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 dive right in this week …
A nickel ain’t worth a dime anymore.
— Yogi Berra
Art is what you can get away with.
— Andy Warhol
How many millionaires do you know who have become wealthy by investing in savings accounts?
— Robert G. Allen
Credits and Debits
Credit: Bitcoin’s journey to the sun continues: On Friday the cryptocurrency darling surpassed $1990 — which means it has almost doubled in price since the beginning of the year. I know. The speculators better hope bitcoin isn’t wearing wax wings.
Credit: Speaking of inflation, a portrait by Jean-Michel Basquiat that sold for $19,000 in 1984, fetched almost $111 million during a Sotheby’s auction on Thursday. That represents a 33-year return of approximately 581,500%. The sale set a new record for an American artist, and is one of only ten paintings in the so-called “$100 Million Club.”
Debit: Hmm. Maybe I’m missing something … but does this look like a $111-million painting to you?
Credit: In other news, the stock markets have been in the longest period of market calm since 1969 — that is, until Wednesday came around and socked them in the jaw.
Debit: So … just how bad were the markets on Wednesday? Well … It wasn’t the end of the world, by any stretch but, after 15 consecutive trading days with no market moves of 0.5% or more, it was a reality check, as the S&P 500 and Dow saw their biggest drop since September, and the Nasdaq and small caps suffered their biggest fall since Brexit.
Credit: Of course, on Thursday the market brushed itself off and began clawing back those losses — with indices once again hovering near their all-time highs. Did you really expect any other result?
Credit: Frankly, the current stock market is eerily reminiscent of the 1999 bubble; it even has people wondering if Snapchat is the next Pets.com. For example, on its first trading day in March, SNAP surged 44% — despite the company never turning a profit and its shares conferring no voting rights. This week, SNAP plunged 25% after it reported a quarterly loss of $2 billion dollars. Imagine that.
Debit: Let’s face it: The stock market is wildly overvalued no matter how it’s analyzed. As Jim Rickards notes, perhaps the best indicator of market bubbles, the Shiller CAPE ratio equity measure, is at the same extreme-high valuation reached in 1929. Yes, that’s the same year of the infamous stock market crash that started the Great Depression.
Debit: Aside from the FAANG stocks — Facebook, Amazon, Apple, Netflix and Google — the market has been silently collapsing since March 1st. For proof, David Stockman says one only has to look at the dirty details behind the rising market during the last 70 days: $260 billion of new “value” was from the FAANGs — but the other 495 companies in the S&P 500 lost $260 billion. Oops.
Debit: In fact, less than 4% of all stocks account for all the stock market’s gains since 1926. Out of the 25,782 companies that have been publicly traded since then, only 30 made fortune-making returns in the long run. Now that’s something you won’t hear from the folks on Wall Street.
Credit: In case you’re wondering, Amazon has provided the biggest gain of any stock since 1926; investors who bought and held its shares since the company went public in 1997 have earned a 49,000% return. That’s impressive by any measure, market bubbles notwithstanding.
Credit: Then again, when it comes to the pretty picture painted by Amazon’s stellar long-term market return, you can bet there are at least a few art “aficionados” out there who aren’t impressed.
Last Week’s Poll Result
Are cryptocurrencies a legitimate wealth preservation asset?
- No (61%)
- What’s a “cryptocurrency”? (24%)
- I’m not sure (10%)
- Yes (5%)
Almost one in four of the more than 1200 people who answered this week’s survey question admitted to being completely in the dark about cryptocurrencies. Of the rest, three in five say they’re not a credible wealth-storage strategy, while another one in ten were on the fence. Only 5% consider them to be on par with the ultimate stores of value: gold and silver. I’m with the fence-sitters because, unlike precious metals, which have a 5000-year track record as money par excellence, the oldest cryptocurrency, Bitcoin, is less than a decade old. Until we see how cryptos perform during — and after — a monetary collapse, I say the jury is still out.
The Question of the Week
[poll id="164"]
By the Numbers
Ninety years ago this month, two Utah newlyweds moved to Washington, DC, and opened the Hot Shoppe, a family restaurant serving coffee and tamales. Their names were J. Willard and Alice Marriott. Yes, those Marriotts. Here’s a look at how the Marriott empire has grown since then:
1937 Year the Marriotts started providing boxed lunches to Eastern Airlines.
$570,000,000 Price for which Mr. Marriott sold his In-Flite Services catering division in 1989.
19 Number of businesses, besides lodging, that the Marriott family has had a hand in, including home security, travel agencies, and theme parks.
1957 Year the first Marriott Company hotel opened. (The Twin Bridges Motor Hotel, in Arlington, Virginia.)
3000+ Number of Marriott hotels worldwide today.
2 Number of Marriott hotels that will open per day this year.
1166 Height, in feet, of the JW Marriott Marquis Hotel Dubai. It’s the tallest hotel in the world. (And, yes, the hotel takes up the entire tower.)
Sources: Washingtonian; Sherman’s Travel
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Alberta (1.91 pages/visit)
2. Ontario (1.85)
3. British Columbia (1.78)
4. Manitoba (1.66)
5. New Brunswick (1.60)
9. Yukon Territory (1.50)
10. Quebec (1.41)
11. New Brunswick (1.33)
12. Northwest Territories (1.25)
13. Nunavut (1.00)
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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 me at: Len@LenPenzo.com
After reading my piece explaining why whirlpool tubs are for suckers, bjbeetlebabe had the following question for me:
Oh, my gosh! When were you in my bathroom to take this picture??
Last week. Hey … When you got to go, you got to go!
I’m Len Penzo and I approved this message.
Photo Credits: (coffee) brendan-c; (painting) Sotheby’s
I always liked Jean-Michel Basquiat, if had a spare 111 million I would have bought it to hang in my yacht. Though I am not sure I could keep it in the proper climate there, I may need to hang it my Park ave condo. He also illustrated a good kids book.
https://www.amazon.com/Life-Doesnt-Frighten-Maya-Angelou/dp/1556702884
I never heard of the guy until I read this article, MB. I learned he died of a heroine overdose in the late 80s. He also dated Madonna before she became famous, around the time he painted this “masterpiece.”
That painting ain’t the Mona Lisa. But I’ve seen the Mona Lisa in person and thats overrated too IMO.
Have a great weekend Len!
Sara
Art is truly subjective. I never figured out what was so special about the Mona Lisa either, although it seems to me that da Vinci clearly had more technical ability than Basquiat.
The stock markets have two modes of operation: 1. Price discovery of rational investor. 2. The “bigger fool” mode when everyone jumps on the bubble for the easy capital gains. We’re now deep into mode 2.
And sadly, those “bigger fools” include pension and other investment funds that many people gravitate to.
Re. Snapchat: Why is a cell phone app that manipulates photos so you look like a dog worth anything at all? Where is the profit potential considering those who use it are mainly teens and tweens who have no power to purchase anything? The markets have truly gone mad and I am not investing a single dime in them until this all blows up and we can get back to the real world.
I assume your questions are rhetorical. I agree. I feel the same way about Twitter and, to a lesser degree, Facebook.
they don’t make art like they used to
ha ha! No, they don’t, Stan.
I’m in the minority on your question of the week. I think Canada is nicer but I really like Mexican food!
I like Mexican food too, Rhonda — but there’s no poutine there.
Thanks for another great weekend update Len. The run up in Bitcoin prices has been absolutely insane. And good description of Wednesday’s stock market sell-off too. That was a bit of a wake up call! Have a great weekend and thanks again for the update.
My pleasure, Jay. Thanks for stopping by!
sent one of those robot vacuum cleaners back – wife said it didn’t even do as good as me and cost more than I’m worth, to boot.
KIDDING Dear (ouch!)
Don’t sell yourself short, RD! There’s a trick to vacuuming properly.
Not enough choices if I go on the lam, and no good ones. Like Mexico’s warm climate and beautiful beaches, not quite so keen on the gang murders, kidnapping for profit, mass kidnappings of students, government corruption, putting people’s heads on posts while leaving the bodies around which is rather messy (of course with so many MS 13 members illegally immigrating to the U. S. A. this description now includes Long Island, NY which has beautiful beaches too). Canada’s too COLD. Of course you can get good Mexican food in the big cities there. Not sure but I think both Canada and Mexico have extradition treaties with U. S. A. unless the criminals were really savage and are facing the death penalty in which case neither Canada nor Mexico will return them. Would have rather had a choice including some tropical country with lots of beaches and no extradition treaty to ruin the fantasy! Dutch Antilles maybe?
I hear ya, Karen … but you can’t drive or walk to the Dutch Antilles!
Also, congratulations. You have joined the select club of readers who have submitted 100 comments to Len Penzo dot Com! Thank you for all of your contributions over the years!