM when she needs more than $100 in cash, most of the time she uses the cash-back feature on her debit card at the grocery store checkout counter.
The Question of the Week
[poll id=”154″]
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. Arkansas (1.87 pages/visit)
2. Nevada (1.84)
3. Montana (1.79)
4. Alabama (1.74)
5. Delaware (1.69)
46. Connecticut (1.22)
47. Minnesota (1.20)
48. Michigan (1.17)
49. Colorado (1.14)
50. Wyoming (1.12)
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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 about my personal spelling demons, Amanda shared this little gem:
My husband has been known to write checks for thirteen dollars and say, ‘Keep the change,’ to avoid having to spell ‘twelve.’ There are worse things.
Amanda, let’s hope your hubby never has to write a check for $12,000.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
I belong to a couple of “Remember When” type local chat rooms and a prevailing theme is a desire to return to the old days when there was a vibrant downtown (town square) where a large variety of locally owned shops and businesses were supported by the community. The malls destroyed these businesses because everyone thought it would be better shopping in an indoor climate controlled environment. But malls only have the same retail establishments that the malls in every other city has. And recently with roving gangs of thugs assaulting shoppers, the situation is getting worse. Online shopping is more convenient and much safer.
Kathy, I know it’s hard to believe, but the old days will return.
I keep saying to anyone who will listen that when the current dollar dies — or is sharply devalued to its true worth — the US business world will undergo an amazing sea change. Most big box retailers will go the way of the dodo and many businesses, out of necessity, will become more localized once again; that is, mom-and-pop shops will make a big comeback. As imports become more expensive thanks to our devalued currency, you’ll also see a large percentage of warehouses that are currently used to house and distribute imports from overseas turned into manufacturing houses.
America’s military will become smaller — and more localized — too.
Bitcoin looks like a speculative game to me. Although I won’t deny a lot of people are making a lot of money on it right now.
Whenever I begin thinking it may be worth buying a bitcoin or two, I remind myself that if a Carrington event or large scale man made electrical disturbance happens, I’ll have nothing. That helps me remember why I hold gold and silver instead.
Here’s another significant drawback, in my opinion: Unlike gold and silver — which can be measured in terms of troy ounces or grams — bitcoin can only be measured in terms of another currency (such as fiat dollars and euros … or ounces of gold and silver). That further demonstrates precious metals’ superiority over bitcoin.
Many have lost money speculating on it too, Andy. Bitcoin has seen some tremendous price drops (more than 30%) in a short amount of time over the past couple of years.
I think putting a grocery store in a mall is a great idea. It makes me wonder why they never thought of that before!
Have a great weekend Len!
Sara
I read somewhere that Canada has had grocery stores as mall anchors for years now.
Sara,
We lived for most of our lives 5 miles south of a thriving Manitoba town. They had a new mall that included a very large supermarket (grocery store). After a few short years the supermarket closed. We don’t know why.
If more than 50% of Americans don’t have enough cash in their checking accounts to cover a $500 expense, how does this country function? 500 dollars isn’t THAT much money!!!!!
It’s all smoke and mirrors, Sandy — and it’s only being sustained via debt. Eventually, America’s credit card will be cancelled and the illusion will be revealed, to most people’s horror.
The math is inescapable.
People aren’t living within their means.
“What is even more striking is that among Americans who earn more than $75,000 per year – a third more than the typical U.S. household earns – almost half also said they wouldnt be able to cover a $500 surprise expense.”
I find it rather laughable that with my spouse, we together make just around 41k and yet have nearly 7k in our checking/savings accounts.
However, maybe many of these people have their money tied up in CDs or 401ks or IRAS… one can only hope!
Good for you, Taddy!
It’s true; anyone can save money, no matter how much they earn — they just need the right mindset.
I know you’ve probably discussed this in the past Len, but what are we supposed to do to protect money tied up in a 401 K when the inevitable happens? Though I have been purchasing gold and silver it won’t cover what I have in my retirement account. Is it too late to do anything about now?
Margaret, I am in the same boat as you are with respect to the 401(k). The good news is, you only need a fraction of your nest egg in precious metals to ensure insure it against a currency collapse — most financial advisors suggest 10%. So, for example, if you have $100,000 in your 401(k), you’d need $10,000 in physical gold to keep you whole. Frankly, I think that 10% figure is conservative — that is, you probably can get by with even less than 10% to keep you whole when the dollar finally gives up the ghost.
I think you may have missed the mark about the weight of the USS Gerald Ford.
I also think you may have left off a zero or two on the wight.
Maybe I should take your spelling class. That should be weight.
I did. Good catch — it’s corrected now.
Len, I have been buying silver coins when I can, thanks to your advice. I can’t afford gold. What do you think of fractional gold coins? Is that better than no gold at all?
Fractional gold coins have premiums that are much too high. Stick with the silver, Della.
I buy anything I can get a good deal on. Gold is at $1206 currently…I just purchased a 1oz Krugerrand for $1210. I also buy one ounce silver eagles and 90% silver (junk) when the price is right. Local gold is getting harder and harder to find. If silver is what you can afford, buy it. And keep buying. If you have the silver later and want to trade for gold at a good price, do it. But know your prices and the metal content of you stack. Get help if you need it so you don’t get ripped off. Crooks were selling fake 10 ounce gold bars around my area a few months ago and some folks lost a lot of money.
Good advice, Ed. I buy from APMEX precisely because they have a sterling reputation (Trump even deals with them!) and they guarantee everything — that confidence is worth their slightly higher prices, in my opinion. When I buy gold, with few exceptions, it is almost always 1 oz sovereign bullion coins (e.g., American Eagles or Buffaloes). I do have a few gold numismatic coins — an Indian Gold Eagle, a Liberty Gold Eagle and a St. Gaudins Gold Double Eagle; yes, they have a higher premium, and none of them are rare, but I bought them solely for adding variety to my collection.
Let’s say I have a certain amount of physical gold to insure myself against a fiscal / monetary collapse. When it occurs, what is going to prevent the government from outlawing public ownership of gold and/or forced exchange at a particular rate?
It is not like it hasn’t been done before …
And if you think there won’t be a government, why should we assume that governmental collapse / law and order collapse will happen before fiscal / monetary collapse? Russsia and China and Zimbabwe and Venezuela … aren’t they living examples that governments can survive any financial collapse and still impose burdensome laws on their citizenry?
Beyond complete law and order and governmental collapse (Im thinking Mad Max, Zombies, Fallout worlds …. and Im serious …. Im not being sarcastic or making fun of you here), it appears to me that the ability to grow your own food, create your own energy, build your own weapons, defend your own property far outweigh gold ownership …..
Am I off base here?
Kyron: If you are afraid the government will ban gold — and you are prepared to willingly give it up, unlike the 2 in 3 people who ignored FDR’s unlawful order to turn in their gold the last time that stunt was tried — then why not buy silver? That being said, I don’t think that will happen this time around because the last time that happened, gold coins were part of the circulating US currency supply. Obviously, only tin foil hat “doomsday prepppers” hold gold now. lol!
But seriously, I do not envision a doomsday scenario when the dollar finally dies. I am certain government will survive in some form if the dollar collapses. Worst case, the federal government may lose some US states, but that may be a stretch. However, what I think will most likely happen is much more benign: the nation will remain essentially unchanged, but balance of power will simply shift back to the states; government power will thus be more localized, as it should be. Why? Because the federal government will no longer have the means to continue functioning as it has since the dollar was decoupled from gold in 1971.
To your last point: People can own weapons, store and/or grow their own food, create their own energy AND own precious metals — all at the same time. I certainly do, as do many (most?) precious metals owners.
Why do you see them as being mutually exclusive?
You are right. I guess I shouldn’t see them as mutually exclusive necessarily.
I was talking in the sense that ability to grow your own food and energy would be more valuable than a shiny piece of scarce material as the former is a “produceable” directly useable resource.
I guess since trade is inevitable in human interactions, in the absence of other currency, gold will eventually recover to a valuable “tradeable” item.