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.
I hope everyone had a terrific Thanksgiving! As usual, I ended up stuffing myself, which is only appropriate for a turkey like me.
The only surprise at this year’s family gathering occurred when I cut into a pre-ordered “apple” pie we got from the bakery and discovered that it was filled with … peaches.
I can only assume that somebody else out there who was expecting a peach pie for Thanksgiving ended up with our apple pie. I hope they enjoyed it.
No offense to my Georgia readers, but I’m not a real big fan of peach pie.
The good news is we also had a pumpkin and chocolate cream pie to enjoy. So I did!
Okay, on we go …
The Way-Back Machine: Past Posts Of Mine You May Have Missed
From November 2009:
Evaluating My Thanksgiving Dinner Scorecard – The last time we had Thanksgiving dinner at my house was back in 2009. A quick glance at what we spent that year reminded me of just how expensive the actual traditional turkey-day meal can cost.
And Here’s Some Other Posts You Might Enjoy …
Wisebread – 12 Gift Ideas for Crafters
Kiplinger – Ten Holiday Shopping Tips
Reach Financial Independence – Is It Justifiable to Spend a Lot on the Holidays?
Budget and the Beach – Shopping Deals for the Rest of the Year
The Savvy Scot – Are You Ready to be a Landlord?
Credits and Debits
Credit: My family knows that Thanksgiving is my favorite holiday of the year. Of course, when I was a kid, there was nothing better than the post-Thanksgiving run-up to Christmas Day — but I don’t feel that way any more.
Debit: Now, sadly, the Christmas season has become a long hard slog, punctuated by the scourge of hyperconsumerism that typically kicks into overdrive on Black Friday — and all the ugliness than comes with it. Hey, I’m not sayin’. I’m just sayin’.
Debit: On second thought … check that. Shoppers are no longer waiting until Black Friday to take part in all of the embarrassing fights, stampedes, brawls and other mayhem — it’s now happening on Thanksgiving Day too.
Debit: Heck, even the parking lots are dangerous now. On Thanksgiving Day, two men were arrested after a stabbing over a parking space at a Walmart in Washington, DC. That’s an arguable improvement over last year, when two Florida Walmart shoppers were shot on Black Friday during a dispute over a parking space. I know.
Credit: With all that in mind, it’s probably no wonder that a recent CBS News poll found that half of those surveyed dread holiday shopping. Count me among that group too. Here’s hoping that I can get most of my holiday shopping done this year on the Internet.
Debit: In other news, the federal bailout of Detroit is in full swing. The city just received a $24 million grant that will hire up to 150 firefighters. Who thinks Detroit will be able to continue paying for those firefighters when their federal handout expires in two years? Neither do I.
Debit: Following the lead of the European Central Bank, the Fed is now considering dropping the interest rate it pays banks on excess reserves to zero. So US banks are now warning such a policy might result in them charging depositors a fee to hold their money. In other words: negative interest rates.
Credit: The truth is, our financial system is in serious trouble when the bankers are openly expressing concern about people saving too much of their hard-earned money. Huh? It’s just more proof that we are now living in a Bizzaro world where up is down and black is white.
Debit: By the way, did I mention that the Fed is, curiously, now also calling for new policies that can be used to stop future bank runs? Oh yes, they most certainly are. Coincidence? My Spidey sense tells me it’s not.
Debit: For those of you who continue to insist that the Fed has inflation under control, how do you explain that the average price of electricity in the US has hit an all-time high every month for the past ten months? Or that the average electricity price has increased 42% over the past decade?
Credit: Speaking of inflation, if you haven’t been following the biggest “investment” craze since Beanie Babies, check this out: The digital currency known as bitcoins were trading at over $1200 apiece last week. Eleven months ago they were selling for $10.
Credit: Of course, like the Beanie Baby mania, bitcoins look like a scheme that’s eventually going to end up burning a lot of naive people who are looking to make a fast buck. Or not. At least Beanie Baby owners will always have something tangible that they can actually hold in their hands.
Debit: A savvy bitcoin owner in Wales who purchased 7500 of the “coins” for mere pennies back in 2009 knows all about their virtual nature. Several months ago, he mistakenly tossed the hard drive that held them, and now he’s desperately searching a local landfill for it. I would too — those bitcoins are currently worth $6.5 million.
The Question of the Week
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By the Numbers
According to Wikipedia, “Bitcoin is an open source peer-to-peer electronic money and payment network introduced in 2009″ by an anonymous software developer using the nom de plume Satoshi Nakamoto. A little more info on bitcoins:
11 million The approximate number of bitcoins currently in existence. (Well, minus the 7500 that are lost in that Wales landfill.)
21 million Total number of bitcoins that can eventually be produced via the software algorithm that controls the “mining” process.
10,000 Number of bitcoins used for the world’s first bitcoin purchase: $25 worth of pizza bought by “Laszlo” on May 22, 2010.
$12 million Approximate market value of 10,000 bitcoins today. (I hope Laszlo enjoyed his pizza.)
Sources: Wikipedia; BBC; StuffExists.com
Last Week’s Poll Results
Will you be leaving your house to shop on Black Friday this year?
- No (80%)
- I’m not sure. (11%)
- Yes (9%)
Almost 300 people responded to this week’s question. Assuming my survey is accurate and 4 out of 5 people really did stay home, it’s amazing how the stores were still so crowded on Black Friday. Can you imagine how congested the stores and roads would have been if, say, 9 out of 10 people felt the need to stock up on things due to an unforeseen emergency?
Think about that — then make sure you’re prepared, so you don’t have to ever find out.
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
Jenny, had a bone to pick regarding my claim that people who can’t live on less than $40,000 per year have nobody to blame but themselves:
“ Sorry pal, this doesn’t work for everyone. Maybe we should all move to where (you) live!”
Jenny, I was born, raised, and still live in Southern California. Frankly, it seems like everybody but you already has moved here.
I’m Len Penzo and I approved this message.
As ever, a very entertaining round up. Who would have thought 10 years ago that we would be talking about NEGATIVE interest rates – its crazy!!
bitcoins? who knows, tulip bulbs were very hot, traded and sold to goods services and cash. Personally I do not hold any, I do know that no way in h they would end up in the trash!!!as for paying a bank to hold my money, sorry guys but as long as cash has a cash value, it comes down to that it stays with time and if they are trying to “prevent bank runs” i am half serious about taking it out to the penny every time I get paid, especially if they are trying to “prevent” a bank run, that tells me that they are covering their own backsides and to h with the customer….cannot have that ever!!! and in a bank, if they will not allow you to have your money then I probably will nver see it again since they will take what is left and haul butt with it!
The jury is still out on bitcoins because the governments haven’t been able to get their hands on them yet.
Governments will want to control bitcoins so that no income goes unreported and untaxed.
I am Canadian so my Thanksgiving was last month. I am pleased that one of your tv networks is running a Thanksgiving Star Wars marathon. 3 down, 3 to go.
That’s funny that Jenny seems to think everyone should live here.
Firstly, Southern California is crazy expensive. You want to live on $40,000? Maybe here isn’t the best place. (I live in Santa Barbara – I could live on $40k, but only after the mortgage is paid off.)
I hate holiday shopping. I am hand making a lot of holiday gifts this year (crochet, sew, etc.) Rest will be bought on line.
Last year, spouse and I got each other bathroom stuff (a new sink to replace the aging pedestal and a new toilet). Holy cow our water usage went WAY down. That was the gift that keeps on giving.
(1 + 0.0357)^10 = 1.42
Or 42% over a decade is only 3.57% annualized – and not crazily out of line with CPI
And so, Sam, my point remains unchanged: there is price inflation. (Contrary to what many people would have us believe.)
If all anyone ever bought was electricity you’d have a point. I also buy stuff that runs on it sometimes.
Yeah, you’re right, Sam. There is no inflation. No, siree.
We’re getting as much for our money now as we ever did.
And every time producers shrink their package sizes they lower their prices too.
Yep. Nothing to see here, folks. Move along.
All that can be happening and still no inflation. You can’t selectively exclude things people buy because they are less visible in your everyday life.
Sam: Generally speaking, the most important things in people’s lives are shelter, food and energy — and the last two aren’t even counted in the “core” CPI figures released by the government.
Where I live, inflation is noticeably affecting all three. Where do you live?
Do you want it to be convenient, or do you want it to be right? And headline CPI numbers do include everything – and are not way out of line with core anyway. Just less jumpy.
Sam: Do you work for the government?
No. I wonder if it concerns you that your supposed conspiracy is public knowledge? That the market is well aware of it, yet it continues to price inflation at under 2%?
Doesn’t it bother you that your Austrian theory of inflation based on base money does not take into account that if the Fed doubles base money, and promises to half it in 1 year there would be no inflation?
Your answer seems to be to make up your own inflation statistic, rather than understand the existing one. I would say that’s a dangerous way to plan your future finances.
Now you’re conflating monetary inflation with price inflation.
You seem to think that money is not subject to the laws of diminishing marginal utility. For example, hyperinflation results not from rising prices, but from the loss of confidence in a currency that is being printed in huge quantities. The high prices are a symptom of loss of confidence.
By the way, that day is coming. Whether you want to accept that fact or not.
In our debt-based monetary system, flow trumps stock.
Back to price inflation: Would you say there is price inflation reflected in current stock market valuations?
” Would you say there is price inflation reflected in current stock market valuations?”
I would say the price of a single asset class is an even worse indicator of an economy-wide statistic than a few commodities.
Do you see evidence of price deflation reflected in gold?
Short term, yes. In fact, it’s been on sale for a long time! Of course, your comment suggests you do not understand the ultimate reason for owning gold.
Two questions for you:
1. Do you think the central banks are worried about the falling price of gold? They don’t seem to be because they’ve been buying it hand over fist for several years now. Strange, don’t you think? — considering they want you to believe it isn’t money. I suspect you believe gold isn’t money either.
2. Are Federal Reserve Notes money?
I don’t have a philosophy on money. I wonder how you reconcile all your “evidence” for price inflation with the price of gold from 2011 to now?
And I’ve your “ultimate reason for owning gold”. It sounds like the kind of rationalization I’d make while hanging on to something that just lost 30%. It’s also the big shift in marketing pitch the gold hawkers use.
Just as I thought; you don’t understand the difference between money and currency, or the ultimate reason for owning gold — otherwise you wouldn’t be asking the silly questions you’re asking.
Let’s just agree to disagree, Sam. You continue putting your blind faith in the world’s failing fiat-based monetary system, storing all of your wealth in increasingly-worthless Federal Reserve Notes that are being conjured up out of thin air at the rate of $85 billion per month, trusting the world’s central bankers to maintain the value of the currencies they’re printing with reckless abandon, and believing that everything is going to be just fine.
In the meantime, I’ll continue to protect my hard-earned savings by keeping a portion in gold and silver.
Best of luck to you.
how is losing 30% protecting anything? How long does nothing have to happen before you say you need to prepare for real life?
I’m not sure where you are getting your figures. Even so, I haven’t “lost” anything, Sam. I just checked the safe deposit box and guess what: all of my ounces are still in there — regardless of whether their “price” in Federal Reserve Notes goes up or down. (Preferably down, since I like buying things on sale.)
and don’t say you didn’t lose 30% because gold is the measure of prices without explaining the contradiction of price inflation since 2011!
You’re showing your ignorance about precious metals with every additional comment you leave now, Sam. Time to give it a rest.
You keep ignoring the questions instead of enlightening me!
If India decided to buy up all the gold in the world, and the U.S. was using gold as currency, prices in the U.S. would fall drastically would they not?
And if that’s true, how can you believe that your gold today with a certain level of demand would hold its value at a future date that has an unpredictable level of demand?
To keep an item’s price level the same relative to a basket of goods, the supply has to be able to go up or down to match demand.
And is the cost of food and shelter more important to people than having a job? Because that’s the Feds tool: cause unemployment to bring down prices.
Heh. Okay.
You’re a funny guy, Sam. Now please stop peeing on my leg and telling me that it’s raining.
(By the way, the Fed is good at only two things: exacerbating naturally occurring boom and bust cycles, and debasing the US dollar.)
Perhaps you can explain a demand side reaction to a price increase on the supply side that does not cause short term unemployment, then.
I lived on 39k last year in southern california. You pretty much break even and can’t save, and hope and pray an emergency doesn’t happen. Long story short it’s possible, but kind of sucks. Count me in as someone else who hates holiday shopping. Online is the way to go and hey, why not hand out gift cards. Who can’t use a gift card? 🙂 Thanks so much for mentioning my post!