Black Coffee: Dealing from a Stacked Deck

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 …

“If you’re playing poker and you look around the table, but can’t tell who the sucker is, it’s you.”

— Paul Newman

Credits and Debits

Credit: US gasoline prices during the July 4th holiday were the lowest they’ve been in 12 years. Hooray! Don’t get too excited though — analysts believe prices will only go up from here.

Credit: In case you’re wondering, Cleveland, Tennessee — not to be confused with its more famous Lake Erie cousin — has the lowest pump price in the nation: $1.67. Wow. Here in California, my local station’s best price for a gallon of 87 octane is $2.68.

Credit: Perhaps those low fuel prices are the reason why low-income families are now spending 40% of their income on luxuries. If you have a better idea, I’d love to hear your theory.

Debit: Then again, when one considers that 73% of consumers who died last year had $62,000 in unpaid bills on the books, maybe people just enjoy buying things on credit. True; a good chunk of that is attributed to mortgage debt, but even if you don’t include the home loan, that still left almost $13,000 in credit card bills, and student, auto and other personal loans. Yikes.

Debit: Speaking of debt, Illinois took steps this week to close its massive $14.6 billion budget deficit by passing its first budget in more than two years — unfortunately, the fiscal plan also imposed a permanent 32% tax increase on its citizens. No, the new budget doesn’t come close to solving their problem, but I suspect it did manage to tick off most of the state’s remaining producers.

Credit: For those keeping score at home, after the Illinois Legislature overrode the governor’s veto to enact the budget into law, Thomas Lifson astutely summarized the folly of the entire process: “Bipartisan? Check. Massive tax hike? Check. But the other half of the fiscal-sanity equation, spending discipline, is entirely absent.” It always is, Thomas. It always is.

Credit: It’s no secret that Illinois’ fiscal woes stem from government pensions that consume 25% of the budget. Now you know why financial analyst Dave Kranzler says that, “One of the reasons the Fed is working hard to prop up the stock market is because, if it fell 5% to 10% for more than a month, the entire US pension Ponzi scheme would blow up and decimate the financial system.” That may be the only reason.

Debit: In other news, an Italian finance minister admitted the EU and Italy narrowly avoided a financial collapse this week. No, really. You can blame two failing Italian banks, Veneto Banca and Banca Popolare di Vicenza, which were both liquidated after an emergency decree was enforced to shield depositors and senior bondholders from losses. See how that works? Privatize the profits, but socialize the losses.

Credit: Since ditching the lira for the euro at the turn of this century, Italy has actually seen its economic fortunes decline — so it should be no surprise to anyone that the Italian Parliament is now openly discussing the lira’s return.

Credit: Did you see this? It looks like Venezuela’s poor are finally waking up to the con job that socialism has foisted upon them. Yes, finally. Too bad it took almost 20 years.

Debit: Speaking of con jobs, precious metal owners have known for years that there’s a paper fraud problem in the trading market — so-called rehypothecation, where bankers blatantly sell more receipts for gold and silver than actually exist in their vaults, resulting in the same assets being pledged as collateral to multiple parties. And now that fraud is apparently spreading to other metals’ markets too.

Debit: In this case, however, the tables are being turned on the bankers. According to Bloomberg, “Buyers and sellers of copper, aluminum and nickel use warehouse receipts to prove every pound involved in a transaction actually exists and who owns it. But warehouse receipts can be faked, and more lenders are being ripped off by crooks exploiting weaknesses in trade financing.” Aww, somebody pass me a tissue.

Debit: Then again, although they’ll never admit it, it’s not just the world’s central bankers and their bullion-bank brethren who love rehypothecation; your personal bank does too — they just prefer to use the the term “fractional reserve banking.”

Credit: The truth is, whether it’s bankers or card hustlers, rehypothecation has been used by swindlers of all stripes from time immemorial. However, most con jobs eventually get exposed — and that’s when things can turn ugly, as this Mississippi poker game from long ago illustrates:

Last Week’s Poll Result

How many cars have you owned during your lifetime?

• 5 or fewer (40%)
• 6 to 12 (37%)
• More than 12 (23%)

More than 1100 Len Penzo dot Com readers chimed in for last week’s question and slightly more than 3 in 5 say they’ve owned at least a half-dozen cars in their lifetime — and almost one in four have owned a baker’s dozen or more. Personally, after 37 years of driving, I’m only on my fourth vehicle — and I don’t plan on getting my next one for another decade. I suspect that will probably be my last one too. Hmm. Suddenly, I’m depressed.

The Question of the Week

[poll id=”171″]

By the Numbers

Here is a year-to-date performance summary of selected assets and stock indices through the first half of 2017:

14.1% Nasdaq

8.2% S&P 500

8.0% Dow Jones Industrials

7.8% Gold

4.0% Silver

-6.4% US Dollar Index

-14.4% Crude Oil

Sources: Seeking Alpha; MarketWatch

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 (2.46 pages/visit)
2. Alaska (1.94)
3. Arkansas (1.85)
4. Connecticut (1.64)
5. Iowa (1.63)

46. Kentucky (1.21)
47. Mississippi (1.19)
48. Rhode Island (1.10)
49. New Mexico (1.07)
50. Missouri (1.05)

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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 about the most important things every homeowner should look for in a pest control company, Jane in Detroit shared something she recently encountered in her home:

The other day, I found a dead (cockroach) in a box of Lucky Charms that I keep in the pantry.

Hey! They’re magically delicious! Er … the Lucky Charms — not the roaches.

I’m Len Penzo and I approved this message.

Photo Credit: brendan-c