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.
Time has almost run out on 2017, so let’s get right to it, shall we?
“Year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instill in us.”
— Hal Borland
“And now we welcome the new year. Full of things that have never been.”
— Rainer Maria Rilke
Credits and Debits
Debit: If you’re hoping 2018 will be a profitable year for your investments, think again: According to market analyst David Collum, a vicious market cycle will soon be completed where we regress to the mean. Collum says between 2009 and 2016, US GDP growth has been tracking the Great Depression, “So you can be thrilled your 401k has appreciated — but it’s sitting on an air pocket because nothing has improved.”
Credit: Did you see this? Last month, a Pennsylvania utility customer got her monthly electric bill and saw that she owed $284 billion. Yes, billion. No, she wasn’t mining bitcoin. Anyway … after a quick phone call, the electric company knocked nine zeroes off the statement; the actual balance was $284.
Credit: Meanwhile, the Wall Street Journal is wondering if the world’s central banks are about to lose control of interest rates. It’s a fair question — but anybody who has invested in bonds better hope not. Stocks too for that matter. At least this time.
Debit: Of course, the auto industry has used the Fed’s artificially-low interest rates to boost sales, but at least one car salesman is now warning that his industry’s business model has “morphed into an ugly free for all” as automotive credit standards have disappeared to help manufacturers achieve market growth at any cost. As a result, “People are buying cars they can’t afford or shouldn’t even have been able to buy.” Deja vu?
Debit: On a somewhat related note, one in three working-age Americans between 23 to 63 share a home with a roommate — or their adult parents. That’s up from 21% just a dozen years ago. Uh huh. By the way, as a precaution, I just warned my 20-year old son, Matthew, that he better not get any bright ideas.
Debit: In case you’re wondering why so many adults live with a roommate — or Mom and Dad — the reason is simple: According to the latest Case Shiller data, every single US metro area saw home prices climb higher relative to last year, while 16 of 20 major U.S. cities experienced home year-over-year price growth of 5% or higher. Unfortunately, that’s double the rate of average US wage growth. Sustainable? I think not.
Debit: Speaking of wages, the average private sector worker in America earned $58,726 last year. Compare that to the average federal worker’s salary of $86,365 in 2016. Think about that.
Debit: Meanwhile, there are more signs that the end of the petrodollar is coming. Officials at the Shanghai International Energy Exchange say they still plan to go live with a crude-oil futures contract denominated in yuan any day now — thereby allowing oil producing nations to bypass the US dollar for the first time since 1973. If that contract does become a reality, then Americans can expect higher prices on imports in 2018.
Debit: Despite all of the disturbing economic news, including the rapidly unfolding macroeconomic news that portends a dismal future for the petrodollar and, by extension, a decline in Americans’ future standard of living, this week Yahoo Finance boldly declared 2017 as “the year the financial crisis officially ended.” Well … okay.
Credit: Than again, maybe Yahoo is right. After all, this December’s final trading day saw the S&P 500 close higher than the previous month for the 13th consecutive time, including a “perfect year” of 12 monthly positive returns — which has never happened before. Not surprisingly, the S&P is now at its most overbought level since 1959.
Credit: By the way, it’s not just Wall St. that’s in a good mood; after many years, it appears Main St. is too. I say that because Mastercard is reporting that shoppers spent over $800 billion during this holiday season; that’s more than ever before. In fact, holiday sales in stores and online between November 1 and December 24 rose almost 5% — that’s the fastest year-on-year pace of increase since 2011. Not too shabby.
Debit: So has the financial crisis really ended? Or is the US economy an illusion — aided by the biggest mountain of consumer, corporate and government debt the world has ever seen, and abetted by the macroeconomic ignorance of 99% of the general population?
Credit: Ron Paul believes it’s the latter; and if that ain’t bad enough, he expects an upheaval similar to the Soviet Union’s 1989 economic collapse — although he doesn’t believe the US will disintegrate into separate countries. Of course, nothing is certain — and I’m sure most folks think Paul is off his rocker — but you’ve got to admit, the fact that such thoughts are even being openly discussed suggests something is surely amiss.
By the Numbers
Here’s the annual performance summary for several selected assets in 2017:
– 9.9% The US Dollar
– 1.7% 10-year Treasury Note
+ 5.6% Silver
+ 13.0% Gold
+ 19.4% S&P 500
+ 25.1% Dow Jones Industrials
+ 28.2% Nasdaq
+ 1355% Bitcoin
Source: CNBC; MarketWatch
The Question of the Week
Last Week’s Poll Results
Are you a saver by nature, or do you have to force yourself?
- I’m a saver by nature. (76%)
- I have to force myself. (24%)
More than 1400 people responded to last week’s question and slightly more than 3 in 4 Len Penzo dot Com readers say saving comes naturally to them. I guess that’s to be expected for most people who enjoy reading personal finance blogs.
For those who don’t follow me, here’s some traffic that hit the Twitter feed yesterday …
Uh oh … my daughter just ratted me out. https://t.co/pAJTGdwQvb
— Len Penzo (@LenPenzo) December 30, 2017
My dad has a Marriott rewards card and he needed to stay 75 nights by the new year to stay a platinum member but he only has 74
so he’s going down the street, checking into the hotel by our house, taking the shampoos, then coming back home
— Neen Bean (@ninaapenzo) December 28, 2017
Other Useless News
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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 last week’s article highlighting so-called rules of thumb that are actually old wives’ tales, Cameron Marvel left this comment:
“Years ago, some famous celebrity (Zsa Zsa Gabor, Elizabeth Taylor, Joan Collins?) was asked about the two month salary rule for an engagement ring. She said that a man should buy as nice a ring as he can afford, because being broke isn’t sexy.”
I wonder if the large number of young able-bodied men these days who would rather live in their parents’ basement than work know this.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-