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, shall we? Here we go …
“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy. Its inherent virtue is the equal sharing of misery.”
— Winston Churchill
“One and one is eleven. Two and two is twenty-two. Won’t somebody kindly tell me, what the government is trying to do?”
— Frank Zappa
Credits and Debits
Debit: Federal guidelines state that households spending more than 30% of their income on housing costs are considered “cost burdened.” Using that benchmark, the number of Americans who can’t afford housing has more than doubled since 2001. Yep. Thirty-eight million people today spend “too much” of their income on rent or the mortgage — that’s an increase of 146%. Wow.
Debit: The housing situation is so bad that, in San Francisco, a family with an annual household income of $138,000 may soon qualify for ‘middle income’ affordable housing. No, really.
Debit: Meanwhile, skyrocketing premiums caused at least 2 million people to ditch their healthcare insurance in first half of 2017. As Zero Hedge wryly observed, most people bailing out on Obamacare were “18-34 year olds … You know, those who don’t really need coverage, but were forced to subsidize older, sicker people because, ‘spreading the wealth around is good for everybody.'” Forward!
Credit: Speaking of “spreading the wealth around,” last year it was reported that one ounce of silver would buy approximately three months of food in the People’s Socialist Paradise of VenezuelaTM — and one ounce of gold would buy a house there. Hmm. With their economy only getting worse, I wonder what Venezuelans can buy with the same amount of silver and gold this year.
Credit: On a related note, bitcoin’s volatility has always been an impediment towards its use as a legitimate currency — but now it has another problem: As the price of bitcoin has risen this year, acceptance among retailers has been decreasing. That growing reluctance to use bitcoin in business transactions is more evidence that the cryptocurrency should only be treated as an asset.
Debit: Did you see this? Summer gasoline prices are the lowest they’ve been in years but, according to Bank of America, the cheap fuel hasn’t enticed more households to enjoy a summer road trip. Are they kidding? I don’t know where those analysts live, but in my neck of the woods, the summer traffic is as bad as ever. If not worse.
Debit: In other news, politicians and financial analysts waited breathlessly as Fed Chair Janet Yellen read the chicken bones spread before her on the floor of Congress last week. Here was her verdict: “I see roughly equal odds that the US economy’s performance will be somewhat stronger or somewhat less strong than we currently project.” I know. But she really does have a PhD in economics.
Credit: Frankly, that kind of valuable insight is precisely why the Fed is so qualified to manage the economy. Well … at least that’s what all those really smart Ivy League economists tell us.
Debit: For those who don’t understand Ms. Yellen’s “Fedspeak,” allow me to translate: “Anyone with savings in the bank will continue to get robbed by a combination of high prices and low interest rates.” Of course, that policy is especially tough on retirees because low rates makes it impossible to earn a risk-free return above inflation, thereby resulting in a steady erosion of their savings.
Credit: In fact, according to FA Magazine, the current low-rate environment is so punitive that, when interest rates are zero, 25-year-olds making $50,000 annually have to save nearly 38% of pre-tax earnings during their careers to accumulate the $1.3 million required for an 80% income replacement rate in retirement. Thirty. Eight. Percent. See? Easy peasy!
Debit: But — yes, there’s always a “but” — the analysis has a catch: The $1.3 million those 25-year-olds need to accumulate assumes that Social Security will still be solvent in 2059. If it is isn’t — and it won’t be — then today’s 25-year-olds need to save even more. This is basic math, folks — and it’s the reason why there are going to be a lot of broken promises in the very near future.
Credit: By the way, Ms. Yellen also warned Congress “in the strongest possible terms” that it needs to tackle the National Debt by cutting off any further short-term stimulus. No, you’re not going crazy — apparently the Fed is suddenly really, really, really worried about deficit spending.
Debit: Curiously, the Fed saw no reason to issue a similar stern warning at any time between 2009 and 2016, when the government was on its greatest spending binge in US history, adding $10 trillion worth of debt to its balance sheet — more red ink than the previous 232 years of the Republic combined. Then again, maybe it’s not so curious.
The Question of the Week
Last Week’s Poll Result
Credit or Debit: Which payment method do you usually use?
- Credit (67%)
- Debit (21%)
- I use both equally. (12%)
More than 1100 people answered this week’s survey question and when it comes to pulling out their plastic, 2 in 3 Len Penzo dot Com readers usually choose credit. That’s what I choose too. Every time. The rewards and additional consumer protection I get when using credit are an incentive that I find hard to ignore.
By the Numbers
For those living in the Northern Hemisphere, we’re almost one month into summer. Well … at least for most of us:
104 Years ago this week that a Death Valley thermometer reached 134 degrees Fahrenheit; that’s Earth’s highest-recorded surface temp.
30 Consecutive days that the temperature in Phoenix has reached at least 100 degrees.
1993 Year that Phoenix set its current record for consecutive days with triple-digit temps. (76 days)
3 Number of active ski resorts currently in operation in North America.
246 The current length, in days, of the 2016-2017 ski season at Mammoth Mountain in California.
269 Total days in Mammoth Mountain’s 2016-2017 ski season, assuming the resort stays open until its estimated close date of August 6th.
Source: The Washington Post
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. Manitoba (1.88 pages/visit)
2. Quebec (1.75)
3. Alberta (1.70)
4. Ontario (1.64)
5. British Columbia (1.61)
9. Nunavut (1.50)
10. Yukon Territory (1.24)
11. New Brunswick (1.16)
12. Northwest Territories (1.13)
13. Prince Edward Island (1.05)
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(The Best of) 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
Here’ s a strange request from Kate that I found in my inbox:
“I’m doing a homework assignment on snakes. Do you know the most important snake?”
I’m tempted to give you an answer, but I don’t want to make an asp of myself.
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c