Black Coffee: The Repo Man Edition

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.

And away we go …

Credits and Debits

Debit: Uh oh. The S&P 500 has dropped nine days in a row — that’s its longest losing streak since December 1980. No, really. By the way, the stawk market is now down compared to a year ago, and unchanged since December 2014.

Debit: Uh oh. Again. It turns out that the US budget deficit was an astounding $1.4 trillion last year — not the $587 billion claimed by politicians as twisted proof that government spending was, somehow, under control. That’s $5000 of additional debt for every man, woman, and child in America. Yeah, like that’s sustainable.

Debit: Obviously, the US makes up the budget shortfall by simply printing what it needs. And that’s a big reason why prices in the US are skyrocketing — but only for the stuff you really need, like food, housing, healthcare and education. Hey … is this a great country or what?

Debit: And while new cars have dropped in price relative to inflation over the past 20 years, that hasn’t stopped consumers from buying cars they can’t afford. I say that because auto repos are soaring. In fact, repos are now at the third highest level in 20 years — and climbing. Beep beep!

Credit: One thing is certain: You can bet the current repo epidemic would never have happened if there were lenders willing to offer 96-month car loans. Oh wait …

Debit: Frankly, it’s all but certain that pensions will implode during the next financial downturn. For example, the California Public Employees’ Retirement System returned only 0.6% on its investments during the last fiscal year — which is far less than the 7.5% that Calpers needs to stay solvent. The good news is, I’m sure it’s nothing that nine or ten consecutive years of 40%+ returns can’t fix.

Credit: For their part, Dallas peace officers are worried about their police pension’s precarious pecuniary position — so much so that they’ve been retiring in droves recently and taking lump-sum payouts due to fears that future financial-market losses will soon expose their generous benefits as being too good to be true. (Psst. They are.)

Debit: On a somewhat related note, earlier this week Moody’s warned that Deutsche Bank (DB) was dangerously close to being in default. That wouldn’t be so bad if DB was a local savings and loan — but they’re one of the largest banks in the world. Never mind that they’re also sitting on a $47 trillion derivatives book.

Debit: Whether it’s DB or some other trigger, the powers-that-be are woefully unprepared for the next financial crisis. Why? Well, according to economist Jim Rickards, it’s because the crisis will come so quickly that they’re not going to be able to reliquefy the system fast enough.

Debit: Unfortunately, the central banks will eventually “solve” the liquidity problem by pumping more cash into the system. But therein lies the rub, as that additional liquidity will be the final nail in the coffin of the world’s fiat currencies, leading to the final destination that has become the fate of every fiat currency ever created: hyperinflation.

Debit: Of course, Zimbabwe knows all about hyperinflation; they suffered with it between 2006 and 2009 — and, if they’re not careful, they may be gearing up for round two. Apparently, the monetary officials there have already forgotten that it was just a few short years ago when this was required to purchase a bag of Hershey’s kisses in Zimbabwe:

Credit: Meanwhile, over in the People’s Socialist Paradise of Venezuela^TM, citizens have resorted to weighing their nearly-worthless cash for many daily transactions because prices are so high that it takes too long to count the bills. That’s what happens when the nation’s largest bill — 100 bolivars — has the purchasing power of a dime. Forward!

Debit: I know it’s hard to believe but, sadly, if the powers-that-be don’t reform the international monetary system soon, we’ll all discover what it’s like to walk in Venezuelans’ shoes. Yes, reform will be painful — especially for Americans — but it’s better than the alternative. And what’s truly infuriating is, with a little financial discipline, it didn’t have to be this way.

By the Numbers

In case you missed it, the Chicago Cubs just won their first World Series title since 1908. Needless to say, a lot has changed since then — especially with respect to prices:

$0.02 Cost of a Hershey candy bar in 1908.

$0.51 The cost of a 1908 Hershey candy bar in today’s dollars, after adjusting for inflation.

63 The value of the Dow Jones Industrial Index in 1908. (It’s currently hovering around 18,000.)

1 Number of today’s Dow components that were part of the index in 1908. (General Electric)

$3500 Salary of Cubs ace pitcher Mordecai “Three Finger” Brown in 1908. That’s $90,000 in today’s dollars.

$10,000,000 Current salary of the Cubs’ World Series MVP Ben Zobrist.

Source: CNN

Insider Notes: Why Getting Cash During the Next Crisis May Be Impossible

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Last Week’s Poll Results

How old were you when you first moved away from home?

• 18 (35%)
• 21 or older (25%)
• 19 (17%)
• 17 or younger (11%)
• 20 (11%)

More than 1200 Len Penzo dot Com readers responded to last week’s question. Not surprisingly, the winning plurality came from those who left home for the first time at age 18. Another 1 in 9 made up the adventurous group of independent souls who decided to leave the nest before becoming legal adults. As for me, I was 19 when I moved away for the first time — finally striking out on my own to attend college. After I graduated I moved back home for another year, before finally moving out for good and getting my own place.

The Question of the Week

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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

Claire wrote in with this question:

I have $12,000 in credit card debt and $90,000 in school loans. I’m earning $37,000 a year. Any advice on the best way to erase these loans quickly?

Yes. Ask your boss for a really REALLY big raise.

I’m Len Penzo and I approved this message.

Photo Credit: brendan-c