Black Coffee: The Curious George Edition

Comments

1. 1

   Jay says

   Thanks for another great Saturday morning edition, Len.

   I’m glad you mentioned how stocks and bonds are moving together. It’s definitely a little curious, particularly with regards to yesterday’s sell-off: There was nowhere to hide!

   Have a great weekend!
   Jay

   • 2

     Len Penzo says

     Thanks, Jay. You too.

     Next week or two may be interesting in the markets. It looks like the Fed was actually trying to push up the long bond the past two days in order to “unflatten” the yield curve. That could mean they are serious about actually jacking up interest rates when they meet again in a couple of weeks.

     • 3

       Jay says

       Good point, Len! It will definitely be interesting to see what happens. My random guess is Yellen will pull the trigger once before the end of the year but likely not before the election. But only time will tell for sure!

   • 4

     Karen Kinnane says

     Do you think it is possible that the Federal Government at Obama’s urging is propping up / rigging the stock market to make things look rosy so potential voters will vote for Hillary to get a third Obama term?

     • 5

       Len Penzo says

       Karen, I think the BLS and other government agencies are doctoring the economic data for the reason you describe. I believe the Fed is manipulating the markets not for political reasons but for self-preservation — they’re main concern is keeping the stock and bond markets from imploding because they know that if they turn ugly, then the entire international monetary system will eventually collapse, which could put them out of a job (as in no more central bank, God willing) — or worse.

2. 6

   Sara King says

   I’m with Jay. Another great weekend wrap up!

   Can you explain for newbies like me why stocks and bonds usually move in different directions?

   • 7

     Len Penzo says

     During times of economic distress or weakness investors usually get more defensive by buying bonds, which are perceived as being less risky, and selling stocks, which are considered higher risk.

     On the other hand, when economic times are good, people go the opposite direction because high risk offers the opportunity for higher rewards.

     Until the last day or two, both stocks and bonds were being bought by investors — so their prices were moving up together.

     Like Jay said, in that case, there’s usually nowhere to hide when both end up selling off. (Although those who hold precious metals may disagree somewhat with that statement.)

3. 8

   Jeff says

   On the pension articles. I work for the state of Texas and have a pension. I pay 8 percent of my paycheck off the top into it every month. Due to state laws I cannot increase the amount deducted or decrease it myself but has to be increased by the legislature. The state knows it is short and is working in an increase the amount everyone pays in over the next few years. Not sure about the rest of the states mentioned but Texas is fixing there problem.

   • 9

     Len Penzo says

     Thanks for your comment, Jeff. Until last week’s court ruling, California allowed government employees to “spike” their pensions, which were based upon their final-year salary, by cashing in vacation and sick time and working overtime. That court ruling is going to be challenged, but I maintain it won’t matter in the end because the pensions are insolvent (as one would expect, since they are based upon extravagant promises that can never be kept), and will never be able to payout what they are promising.

     California’s pension situation is so twisted that we have government employees who retire at age 50 (!) with their final-year salary or higher — and with cost-of-living adjustments! — for the next 35 years. That is not sustainable. Nor is it reasonable — or something one sees in the private sector.

     And making the taxpayers make up the difference to cover those extravagant public pensions — most who lack pensions of their own — will never work either because the heavy burden is politically unacceptable.

     (The story I am referring to can be found in the link in the second to last “Credit”)

4. 10

   olivia says

   I’ve been tossing around your thoughts on living on $45,000 a year. Three years ago it was doable but very tight. So I agreed with you. Even though the examples you cited were of smaller households living in less expensive areas, without chronic health needs, all things considered, we were managing on a comparable income. With the current trend towards massively more expensive healthcare, plus fewer “marketplace” choices, increased food costs, higher doctor fees, higher car insurance, more taxes, this is no longer reasonably possible.

   I think you’ll need to reconsider your position.

   • 11

     Len Penzo says

     You make a good point, Olivia. That being said, I maintain it can still be done — more so in states where the cost of living is low. The biggest fly in the ointment is Obamacare, which has greatly jacked up healthcare costs to a point where it makes it much tougher to get by; especially for a family of four or more. This is mainly because low-cost catastrophic healthcare plans are now illegal — unless you are granted an exception. Thankfully, Obamacare can be gamed by simply choosing not to pay for it unless you have a major medical issue, at which time you can sign-up after the fact. In the meantime, people can set aside the premiums they would normally pay to the O-care exchanges into their own personal savings account for non-catastrophic medical bills as they arise. Another Obamacare option are Christian healthcare sharing ministries.