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.
Okay, off we go …
Credits and Debits
Credit: Stop me if you heard this before: This week the Fed ruled out raising interest rates next month and the S&P 500 immediately responded by hitting an all-time high. That’s how any addict hooked on low interest rates would react.
Credit: Yes, sedated stock investors have been getting their Fed fix for so long now that even Bank of America is warning that the markets are in The Twilight Zone and urging investors to hold more cash and — get this — the barbarous relic known as gold. Yes, that gold.
Credit: I see the Austrian Central Bank didn’t waste any time following B of A’s advice — they announced this week that they are repatriating 110 tons of yellow metal that’s currently being “safeguarded” for them by the Bank of England.
Debit: Sadly, central bank zero-interest-rate policies have distorted bond markets around the world so badly that conservative investors are now flocking to relatively-high yielding junk bonds as their new fixed-income haven. This won’t end well either — no matter which path investors take.
Debit: Did you see this? The economies of 32 states are in such bad shape that they’re now dealing with significant budget gaps in fiscal 2015, 2016 — or both.
Debit: With so many states in fiscal distress, it makes the US Senate’s decision to hide the details of the Trans Pacific Partnership trade bill being touted by President Obama before it votes a curious one. Why the subterfuge?
Debit: Of course, the last bill that had to be passed to “find out what’s in it” was Obamacare — and we all know how that worked out. Thanks to Obamacare, last month healthcare costs rose at their fastest pace since 2007.
Debit: But wait, it gets worse: According to the Wall Street Journal, high medical costs incurred by new Obamacare enrollees are causing insurers to raise rates in 2016 by as much 51%. You can bet those outrageous deductibles won’t be going away though.
Debit: Meanwhile, Medicaid sign-ups under Obamacare are skyrocketing beyond advocates’ original expectations — and despite opponents’ warnings to the contrary. Unfortunately, a portion of the resulting cost overruns will be levied on the states after 2016. Oops.
Credit: If only Hawaii’s Obamacare exchange was so successful — guess how many enrollees they got during the special “last chance” enrollment period between March 15 and April 30. If you said “one,” you overestimated.
Credit: Hey, now … If you’re from Rhode Island and Vermont, don’t laugh — those states enrolled just 25 and 97 people, respectively, during the same period. Obviously, a growing number of folks would rather pay the Obamacare tax penalty than buy its over-priced insurance.
Debit: Perhaps if Obamacare was less expensive, union protestors wouldn’t have shut down a McDonald’s restaurant this week because fry-cooks don’t make $15 per hour. Then again, these are the same Utopians who demanded Obamacare be foisted on everyone too. Well, everyone but them.
Debit: By the way, according to the Economic Policy Institute, 36% of all minimum wage workers are age 40 or older. Yeah, that’s the sign of a healthy economy. Isn’t it? Okay … maybe not.
Credit: One thing is certain: Contrary to the Institute’s emotional claims, the demographics of those earning the minimum wage is not a reason to raise it to $15 per hour.
Debit: Then there are those who are currently making nothing at all because they’re hopelessly unemployed. A new survey found that the economy is so dismal, 40% of the unemployed have quit looking for a job entirely. I know.
Debit: Finally … With Memorial Day weekend upon us, some of you may be planning on eating a hot dog or two — just don’t buy one in New York City, where one unscrupulous street cart vendor near Ground Zero was allegedly selling them for $30 each. Sad.
By the Numbers
Speaking of overpriced New York City hot dogs, here are a few facts and figures on the popular summer food:
20,000,000,000 Hot dogs consumed by Americans each year — that’s 70 per person annually.
35 Percentage of hot dogs eaten between Memorial Day and Labor Day.
2 European cities that claim to be the birthplace of the modern hot dog. (Vienna and Frankfurt)
1900 Year “hot dog” first appeared in The Oxford English Dictionary.
$2500 Daily revenue for a Big Apple hot dog cart at W. 67th St. and the West Dr. on a typical summer Saturday.
$50 Amount the same NYC hot dog cart brings in on a typical winter day.
$266,850 Annual fee charged by NYC Parks for a hot dog stand at the same location.
$300 Amount Nathan Handwerker borrowed in 1916 to start a hot dog stand at Coney Island.
$82,900,000 Nathan’s Hot Dogs revenue in 2013.
Source: NBC News
The Question of the Week
[poll id="62"]
Last Week’s Poll Results
How many homes have you ever owned?
- 1 (28%)
- 2 (27%)
- 3 (16%)
- 5 or more (11%)
- 0 (10%)
- 4 (8%)
More than 400 people responded to last week’s question, and it turns out that more than half of all respondents said they owned either one or two homes during their lifetime. In fact, it was almost evenly split. Another 16% have owned three homes, while just as many people owned five or more homes as those who never owned one at all. As for me, at age 51 I have owned two homes; and I’ve been in my current place almost twenty years now.
Other Useless News
Here are the top 5 articles viewed by my 6457RSS feed and weekly email subscribers over the past 30 days (excluding Black Coffee posts):
- How I Live on Less Than $40,000 Annually: Tara from Maryland
- An Easy Way to Save $1500 Per Year Just by Doing Laundry
- The Smartest Way to Eliminate Your Credit Card Debt
- 3 Quick Tests that Predict If You’re Irrational About Money
- Should I Buy a New Car with a Loan or a Used Car with Cash?
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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 out to me at: Len@LenPenzo.com
Here’s an odd message I received in my inbox this week fromJoriss:
Your blog is a total squander of time!
Okay. Now let me guess: You’re a professional fortune cookie writer, aren’t you?
I’m Len Penzo and I approved this message.
Photo Credit: brendan-
Mr Penzo
Your website is very informative, but it seems to me that if someone was new to your site they’d get feeling that all of America’s financial woes were due to low interest rates and Affordable Care Act (aka Obamacare). Riddle me this Batman, if the Feds starting raising interest rates and the Affordable Care Act suddenly faded into the ether would the American economy jump on the fast track to growth and prosperity?
Hi Larry, thank you for your comment.
In answer to your question: no. The American economy has serious structural issues that need to be fixed first. Reducing onerous government regulations and reducing the size of the federal government and its expenditures by half would be a good start — but that will never happen, so I’m afraid our ever-expanding gargantuan debt (caused by a federal government that is far too large) will continue growing until we have a currency crisis. To those who are paying attention, that day is getting closer with each passing day.
At this point in time, there is no way out. US debt is so large that even raising interest rates a few hundred basis points will increase the cost of servicing our debt to intolerable levels. So the Fed is in a box — they kept interest rates far too low for far too long — and now they’re now darned if they raise them, and darned it they don’t.
Larry, get the majority of your self worth in hard assets ASAP! Land, art, machinery and especially gold and silver. Keep as much cash on hand as possible.
“Debit: Did you see this? The economies of 32 states are in such bad shape that theyre now dealing with significant budget gaps in fiscal 2015, 2016 or both.” What is the breakdown by political party? How many of the 32 states are Democrat run and how many are Republican controlled? I have a theory because there is no breakdown, bet it would not be flattering to the Left leaning states. Anyone know the breakdown by political party and care to share it with us?
Karen, I can’t remember the exact breakdown at the moment, but it seemed to be fairly evenly distributed, although I think it leaned blue. One surprise was that California — a very blue state — was NOT on the list. If you click on the link, I believe there is a map outlining the affected states.
The point it, regardless of who is running the show, the economies are so bad that tax revenue is drying up. Even governors and legislatures in some red states are considering tax increases now to make up the difference — which is not smart, as they should be looking at ways to reduce spending instead.
I wouldn’t be surprised either way. Because all US states (except Vermont) cannot run structural operating deficits. They can however run capital deficits for long term constructions and the sort ….
That is why Im surprised by most governors running for President and claiming …. “ho! hum! ho! hum! i balanced my state budget …” … well, you had to. It is written into your state constitution. Unlike the federal government / US constitution …
And my state OR has a kicker rule. Because it collected >2% surplus taxes in 2014, we are going to have some of the money returned to us …. and it is a whopping 9+ rate …. Yippeee … (and OR is such a blue state …)
Hey Len,
This part of your blog is always my favorite. Where do you usually go to find your stats? It’s like there are two worlds out there when I read your stats and hear just the opposite from other sources. I find that very confusing.
Thanks, Paul. The supporting data is usually found by just clicking on the links within each credit or debit.
The one thing that bothers me about the continuous Obamacare bashing is the following:
Fine, I agree that Obamacare is an imperfect solution to the status quo in US.
Republicans have had full control of the house and senate for almost half a year now. Why aren’t they passing an alternative yet? Which incorporates all the free market principles? Granted it won’t pass the senate filibuster or Obama …. but they didn’t stop them from trying to repeal Obamacare …. like 60 times? I lost count … What is stopping them?
P.S. I always thought Obamacare should’ve been an opt-in. i.e. don’t have penalties, don’t have mandates …. only have benefits for added cost. Only require that if you want pre-existing coverage exclusion, no lifetime coverage limits, etc, etc, you have to remain insured from day 1.
If you want to remain uninsured, that is your prerogative, no penalties, no mandates.
If you want to add insurance on day 2000, say, then sure, any company that wants to sell it to you can take you. Only the company can deny coverage for pre-existing conditions, etc, etc.
And if you want to add insurance on day 2000 and want all the protections of Obamacare, then you pay all the necessary premiums from day 1 to day 2000 + I don’t know … say a 50% penalty to discourage late adders … whatever makes actuarial sense / disincentivization of free loaders.
This way, people who want the old status quo have it. No need to impinge on freedoms. People who want them can get new benefits for new costs. People who change their minds midway (independents?) can get new benefits for new costs + penalties for late enrollment.
The trouble with Obamacare is that the insurance companies would be instantly bankrupt if it was voluntary because the math doesn’t work. Now that it’s “mandatory,” the math still doesn’t work, so it will still go bankrupt, it will just take a little longer.
As for the alternatives, things were working relatively well before Obamacare — and certainly much better than it does now. Before O-care made it illegal, one could buy very affordable catastrophic care for under $100 per month.
That being said, prices would come down if we simply opened up competition via portability across state lines.
As usual, healthcare was affordable for everyone and prices didn’t begin skyrocketing until the government got into the insurance game back in the 1960s; it’s no different than college tuition costs. That’s where the real solution sits: get the government out of the health care industry and lower prices will follow.
Your reply again bashes Obamacare. Like I said, Im tired of Obamacare bashing. My question really is where is the better plan in the real world? Not in articles . Not in one-liners not in calls for free-market, calls for liberty, calls for portability, calls for competition, calls for malpractice reform. I don’t want to hear a 100 NOs. If one has enough time on their hand to vote a 100 NOs, then they most certainly have enough time to think and propose a replacement plan that passes even once through the House and atleast debated in the Senate even if it is rejected. Why are the Republicans sitting on this amazing cure-all plan?
Everybody knows (assuming one paid attention) Obamacare was rigged to hide costs by frontloading revenues and delaying benefits so 10yr cost/benefit projections were very rosy. Everybody knows getting people into the system (which is what the mandate does) is needed to control costs. But the best kind of incentive to get people into the system is free-will. Free to reject Obamacare but you lose the benefits of pre-existing condition exclusion, guaranteed coverage, etc, etc and need penalties + continuous insurance payments to get in so people dont game the system by waiting till they get sick. And nobody can complain it impinges on their liberties. If one likes the pre-Obamacare system, one is most welcome to stay inside it.
And I most certainly disagree with affordable catastrophic care under 100$/mo. They provide zero benefit in our world where (1) insurance rules over all (2) I cant get a simple answer on how much a simple office visit costs (3) hospitals can charge 200$ for ibuprofen and 800$ for bandages. A >5000$ or >10000$ catastrophic coverage plan doesnt do jack except make one think they are covered but my taxes and/or my premiums still pay for their uncompensated care. Health-insurance-industry-payment-for-everything must be entirely killed and true market reform, price visibility, etc in healthcare must occur before a catastrophic insurance plan can make any sense.
Kyron: There was a previous system that worked well — it was called NO OBAMACARE. There can be no argument that for the vast majority of Americans, things are much worse now than before this abomination was passed without a single Republican vote in the dark of night on Christmas Eve. Indeed, there were plenty of polls out there saying that 87% (or thereabouts) were happy with their healthcare BEFORE Obamacare was created to “save the day.” In other words: O-Care was a “solution” to a “problem” that didn’t exist. A Utopian dream.
If “everybody” knew that Obamacare was rigged to hide costs, then why was it ever passed in the first place? (Never mind how it got any support from the public before the bill became law. I remember the President and his followers mindlessly repeating ad nauseum that average healthcare premiums for a typical family would drop by $2500 annually. LOL. Unfortunately for the rest of us, many unsophisticated folks lapped that up.) I knew it, and most people against Obamacare were shouting from the rooftops that this law was a disaster because the math didn’t work — but we were shouted down as being “uncaring” and “selfish.” Meanwhile, the advocates got enough voters to swallow the Utopian dream hook line and sinker.
Catastrophic insurance, now banned because of Obamacare, was indeed viable, and worked very very well for young people despite your assertions to the contrary that catastrophic insurance didn’t pay out to those who needed it. You only used it when your costs were catastrophic and surpassed a high dedcutible. Otherwise, you paid for everything. In fact, catastrophic insurance was essentially Obamacare today — but priced fairly and correctly — it offered low premiums and a high deductible, and no taxpayer support was required to keep it viable. With Obamacare, it’s high premiums and high deductibles — and lots of taxpayer subsidies and wealth redistribution to make it “work.” How is that better???????????????????? It’s not, which is why Obamacare abolished catastrophic coverage; it couldn’t compete on a level playing field!
As for solutions: Aside from catastrophic coverage, I just offered you another alternative solution (portability across state lines), but you reject that too — and fall back on the tired and intellectually dishonest Democrat “Republican do nothing” talking point. Why? No health insurance system can ever survive that allows exclusions for pre-existing conditions for the same reason you can’t buy homeowners insurance after your house burned to the ground, Kyron. If that was possible, why would anybody bother buying homeowners insurance at all until they really needed it? Health insurance is no different. And that just goes to show why “free will” isn’t going to come to the rescue for Obamacare or any other government-based solution, including single-payer: self-interest always rules the day. When they’re asked to vote with their wallets, people end up listening to their brain and not their heart.
If you truly want to rely on free will to ensure a vibrant, affordable and efficient healthcare system (as I do), we all need a free market without any government intervention; but it doesn’t seem to me that you want that. We can’t have our cake and eat it too — that’s only possible in Utopia! Obamacare clearly demonstrates that.
I’m sorry you don’t like the bashing — but I don’t like Obamacare. It’s a disaster that was sold on a bed of egregious lies and passed by a gaggle of ignorant and/or naive lawmaking ideologues. And since knowledge is power, the bashing will continue here until it is repealed.
Hey, long post but you are getting worked up over nothing.
I don’t care even a little bit that you are bashing Obamacare. Im not going to sit here and defend how it was passed in the middle of the night, how somebody lied to gullible people, etc, etc.
But I DO care that you are bashing and there is no alternative solution. Where is this portability infused solution? Where? I don’t want ideas. I’ve heard many. I have many. I want action. NO-to-Obamacare passed 50-60 times in the House, perhaps? …. where is the Alternative-to-Obamacare?
You just didn’t get my proposal. To quote your example, if your house get’s burnt, then you don’t have any coverage. Tough luck. If free-will made you chose to go without Obamacare’s insurance’s benefits of pre-existing coverage, then you will never get retro-active pre-existing condition coverage. Since you love the existing system so much, you shouldn’t have a problem with this method when your house gets burnt. You chose it. You can however enter the insurance market however you choose.
And Im all for free-will based free-market, free-from-government system. BRING IT ON. Im waiting for it. Where is it? What we had before Obamacare was most certainly not a free market system. No cost transparency (yes, Im sure there is a government rule that mandates that hospitals should not have cost transparency), everything through insurance (yes, Im sure before Obamacare, the government forced the hospitals and providers to accept only insurance).
And even Republican budding efforts (aka just talk for now) to replace Obamacare strip away most Obamacare mandates but they most certainly don’t call for returning to pre-Obamacare. If you love pre-Obamacare, you are most certainly in the minority.
There is however one aspect where the government is the major culprit. That is their misplaced emphasis on fee-for-service model for their Medicare programs …. which they ultimately forced this system on the entire market.
And let me know when the free market solution is ready. I am ALL FOR IT.
Anything else left unattended?
“Where is this portability infused solution? Where? I don’t want ideas. I’ve heard many. I have many. I want action. NO-to-Obamacare passed 50-60 times in the House, perhaps? Where is the Alternative-to-Obamacare?”
How about H.R. 3121 or H.R. 2300? Of course, these bills by the “Do Nothing Republicans” were squelched by Democrat Senate Majority Leader Harry Reid.
Even today, the Republicans are offering up a compromise Obamacare Lite bill to help make O-care at least a little more tolerable while the President is in office — since a complete unconditional repeal is out of the question as long as he has the veto pen.
There are others, but I don’t feel like doing all the work here for you.
(Now let’s bury those DNC talking points.)
You just lost all credibility Len.
What did you do? Google and report the first 2 hits that you “thought” were Republican alternatives? Did you even bother to research them further? This is classic confirmation bias and system I false coherence. But Im sure it made you feel real good that republicans are solution people.
Both HRs were NOT EVEN VOTED on in the House. i.e. they were such amazing solutions that didn’t even pass the republican controlled House (never mind the nasty Reid senators of yester-Congress), they are simply stuck in “referred to committee”. And of course, those nasty Reid senators didn’t stop the House from PASSING Obamacare repeals … like …. 50 times? 60 times? …
I’ll say this again. If you had time on your hands to pass something 50 or 60 times, and you had no time to pass an alternative even once … atleast through the house of legislature completely controlled by you, something is deeply indicative of idea bankruptcy and the hollowness of your own talking points …… … but … yeay ….. let us reduce govt intrusion … let us increase competition … lets … (every RNC talking point) ….
Let me know when those bills are actually PASSED. And if they PASS the house but fail the senate due to some reason (yes, nasty nasty democrats), then let the house pass the same HRs another 50-60 times. … and then, let’s most certainly talk again about republican solutions to US healthcare system.
You’re moving the goal posts now. Sorry — that doesn’t fly. Yes, my mistake it they didn’t get out of the House; that’s what I get for not taking the time to do due my due diligence on research that you didn’t even try to do in the first place. Even so, they are proposals nevertheless. Remember, you blindly swallowed the DNC talking points and insisted there were NO alternative proposals — a claim that I easily shot down. So now that you’re cornered, you are resorting to psychological projection: it is YOU who lost credibility and is guilty of confirmation bias.
By the way, REPEAL of Obamacare and a return to the previous (working) system IS an alternative too. You just won’t accept that, but that doesn’t make it any less so. In this case, the saying is true: None are so blind as those who refuse to see.
The Democrats shamelessly created this mess upon a bed of egregious lies and Utopian deceit — and without a single Republican vote, but plenty of warnings that it wouldn’t work. Therefore, the Democrats need to fix it; after all, they’re 100% responsible for it.
What cracks me up is how the Democrats who insisted on passing — and are 100% responsible for enacting — a failed law to “fix” something that wasn’t broken in the first place now demand that Republicans propose an alternative that will correct the problems the Democrats created by passing said law — and if the Republicans DON’T this whole Obamacare debacle is somehow THEIR fault. Incredible.
One last point: Remember, there are democrats on every committee too; they could have voted to get those Republican alternatives (that, according to the DNC and its followers, didn’t exist) to a House vote just as easily as the Republicans. Why didn’t they? Were they just being obstructionists too?