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.
Another glorious week comes to an end. Off we go …
If you’re for less government, you want sound money. The people who want big government, they don’t want sound money. They want to deceive you and commit fraud. They want to print money. They want a monopoly. They want to get you conditioned, as our schools have conditioned us, to the point where deficits don’t matter.
— Ron Paul
Credits and Debits
Debit: After peaking at an intraday price of $2799 on Thursday, bitcoin has fallen back more than $500 to close the week around $2200. That’s still more than 10% higher than the previous week’s close. Unfortunately, those who bought near Thursday’s high are already down 21%.
Credit: Meanwhile, stock market watchers are wondering whether Alphabet or Amazon will reach a $1000 share price first. Hooray!
Credit: Of course, while the stock market indices suggest that all is well, in reality their foundation continues to crumble. Dave Kranzler points out that the Dow and the S&P 500 have been levitating on the backs of just five tech stocks: Apple, Amazon, Facebook, Alphabet and Microsoft. And Apple alone is responsible for 13% of the S&P’s 2017 gains — and 25% of the Dow.
Credit: In fact, David Stockman says the market rot is so pervasive that he expects a crash between August and November. Keep in mind, though, that this is the same guy who incorrectly predicted there would be a market meltdown prior to the 2016 US presidential election. Just sayin’.
Debit: However, if Stockman is right this time, that’s bad news — especially for gold-plated government pensions, the vast majority of which are already underwater despite an 8-year bull market in stocks. For example, California’s pension liabilities skyrocketed 22% in the last year. And the state’s pension plans are now 65% underfunded — which is a nice way of saying “insolvent.”
Debit: Most government pensions have been taking money from future plan beneficiaries and using it to fund benefit payments to retirees for a long time now — even though the fund managers know that future retirees realistically have no chance of ever being paid in full. Yes, that’s a Ponzi scheme. And if a Wall Street hedge fund ran a similar operation, the managers would be in jail.
Debit: The 36-year bull market in bonds will be facing pressure too if the Fed’s decision to unwind its balance sheet this year is implemented. Needless to say, any prolonged sell-off in the bond market will also make the US government’s long-term addiction to deficit spending more problematic. Well … unless officials want to kill the US dollar. Actually, they really have no choice.
Debit: Then again, Main Street already has its own deficit-spending problems, as 7.5% of loans are now at least 30 days in arrears. During the height of the 2008 financial crisis that figure was approximately 10%. (Psst. That’s what happens when lending standards are lowered in order to keep our debt-based financial system Ponzi scheme afloat.)
Debit: By the way, the combined enrollment in America’s four largest safety net programs has reached 236 million. Yes, that number is inflated because many Americans are double-, and in some cases, triple-dippers. Even so, more than one in three Americans are currently receiving some form of government assistance.
Debit: Speaking of safety net programs, Facebook creator and multi-billionaire, Mark Zuckerberg, says it’s time Americans “explore” guaranteed universal basic incomes for everyone. No, really. Obviously, Zuckerberg also believes every American deserves a nice government-provided suburban home with a white-picket fence — and a two-unicorn garage.
Credit: Am I the only one who thinks Zuckerberg is a great example of why you should never assume somebody truly understands what they’re talking about just because they’ve got a big bank account? I didn’t think so.
Debit: With all that “free money” in mind, you shouldn’t be surprised that the national debt is now growing far faster than the economy as a whole — although that really isn’t a problem. Well … that’s what the utopian guaranteed-income crowd — and those who believe in perpetual motion machines — tell me anyway. Right, Mark?
Debit: After all, as Greek authorities proved again this week, whenever the government — or its banker cronies — find themselves in a financial pickle, they have no qualms plundering the people’s wealth, whether it’s via mass confiscation of safe deposit boxes and other assets, or stealing your cash outright under the guise of a bank “bail-in.” Either way, it’s heads they win, tails you lose.
Credit: Ultimately, the only people who will come out of this looming financial disaster relatively unscathed will be wealthy people like Mark Zuckerberg and the folks who keep their exposure to the current financial system to the bare minimum — along with some wealth insurance in the form of physical gold and silver.
By the Numbers
With the Memorial Day holiday upon us here in the US, I thought I’d pass along a few facts about it:
1868 The year “Decoration Day” was established to decorate the graves of the Civil War dead with flowers.
1971 The year Memorial Day was declared an official US holiday by Congress.
1,264,123 The number of Americans killed in combat in Americas wars from 1775-1991.
39,300,000 The number of Americans who will venture at least 50 miles from home this weekend.
88 Percentage of Americans who will travel by car; that’s the highest figure since 2005.
75 The percentage of Americans who plan to barbecue this Memorial Day weekend.
818 The number of hot dogs per second that will be consumed in the US between Memorial Day and Labor Day.
23 The number of days between Memorial Day and summer, which officially begins on June 21.
Source: The Connecticut Post
The Question of the Week
[poll id="165"]
Last Week’s Poll Results
If you were an American on the lam, which country would you rather escape to?
- Canada (81%)
- Mexico (19%)
An overwhelming majority of the more than 1300 Len Penzo dot Com readers who responded to last week’s question said if they were on the lam, they would flee to Canada, rather than Mexico. Unfortunately, I have no way of knowing if that’s primarily because they like poutine more than tacos, or prefer colder climes, or are worried about potential language barriers. As for me, I’m with the minority again — mainly because I can’t stand the cold.
Other Useless News
Here are the top five articles viewed by my 15,311 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- Are Gas or Charcoal Grills More Cost Effective?
- 10 Famous People Who Have Gone Bankrupt
- 22 Signs Your College Degree Might Not Be Worth the Money
- How to Take Advantage of Error Fares for Booking Super Cheap Flights
- 6 Cheeky Ways Frugal People Save Money
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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 putting ketchup on a hot dog is definitely not poor etiquette — despite what the food snobs say — Char left this comment:
I take a lot of flak for putting mayo on hot dogs.
To be frank, I’ll continue to mustard up my dogs with whatever toppings I relish.
I’m Len Penzo and I approved this message.
Photo Credit: Community Coffee
Len,
I think Memorial Day was made a national holiday in 1971 not only for those who died serving our country, but it also marked the death of our economy that same year! It’s just been a slow death and I believe the last breath will be before 2020. I just can’t see this madness going on much longer, but many of the sheep still slumber. I can really see the difference in our economy from when I graduated high school in 1995 to now. When I was in high school malls were packed and the place to be, now they resemble a ghost town for the most part. There were many small businesses, but now it seems all there is are big outlet stores and many of those are even shutting down. I’m amazed the American people can’t see this!
Wake up America!!!
Jared
Jared, after the dollar loses its reserve currency status — and at least half of its current value — I am confident we will see manufacturing jobs return to these shores (because creating things domestically will become much cheaper) as well as a return of the ‘mom and pop’ shops that began disappearing after the dollar was decoupled from gold in 1971.
Most people can’t see this because: 1) they are blinded by normalcy bias; and 2) the public schools don’t teach macroeconomics. Yes, the universities teach macroeconomics, but Jim Rickards points out that only a very few teach it anymore in the classical sense (i.e., with gold as the bedrock).
I think if Mr. Zuckerberg wants a guaranteed income for everyone he should pay for it out of his own pocket rather than pick the pockets of the middle class, which you know is where THAT would actually come from. Just like Obamacare!
Have a great Memorial Day weekend Len!
Sara
I think that’s a great idea, Sara. Most Utopians never practice what they preach — they expect others to make the sacrifices.
Thanks for another great update Len. I always enjoy this take, even if David Stockman’s bearish prognostications haven’t yet come to fruition! Of course, I do admire his persistence and think his ilk raise some great points. So I guess I’ll just keep holding my AAPL, AMZN and GOOGL until the music stops!
Be careful, Jay … when the music stops everybody will be rushing for the exits at the same time — but the door to safety is very very small, so most people won’t get out in time. In other words, the markets are a big roach motel.
What are the four safety net programs? You didn’t mention them. My brother in law started sending me your black coffees a few weeks ago and now I’m addicted. Thanks.
Hey, welcome aboard, Shaun!
The four safety nets are : Medicaid, Medicare, Social Security and Food Stamps.
(For future reference, I usually provide a supporting link for every Credit/Debit. Those who are interested can always get more details on those Credits/Debits by clicking the link.)
It’s called GOTS (Get out of the system) and it’s great advice. I have just enough money in my checking account to pay the bills each month. The rest is in cash, PMs, real estate and other tangible assets.
Yep … and for those who don’t feel comfortable getting out of the system, you can help minimize risk of bank bail-ins by spreading things out — that is, keeping multiple accounts with smaller balances at multiple banks. The Honeybee and I do this; we keep multiple bank accounts, all with balances under $20,000.
“Credit: Am I the only one who thinks Zuckerberg is a great example of why you should never assume somebody truly understands what theyre talking about just because theyve got a big bank account? I didnt think so.” – Len
Even worse: Assuming a Hollywood “celebrity/performer” knows anything worthwhile – e.g. Cher, pontificating ad nauseum in the media.
You got that right, Dave! There are a few smart ones in Hollywood — but not many.
most aren’t good at math either
There are going to be some pissed off state workers out there when they realize those to good to be true pension promises were a scam based on pure fraud.
Technically, the pensions are sustainable because they are “guaranteed” by the tax payers — which encouraged the pols to negotiate those ridiculous gold-plated payouts in the first place. The trouble is, there is a limit to how much blood the government can extract from the taxpayers before the citizens 1) move out of state, or 2) revolt. Illinois is facing this problem now. Their legislature just voted for a 33% increase in personal and corporate income taxes to help cover their state workers’ woefully underfunded pension shortfalls. It’s not going to be anywhere near enough.
Here’s one more article explaining why anybody collecting — or planning on collecting — a government pension better start thinking about finding a Plan B for their retirement.
“…anybody collecting or planning on collecting a government pension better start thinking about finding a Plan B for their retirement.” – Len
Highly probable exception: the “grandfathered in” pension congress granted itself (and I and other Federal employees riding their coattails), who retired before everyone went to 401Ks.
Thanks Len for another insightful edition of “black-coffee”. I thought the number of deaths listed in all wars seemed low. The following seems to indicate the number is much higher. The number of deaths per deployed is also an interesting statistic. http://prospect.org/article/american-war-dead-numbers Thanks again for dedication to telling like you see it.
Good catch, Steve. I thought that number seemed low!
I have upped the figure from the previous 651,031 to the number provided in your source.
Zuckerberg is one slimy hypocrite. Not only does he not pay more taxes than he owes, in order to make his contribution towards “universal income”, he wants open borders for the U. S. A. while having huge fences and paid security guards around his homes! What a sleazebag! He wants the middle class to pay for the non productive, and suffer the consequences of all the criminal illegals slinking over our porous borders.
Yep … and Katy Perry too.
Len,
1. W.r.t wealth insurance: Im curious to know what the level of insurance is that you have established for yourself against currency collapse. Have you every published your portfolio asset allocation? Specifically, what % of your assets do you invest in gold/silver?
2. W.r.t Zuckerberg, Guaranteed Minimum Income is not a fringe theory, it has some rationale and some economics behind it. The idea is not just to give free money to everybody. The idea is to kill every other welfare program out there and replace it with this (kill food stamps, kill unemployment insurance, kill housing support, kill heating assistance, etc, etc). And if you qualify as able-to-work and are looking-for-work, you are still paid below minimum-wage benefit for a small period of time to get you on your feet.
It is kind of like “kill all tax loopholes, exceptions …. and implement a low flat tax” ….. It becomes “kill all welfare loopholes, exceptions, programs … and implement a low below-poverty-line-temporary benefit of a simple cash check”.
Just pointing it out. Im not saying I agree with GMI. But it does have some merits …. (i mean, of course, if we are going to be a full capitalist survival mano-mano die-if-you-can’t-make-it society, then I guess that is what we want to be …. Im not judging … but if we are for a society that offers some assistance, then GMI is a idea worth looking into for effectiveness of money spent on a welfare purpose)
Kyron,
1. I am diversified approximately: 40% gold, 20% silver, 25% stocks, and 15% bonds. I’m gradually replacing my bond holdings with precious metals, which I believe will be the new dominant safe-haven retreat in the coming decades.
2. I’ve heard that argument before … the only merit I see is potentially reducing bureaucratic welfare red tape. Of course, as you know, there is no such thing as “free money” — those handouts come at the expense of producers.
By the way, I find your description of capitalism as being a “survival mano-mano die-if-you-can’t-make-it society” to be a bit over-the-top. Churches and other organizations effectively handled the charity and welfare role before the US government decided to take those responsibilities on in full-force with LBJ’s failed “War on Poverty.” And they did it without having to resort to forced wealth redistribution.
The eventual return to an honest monetary system based on precious metals rather than debt will take the role of charity and welfare away from the government and return it to private organizations and churches.
Holy cow!! you have 60% precious metals!!! You, my friend, have put your money where your mouth is. I admire your steel! (may be, I should say that I admire your gold and silver!!)
I’m not describing capitalism necessarily there. Just the laissez-faire version. And like I said, I’m not criticizing or judging. I’m perfectly fine playing with a system with zero welfare and letting private parties take the role of welfare. If such a system is implemented, I just require that there be zero welfare of poor people, rich people, corporation tax loop holes, corporation bail outs, etc. That would include tax loopholes for charitable giving, etc as well as that would again be the government subsidizing certain private parties over others and making judgement calls over what is charitable.