It’s time to sit back, relax and enjoy a little joe …
Yes, I’m back. I took last Thanksgiving weekend off. I hope you all had an enjoyable and restful holiday. I know I did!
Okay, away we go …
Credits and Debits
Credit: There’s an old saw that says socialism is great until you run out of other people’s money. Of course, what happens next is reality asserts itself, the economy dies, and then the misery begins. Every. Single. Time.
Debit: Just ask any Venezuelan; they happily embraced la revolucion more than a decade ago but, with the plunder of the Treasury complete, now spend their days waiting in endless lines for scarce items or bartering for necessities. Forward!
Debit: Don’t laugh. We Americans have been heading down the same path since FDR unleashed his free-lunch New Deal policies 80 years ago — just at a much slower pace. Well, until recently.
Debit: What’s truly amazing is, despite incontrovertible evidence of socialism’s failures, a growing number of Americans continue to gravitate toward Big Government politicians who promise to take care of our every need from cradle to grave.
Debit: The ugly truth is America has been living far beyond its means for the past five decades, consuming more than it produces and going deeper into debt with each passing year. Unfortunately for us and our artificially-high standard of living, the day of reckoning is almost here.
Debit: By the way, for those who care to dig into the details, it’s easy to see that our hopelessly broken economy is a symptom of a dying empire — despite the Fed’s increasingly desperate attempts to keep the charade going. Yes, I said “charade.”
Credit: One example: the S&P 500. It’s up 1.5% in 2015 — but only because of gains from four high-flying stocks with absurd valuations: Facebook, Amazon, Netflix, and Google. #PlungeProtectionTeam
Debit: How absurd are the current valuations for those so-called FANG stocks? Well … Last week, Google’s stock had a price-to-earnings ratio of 35, while Facebook and Netflix were at 108 and 329, respectively. As for Amazon: it was 966. An average P/E figure is 16. Nope, no bubbles there.
Debit: The stock market isn’t the only indicator that the system is broken either. For most Americans, household income, after adjusting for inflation, is lower today than it has been in more than a decade. In fact, “peak income” in the US occurred 15 years ago in 81% of US counties. But you probably already suspected that.
Debit: The economic malaise is a global problem: 99 major corporations around the world have defaulted on their debt this year — that’s the worst performance since the end of the last financial crisis in 2009.
Debit: Maybe that explains why worldwide container freight rates plummeted an incredible 70% over a three-week period last month. You rarely see sales like that on Black Friday.
Credit: Mexican retail magnate Hugo Salinas Price certainly recognizes that the current dollar paradigm is on its last legs. This week, in a must-read article, he warned that the international monetary system — and the associated world order that it fosters — is crumbling all around us.
Debit: Meanwhile, back in the States, as America was fixated on the shootings in San Bernardino, Standard and Poors quietly downgraded the credit ratings of eight of America’s largest banks. No, really.
Credit: It’s okay though … I’m sure there’s no need to worry. After all, Christmas is just around the corner. And besides, the NFL still has a full slate of games on tap this Sunday.
By the Numbers
Believe it or not, there are just 13 states where the majority of consumers have credit scores designated as prime or near-prime. Here are the top 10:
10 Wisconsin (51.6% of all consumers with good to excellent credit)
9 Montana (52.5%)
8 Massachusetts (53.2%)
7 Hawaii (53.6%)
6 Nebraska (53.7%)
5 Iowa (53.9%)
4 Vermont (54.2%)
3 South Dakota (55.0%)
2 Minnesota (57.1%)
1 North Dakota (57.2%)
Source: Credit.com
Last Week’s Poll Results
What are you doing with the extra cash in your pocket from lower fuel prices?
- Saving it. (42%)
- It’s too little to make a difference. (35%)
- Paying bills. (17%)
- Splurging. (6%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that a strong plurality (42%) say they’re saving the modest cash windfall that we’ve been receiving at the gas pump ever since prices started falling more than a year ago. On the other hand, almost one-third of you say those savings are too little to make a difference. In the end, I think it mainly depends on how much driving you do each week; as a result, most retirees and people who work from home will end up seeing a smaller change in their monthly expenses than those who drive a lot.
The Question of the Week
[poll id="90"]
Insider Notes: The Gold Standard and an Example of Gold Revaluation
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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
I received more than a few messages in my mailbox on the same topic this week, but nobody was more to-the-point than Dan:
What? No Black Coffee?
It was the turkey’s fault. That’s my story, Dan, and I’m sticking to it.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Len,
You can just feel with each passing economic indicator that the end is so close it’s scary. The only indicator that shows anything positive is unemployment and its a joke. Most of the jobs gains were part time/seasonal. I cannot believe the sheep in our country are so blind to this. Oh, by the way I’m calling checkmate in 2016 with the Renminbi receiving Reserve Curreny status. I know China’s fiat currency is no better then our Dollars, but He who owns the Gold makes the Rules! Our idiot political leaders forgot this long ago unfortunately. Glenn Beck says its Zero hour and I cannot find any argument against that.
Many people who have not prepared are in serious trouble, the world needs another Christmas Miracle!
Jared
The system is definitely in distress, Jared. No doubt about it.
Up until Nixon unpegged the dollar from gold in the early 1970s, a single man (or woman) could still comfortably afford to buy a home, support a family, go on an annual summer vacation and send their kid to college on a blue collar wage without being mired in an onerous level of debt. That is the norm in a functioning monetary system because it prevents unbalances that lead to mispricing.
Of course, today the same household needs two blue-collar incomes to have any hope of doing the same thing — and if they can, it is a struggle. This will only get worse until our leaders decide to reset the system, or they wait until it breaks.
I’m afraid they will wait until the system breaks because to reset the system (and lower American living standards in the process) is political poison.
When will the system break? I’m not sure, but I agree, the macroeconomic systemic dislocations are becoming epic and approaching uncharted territory now.