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 everybody had a wonderful Christmas. I know I did!
Okay, off we go …
Credits and Debits
Credit: Is America a great country, or what? After all, where else can policemen earn more than $300,000 annually? If you don’t believe me, just ask one of those eight New York Port Authority officers who did this year.
Debit: Surprised? You shouldn’t be — why do you think it costs $14 to cross a bridge into the Big Apple?
Debit: By the way, those paychecks are a prime example of government excess: $300,000 is significantly more than the average medical doctor earns in a single year.
Credit: Truth be told, paying even $200,000 — overtime included — for any job with an almost-unlimited pool of potential applicants is senseless.
Debit: And, yes, those humongous police paychecks help level-set the cops’ taxpayer-provided pensions too. Of course, to earn that much, they have to work upwards of 100 hours almost every week. Really?
Debit: How effective can anybody be working 100 hours week after week? Even working over seven-days, that leaves less than 10 hours per day for family, errands, commuting, sleep, and everything else. Well … assuming they aren’t sleeping on the job. Just sayin’.
Credit: Did you see this? According to Politico’s Michael Grunwald, the US economy is “awesome” too. Yes, “awesome!” I bet there are at least eight New York Port Authority cops who are nodding their heads in agreement right now.
Credit: Mr. Grunwald makes his case using November’s job numbers, the soaring stock market, falling oil prices, and the latest GDP print, which was revised upwards to 5% — the highest rate in more than 10 years. Hooray!
Debit: Sadly, in the same way a child believes that he really did see a magician cut his on-stage assistant in half with a saw, Mr. Grunwald takes the economic data he’s presented with at face value, while dismissing us party-poopers who dare to reveal the statistical sleight-of-hand. To Mr. Grunwald, guys like me are just “Chicken Littles.” No, no … it’s okay; I’ll find a way to carry on. Somehow.
Credit: The truth is, crashing oil prices are not indicative of an expanding economy — especially one as large as the United States that is, supposedly, growing at the frenzied pace of 5%.
Debit: You can believe America’s GDP ran at a 5% clip last quarter — but please, please, explain how that’s possible in the face of declining consumer spending and persistently stagnant wages — the Port Authority police notwithstanding. Lord knows economic cheerleaders like Mr. Grunwald aren’t.
Debit: As Zero Hedge points out, in reality, that revised 5% GDP figure is largely due to unabashed accounting gimmickry: In fact, roughly half of last quarter’s growth was attributed to previous consumer spending on — get this — those outrageously expensive Obamacare premiums. Forward!
Debit: As for that misleadingly “low” 5.8% unemployment figure … It doesn’t account for the US labor participation rate being at its lowest point since 1978; it also fails to highlight that, despite a growing population, fewer US-born Americans have jobs today than in 2007.
Credit: Then there’s the biggest “tell” of all: the Fed’s outright refusal to end its dollar-killing zero-interest rate policy — which has been running for five years now. If the American economy truly is as rosy as the GDP — and mainstream pundits like Mr. Grunwald — suggest, then interest rates should be rising. Sharply.
Debit: Yes, your 401k balance may be as flush as ever, but it’s only because of the Fed’s reckless easy-money policy. As Bull & Bear Mash notes, the S&P 500 is now so completely detached from the commodities market that a collapse is all but inevitable.
Debit: As Charles Hugh Smith rightly observes: “If the Fed can’t raise interest rates even a quarter-point without threatening to collapse the unstable pyramid of debt-based affluence and consumption, then what does that say about the fragility of (US) ‘growth’ and ‘prosperity’?”
Credit: It’s a simple question. I just wish mainstream economic cheerleaders like Mr. Grunwald would help out us Chicken Littles by answering it. Now that would be awesome.
By the Numbers
Like most anything else in the economic world, wages are generally a function of supply and demand. Last year, the annual mean US wage was $46,440. Here are the annual mean wages for the ten largest occupations in America (from 1 to 10):
$25,370 Retail salespersons
$20,420 Cashiers
$18,880 Fast food and other food prep workers
$29,990 Office clerks
$68,910 Registered nurses
$20,880 Waiters and waitresses
$33,370 Customer service reps
$26,690 Laborers and freight/stock movers
$34,000 Secretaries and administrative assistants
$25,140 Janitors
Source: Bureau of Labor
Other Useless News
Here are the top 5 articles viewed by my 6203 RSS feed and weekly email subscribers over the past 30 days (excluding Black Coffee posts):
- 10 Things That Today’s Middle Class Can No Longer Afford
- 10 Essential Negotiating Tactics Everyone Should Know
- How to Quickly Tell If Your Grocer’s Produce Is Genetically Modified
- 3 Reasons to Have an Emergency Fund That We Don’t Talk About
- 8 Reasons Why My Favorite Charity Is Me
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The Question of the Week
[poll id="40"]
Last Week’s Poll Results
Have you ever flown on a jumbo passenger jet with twin-aisles?
- Yes (66%)
- No (31%)
- I’m not sure. (3%)
More than 300 people responded to last week’s question and it turns out that two out of every three folks who answered have had the pleasure of flying on a twin-aisle passenger jet. To-date there are 12 wide-body aircraft that have been in service at one time or another in the West (note: bold signifies aircraft that are still in production): Boeing’s 747, 767, 777, and 787; Airbus’s A300, A310, A330, A340, and A380; Lockheed’s L-1011; and the McDonnell Douglass DC-10 and MD-11. The Airbus A350 is a wide-body competitor to Boeing’s highly-successful 787 that is scheduled to enter service this January.
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
This week I got this odd question from 69GTO:
Did you ever wonder why the people who we’re supposed to invest our money with are called ‘brokers’?
Beats me. Truth-in-advertising laws?
I’m Len Penzo and I approved this message.
Photo Credit: brendan-
Len,
You used to link to other bloggers but no more – new policy?
Just for December, Suzy. They’ll be back next year.
I can’t comment on transit police allegedly working 100 hours per week. My Uncle Johnnie used to be a motorman on the subway in New York. The last year or two of his job he clocked in for 80-100 hours per week every week. Much of the time he was sleeping in a store room and other motormen covered his work. They were happy to do so because when their last year or two on the job came, other motormen did the same for them. Retirement pension amount was predicated on the last year or two of number of hours worked per week. They then retired with two or three times the pension for which they were entitled because of the chicanery.
Voting button not working again
Dang. I’ll see what I can do, MaryAnn.
This overtime gimmick thing goes on with firemen as well. Also, they know people in other civil service type jobs and when they do retire, many at young ages, they get into another sweet kind of gig with another public pension. Meanwhile, in the private sector, if you were even lucky enough to have a small pension, as you get older they cut it off at the knees and cap your salary; you can’t collect on it until you are of full Social Security retirement age-even if you leave the company earlier- and you have to hope there is anything left when you do get to that point. Sickening….
Yep. Don’t get me started on those gamed government pensions, MaryAnn. The real financial problem with them is that the recipients end up retiring at age 50 (or shortly thereafter) and then they collect a six-figure pension for the next 30 or 40 years. That is not only ludicrous, it’s also unsustainable — and it’s only “possible” at the moment because the taxpayers are on the hook for that. Those ridiculous pensions would put any private sector company out of business.
Here’s the thing: When the dollar finally takes its final bow — and I expect that to happen sooner rather than later — all of those bloated pensions will not be worth the dubious promises that currently back them. And while that will be good news for the taxpayers who are currently being mugged by these pensions, it will be disastrous for the police and firemen who were expecting a very comfortable existence over a very long retirement period. Those who put all of their eggs in their fat-pension basket will be forced to find employment once again.
Yeah, the port authority’s employees appear to be pulling in excessive overtime shifts and appear to be loop-holing the pension system to improve their “best 3 years of salary”. I hope it is genuine work. If not, I would have a beef too.
Unless you are claiming these guys are frauding the system, may I offer a little alternative perspective?
1. Engineers on the production side in the tech company I work for routinely put in 80-90hrs per week. They are always on call. If paged, they must get up at 2am or whenever and handle production issues, come in to fix problems and they don’t get to leave until problems are fixed. No night shifts, no weekends. These are my colleagues.
2. Newly hired wall street investment bankers: 14-16hrs every day is not uncommon for the first 2-3yrs. 2 close family members did this. They may get 1 day off a week if lucky.
3. With that in perspective, soldiers, firemen, police put their lives in danger versus engineers and bankers …. do they not deserve a risk premium for the same number of hours worked (assuming genuine work)?
4. Barrier to entry is reasonably low (compared to engineering / PhD and banking / MBA) for policemen. Starbucks waiters / waitresses would love to get in on this cash cow from their current 20-30K. If you want 300K, go to NY and get in with this system. Why are all the free market proponents on this site complaining? Let’s get our Adam Smith invisible hands working for our own self interest ….
“Why are all the free market proponents on this site complaining?”
Because the PA’s taxpayer-provided pension plan (and its lax rules which encourage further gaming of the system) is not based upon free market principles, Kyron. It’s due to cronyism.
(And to your third point: When it comes to risk of death or injury, BLS statistics show that police and firefighters are not even among the top 10 most dangerous jobs in the US.)
Hi Len,
Yeah, I agree with you on the pension plans. I said as much in the opening sentence. Infact, I think all pension plans should be killed and people should be incentivized to save for their own retirement. What you save/invest/grow is yours. Governments/Municipalities should not be assuming unlimited (and unfunded) liabilities.
Regarding risk, my point wasn’t that police / FFs are the highest risk jobs, just that they assume more risk than wall street bankers so I am not worried if both genuinely work 100hrs a week and police get paid more.
Per the article, the job pays 40$/hr (seems high but again doesn’t seem insanely unreasonable to me for their job) and they get 80K/yr for normal time. Overtime is paid at 1.5x, so doubling their hours to 80hrs/wk makes it 200K salary.
And so, let me also end again with (1) I don’t support these lavish pension plans and loopholes, (2) don’t support non-genuine work, (3) don’t support fraud. So, if those things are satisfied,
my point is that 40$/hr is not as insane as the final number of 200-300K/yr that everybody seems to be railing against ….