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 is enjoying the long Labor Day weekend.
By the way, if you find my weekly Black Coffee columns informative and enjoyable, please help me get the word out by sharing it with your friends and relatives. I’d be much obliged!
Okay, off we go …
The Fed can change how things look, but it cannot change what things are.
Credits and Debits
Debit: With Obamacare insurers bleeding cash due to risky mandates that allow sick people to buy insurance with preexisting conditions, and healthy customers rejecting its one-size-fits-all plans, high premiums and even higher deductibles, it won’t be long before taxpayers will be forced to pay the bills. Aside from that, Obamacare has been a raging success!
Debit: Of course, the healthcare law from hell is actually on life support. As Obamacare continues its inevitable slow-motion implosion, 36% of the country will have only one insurer offering Obamacare plans in 2017. Imagine that.
Credit: Then there are the residents of Arizona’s Pinal County; they’ll have zero Obamacare providers next year. Yes, zero. But there’s a silver lining: Pinal County finally found a way to make Obamacare affordable. At least to those who’ve been stuck paying for it. Hooray!
Credit: I would never be so brash to say “I told you so!” to all of the misinformed Obamacare advocates who lectured opponents like me and called us “fearmongers” … on second thought, yes, I would: I told you so! And so did everybody else in America who has an aversion to sticking their head in the sand.
Debit: Obamacare isn’t the only thing that’s collapsing — investment fund manager and financial analyst Dave Kranzler is warning that Puerto Rico’s recent bond default is merely a preview of what’s to come in the US. Phew! I’m just glad it’s nothing serious. Say … Does anybody know if the Dodgers are on television this weekend?
Debit: More good news: WalMart announced that it’s cutting 7000 jobs. Even better, they’re all higher-paying backroom management positions, which means there should still be plenty of WalMart greeter jobs available for laid off US manufacturing workers. I know, right? Obviously, it’s morning in America again.
Credit: Meanwhile, the stock market continues its miraculous levitation act.
Credit: Those who follow the financial markets closely understand it’s a sham. Even highly-respected financial manager Bill Gross now admits that, “The Fed has mastered the art of market manipulation.” Yes, he actually said that last week. And Gross isn’t just talking about the stock market — it’s all financial markets.
Debit: The sad truth is, those manipulated financial markets are just another sign of society’s mass escape from reality in seemingly every aspect of life. Today, down is up, black is white and bad is good — and those who dare to point that out are routinely ridiculed. Or worse.
Debit: The proof is in the pudding — a recent Deutsche Bank study found that central banks are currently responsible for 40% of the “value” of the S&P; that is, 100% of the gains since 2012. Incredibly, there are plenty of folks out there who don’t see a problem with that. Well … at least as long as the profits keep rolling in.
Credit: Meanwhile, the Fed’s meeting at Jackson Hole last week resulted in nothing significant. According to John Embry, who is the chief investment strategist at Sprott Asset Management, “That’s not surprising because the very people who got the world into this mess have no idea what to do now other than produce bogus economic statistics, while manipulating markets and making absurd statements.”
Credit: Financial analyst Bill Holter says there’s a good reason why the system is being gamed: “If gold and silver weren’t suppressed, could we have 0% interest rates, or the buying power that fiat currencies currently afford, or stocks at many multiples of book value and 20+ times earnings? No, we’d already be living in a very different world — and one that will certainly arrive when the rigging finally fails.”
Credit: The bottom line is that the Fed and the rest of the world’s central banks are desperately trying to keep confidence alive in a fiat currency system that is in its death throes. (Psst. They’re failing.)
Credit: In fact, savers around the world have already lost faith in the banking system, as evidenced by a 25% increase in home safe sales across Germany since 2014 — and a doubling of home safe sales in Japan from the previous year.
Credit: So … what will economic collapse look like? I suspect it will be a tough slog for awhile — but it won’t be the end of the world. In fact, over the long run it’s the best thing that could happen.
Credit: To be sure, the most immediate — and important — change would be that reality would return to the markets and interest rates would return to a level that discourages wasteful malinvestment. And that’s bad news for grossly unprofitable companies like Tesla and Twitter that only survive because of government subsidies or cheap loans.
Credit: More importantly (to paraphrase a Zero Hedge reader) savers would regain their rightful place in the world of capitalism and be paid appropriately for their prudence — but the biggest change of all will be that everyone will finally rediscover the true value of productive labor. Amen. And Happy Labor Day.
By the Numbers
It’s probably no surprise that the average price of new cars and SUVs is at an all-time high in 2016:
$33,845 The average sale price of a new car or SUV this year.
3.5 Percentage price increase of a new car over the previous year.
$30,000 Value of the average car loan in 2016.
$1287 Average mark-up for a car with a backup camera, rear-parking sensor, and adaptive headlights.
42 Percentage of people who spent less than $20,000 on their last new car.
16 Percentage of people who spent more than $40,000 on their last new car.
Source: Time
Insider Notes: If the US Has a Debt Problem, Why Isn’t Inflation Rampant?
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Last Week’s Poll Results
How much was your electricity bill last month?
- $100 to $200 (42%)
- Less than $100 (33%)
- More than $200 (24%)
- I don’t have an electricity bill (0%)
More than 1200 Len Penzo dot Com readers responded to last week’s question and the most interesting discovery to come from my informal electricity bill survey was that only seven readers said they don’t have an electricity bill. That seems extremely low to me … I figured I had more minors and older children living in their parents’ basement reading my blog than that.
The Question of the Week
[poll id="127"]
Other Useless News
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Letters, I Get Letters
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Photo Credit: Community Coffee
Good coffee this week, Len. Of all the events of the week, the failure to deliver gold may be the most significant. As trust in government and the market falters, the security of your gold ETF is now gone also. I have really grown to appreciate the rigging and suppression of prices over the last few years as it has allowed me to convert many fiat dollars to real money. But the house of cards may begin to tumble now as Europe and the rest of the world discover that they need real money.
Hey, thanks, Ed. Yes, Deutsche Bank’s failure to deliver physical gold to an ETF client offers those who are paying attention an important glimpse at the chaos that is really going on behind the curtain. Here’s a link for those who missed the story: http://www.zerohedge.com/news/2016-09-02/deutsche-bank-explains-why-it-failed-deliver-gold-demand-solution-will-be-found
There is just not enough good collateral left anymore to continue expanding the credit (debt) required to keep the Ponzi going. The system is depending on the continuing confidence of the wealthy who are financially savvy and the ongoing ignorance of the masses who aren’t — and the Deutsche Bank failure to deliver will certainly shake the former.
Are things about to come to a head? Nobody knows for sure, but the signs of financial distress behind the scenes are definitely growing.
I get your claim that it will be good in the long run when the economy finally collapses but I don’t think it will be good for retirees in the long run. Especially the gov’t employees collecting $100,000 plus pensions. I don’t think those will keep paying out!
Totally agree, Sara.
Your link to Casey Research (what will the economic collapse look like) leads to a blank page. You may want to fix that.
Liz, the link is working on my computer. Maybe their site was temporarily down for awhile.
Your softening up. I don’t think I’ve ever seen so many credits compared to debits.
lol … Yeah, I think that has to be a record number of credits too, Chad!