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 …
“It’s difficult to get a man to understand something when his salary depends upon his not understanding it.”
— Upton Sinclair
Credits and Debits
Credit: Last week, Amazon shares surpassed the $1000 per share milestone. This week it was Alphabet’s turn to surpass the $1000 barrier. Alphabet, of course, is Google’s parent company.
Credit: If you think that’s impressive, Jim Rickards noted this week that if the money supply of the US, China, and European Union was fully-backed by their respective central banks’ gold holdings, then the yellow metal should actually be selling for $67,000 per ounce — not the current market price of $1267. That’s right: 67 large.
Credit: The current gold-silver ratio is approximately 73, but silver bugs will point out that if the ratio returns to its historic average of 15, Rickards’ gold figure would imply the true price of silver is $4467 per ounce — not today’s $17.20. Will it ever get there? Who knows? But that doesn’t change the fact that physical silver — and gold — are severely undervalued.
Debit: Then again, nobody cares about gold and silver these days, especially with bitcoin up nearly 200% in 2017. In fact, the cryptocurrency is now pushing $3000 — and it could be headed for $1,000,000! No, really. At least that’s what MSNBC’s Jim Cramer said this week — which means the bubble phase can’t be too far behind. (Psst. If you hear the baristas at Starbucks touting bitcoin, take the money and run.)
Credit: These are heady days, to be sure. After all, American households’ cumulative net worth is now at a record $95 trillion. You can probably thank Amazon, Alphabet and bitcoin for at least part of that.
Debit: The bad news is, most of that increase in net worth was concentrated in the top 10% of all households. Average wealth was about $4 million for families in the top 10% of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles. As for households in the bottom quartile, well … they were, on average, $13,000 in debt. Ouch.
Debit: Hey … it’s tough out there, which is why many older folks are working jobs that used to be done primarily by teenagers. As a result, the number of teens working summer jobs — or even looking for one — is plummeting. For example, last July, 43% of teens between 16 and 19 were either employed or looking for a job. Compare that to 1988, when the July labor force participation rate for teens was nearly 70%.
Credit: Yes, many teenagers are allergic to work; but many adults are apparently so allergic to earning a living that they’d rather “starve,” as evidenced by 13 Alabama counties that saw an 85% drop in food stamp participation after work requirements were enacted this year. Crazy, I know — but Maine recently saw similar results after passing a nearly-identical law.
Debit: Speaking of crazy, last month I pointed out the folly of the April payroll report considering that the loony “birth/death model” inflated the final jobs number by 255,000 positions. In fact, without that dubious manipulation, the economy actually lost 44,000 positions that month.
Debit: Believe it or not, it gets worse: The statistical deception in the employment figures is so bad that 93% of all jobs created since 2008 were added through the birth/death model. Yes, in other words, the government reports are a sham — which goes a long way toward explaining why the labor participation rate is at a four-decade low, despite an “official” unemployment rate of 4.4%.
Credit: Financial analyst Dave Kranzler isn’t surprised. He notes that, “If you sift through the Bureau of Labor Statistics’ website section that describes the birth/death model methodology — something which Wall St. analysts and financial reporters never bother to do — the BLS admits the high potential for error.” Ignorance is bliss, Dave — and it keeps food on the table. Well … at least it does for some people.
The Question of the Week
Last Week’s Poll Result
How many checking, saving, and other bank accounts do you have?
- 4 or more (59%)
- 3 (19%)
- 2 (17%)
- 1 (5%)
- None! (0%)
More than 1400 people chimed in for last week’s question and it turns out that 3 in 5 Len Penzo dot Com readers say they have four or more bank accounts. Only 1 in 20 get by with a single one-size-fits-all account. And for what it’s worth, exactly two respondents said they are completely out of the system.
By the Numbers
With the price for one share of both Amazon and Alphabet now above $1000, here’s a closer look at the highest-priced stocks:
6 The number of US companies with shares currently selling for at least $1000. (Berkshire Hathaway A, Berkshire Hathaway B, Seaboard, Priceline, Amazon, Alphabet)
17 Percentage of Amazon stock that is owned by insiders.
79,900,000 Shares of Amazon stock owned by company CEO Jeff Bezos.
1500 Percentage return on Amazon shares since 2009.
1.39 Amazon’s beta. (Beta is a measure of the systemic risk of a stock relative to the market. Stocks with a beta above 1 tend to outperform the market when stocks rise and under perform when stocks fall.)
0.94 Alphabet’s beta.
$250,305 Closing share price for the most expensive stock, Berkshire Hathaway (Class A), on June 8th.
A cowboy named Bud was overseeing his herd in a remote mountainous pasture in Montana when suddenly a brand-new BMW advanced toward him out of a cloud of dust.
The driver, a young man in a Brioni suit, Gucci shoes, RayBan sunglasses and YSL tie, leaned out the window and asked the cowboy, “If I tell you exactly how many cows and calves you have in your herd, will you give me a calf?”
Bud looks at the man, who obviously is a yuppie, then looks at his peacefully grazing herd and calmly answers, “Sure, why not?”
The yuppie parks his car, whips out his Dell notebook computer, connects it to his Cingular RAZR V3 cell phone, and surfs to a NASA page on the Internet, where he calls up a GPS satellite to get an exact fix on his location which he then feeds to another NASA satellite that scans the area in an ultra-high-resolution photo.
The young man then opens the digital photo in Adobe Photoshop and exports it to an image processing facility in Hamburg, Germany.
Within seconds, he receives an email on his Palm Pilot that the image has been processed and the data stored. He then accesses an MS-SQL database through an ODBC-connected Excel spreadsheet with email on his Blackberry and, after a few minutes, receives a response.
Finally, he prints out a full-color, 150-page report on his hi-tech, miniaturized HP LaserJet printer, turns to the cowboy and says, “You have exactly 1,586 cows and calves.”
“That’s right. Well, I guess you can take one of my calves,” says Bud.
He watches the young man select one of the animals and looks on with amusement as the young man stuffs it into the trunk of his car.
Then Bud says to the young man, “Hey, if I can tell you exactly what your business is, will you give me back my calf?”
The young man thinks about it for a second and then says, “Okay, why not?”
“You’re a government bureaucrat from Washington, DC,” says Bud.
“Wow! That’s correct,” says the yuppie, “but how did you guess that?”
“No guessing required.” answered the cowboy. “You showed up here even though nobody called you; you want to get paid for an answer I already knew, to a question I never asked. You used millions of dollars worth of equipment trying to show me how much smarter than me you are; and you don’t know a thing about how working people make a living — or about cows, for that matter. This is a herd of sheep.
“Now give me back my dog.”
Other Useless News
Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. South Dakota (2.25 pages/visit)
2. North Dakota (1.89)
3. Maine (1.85)
4. West Virginia (1.73)
5. Arkansas (1.70)
46. New Mexico (1.21)
47. Wyoming (1.20)
48. Oregon (1.19)
49. Mississippi (1.09)
50. Missouri (1.06)
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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
After reading my post on why corner lots are for suckers, Social Butterfly left a long and haughty commentary that included, among other things, this little pearl:
I envy people in the flyover states with huge lots and plenty of room. Here in West L.A. you have to knock down a (neighboring) house for a decent sized lot, and the zoning changes are a nightmare.
Well … For your neighbors’ sake, I’m happy to see that you don’t believe it’s better to beg forgiveness than ask permission.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c