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.
Let’s get right to it this week …
Credits and Debits
Debit: Although restaurant sales are up 5% for the year, they’ve fallen during three of the last six months. If so, analysts say that could be signaling tough economic times ahead. Hey … Don’t blame me — I’ve dined out a lot this year. Just ask my bathroom scale.
Debit: Judging by the latest durable goods data, there’s little doubt the tough times are already here. Yep. Orders for things like washing machines, furniture, and household electronics saw their biggest drop in two years.
Debit: Meanwhile, the homeownership rate is now at its lowest level since 1965. Then again, I guess it’s hard for anyone to buy a home when the majority of jobs being produced in today’s economy are low-paying service industry positions.
Credit: With fewer and fewer good-paying jobs being created it really shouldn’t be much of a surprise to hear that the subprime auto loan bubble just popped. The good news is, the demand for repo men will soon be going through the roof. Well … it’s good news if you need a job that pays more than the minimum wage.
Debit: Needless to say, non-performing loans are never good news for the banks. And it certainly isn’t good for struggling Deutsche Bank; on Wednesday they announced that their profits fell 98% last quarter. Uh oh.
Debit: Believe it or not, banks don’t like negative interest rates either — partly because their customers hate them. Even so, English bank NatWest is now threatening to charge depositors on cash held in their accounts. It’s not just NatWest; the Royal Bank of Scotland is too. You know what that means, don’t you? The rest of this year should be very good for mattress sales. And gold.
Debit: The central banks’ negative interest rate policy is why US public pension long-term returns are expected to drop to the lowest levels ever recorded; they’ve fallen almost 40% since 2001. According to the Wall Street Journal: “The dip is intensifying a national debate over whether states and cities can continue to afford pension obligations.” What debate? The answer is “no.”
Debit: The current economic dysfunction we all find ourselves in became inevitable after the US dollar lost its anchor to gold in 1973. Since then, America has transformed itself from an industrial economy to one dependent on financialization. That’s great for Wall Street — but bad for Main Street.
Credit: Eventually, however, it will be bad for Wall Street too. At that point, the free lunch era in America will finally be over — and Main Street will rise from the ashes. No, really.
Debit: For now, Main Street will continue on its gradual terminal descent until the dollar finally falls victim to something that most Americans are unable to comprehend: a currency collapse.
Debit: Of course, the People’s Socialist ParadiseTM of Venezuela knows all about collapsing currency. Food shortages there are so severe that soldiers are now forcing citizens to work on farms and grocers to sell their merchandise at a huge loss. How can so many people be so utterly clueless?
Credit: Somebody really needs to whisper in President Maduro’s ear that without profits, there’s no incentive for producers to put food on store shelves. On the other hand, being the ideologue that he is, those words of wisdom will go in one ear and out the other. (Sorry; I couldn’t resist.)
Debit: In fact, a butcher in Caracas told the Financial Times that soldiers forced him to sell his beef at $0.11/lb. — even though his suppliers charged him $1.32/lb. According to the poor merchant, “They told me the beef ‘belonged to the people’ and stayed seven hours as a huge queue formed outside.” Ain’t socialism grand?
Debit: On a related note, I see Cloverdale, California, is being stiffed by the Bernie Sanders campaign. Apparently, they skipped out on a $23,000 invoice after a rally there earlier this year. Meh.
Credit: Frankly, Cloverdale city officials should know better. After all, by his own admission, Bernie is a socialist — they always stick others with the bill. Forward!
By the Numbers
It’s been a hot week across the US — but especially in the American heartland. Read on to see how hot — or perhaps not so hot:
97 F High temp in Minneapolis, this week.
83 F Average temp, historically, in Minneapolis over same period.
109 F Wednesday’s high in Pierre, South Dakota.
100 F Temp in Dallas on July 22 — the first triple-digit temp of the year there. It came 21 days later than average.
105 F High temp in Little Rock, Arkansas, on July 22.
114 F All-time high temp in Little Rock. (August 3, 2011)
Sources: AccuWeather
The Question of the Week
[poll id="122"]
Last Week’s Poll Results
Do you have Pokemon GO on your smartphone yet?
- No, and I never will! (89%)
- No, but I’m thinking about it. (6%)
- Yes! (5%)
More than 900 people responded to last week’s question and I’m happy to say that only 1 in 20 Len Penzo dot Com readers have Pokemon GO on their smartphones. Maybe there is still hope for humanity.
Other Useless News
While you’re here, please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
2. Make sure you follow me on Twitter!
3. Subscribe via email too!
And last, but not least …
4. Consider becoming a Len Penzo dot Com Insider! Thank you.
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
From Benjamin:
Hello, Len. First time reader here, and I must say, you’ve frightened me.
No need to be scared. Most people say I have no idea what I’m talking about.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-
In addition to Deutsche Bank, did you see where the U.K.’s Lloyd’s Bank also announced branch closures and layoffs this week? http://www.telegraph.co.uk/business/2016/07/28/lloyds-to-slash-3000-jobs-and-close-branches/ I guess the good news is that I’m finally reading about these things in the main stream news (maybe that’ll help wake people up!)
No, thanks for sharing that, Lauren. The banking system is very sick at the moment. And while the symptoms we can see (layoffs, plunging stock prices, etc.) are bad, you can bet what’s going on “behind the curtain” is even worse.
Len, When do you think those of us who bank in America will finally have negative rates forced on us?
Sara: When you consider inflation, real interest rates have been negative for years. (For example, if you’ve been receiving 1% interest in a savings account, but inflation is 3%, then the real interest rate on those savings is negative 2%.)
As always, your black coffee segment is great. You suggest gold as as an alternative to other investments. Other than being more liquid (and the obvious space requirement) than real estate what advantage would you say gold (or other metals) has over acreage?
Steve, one of the biggest advantages that gold has over real estate is that it’s fungible. That is, a one-ounce gold coin in my pocket is worth the exact same amount as a one-ounce gold coin in your pocket (assuming they are of identical purity). That is not true for real estate, as its value is dependent on several factors such as location, soil fertility (for potential farmland), etc.
Another advantage is gold is portable; you can carry your wealth with you — not so real estate.
The final advantage is that gold is easily concealed and, therefore, at less risk of loss from hostile actors. Either by force, or through oppressive taxation — after all, there is nothing stopping the government from raising property taxes so high that it becomes impossible to pay them.
Thanks Len, As always, I appreciate your thoughtful opinion