Black Coffee: Money for Nothing (and Chicks for Free)

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 …

“The financial markets are rigged by the big banks, the Fed, and the Treasury in the interest of big bank profits and the dollar’s exchange value, which is the basis of US power.”

— Paul Craig Roberts

“Taking money from small businesses, spending it in Washington on favored industries and favored individuals, picking winners and losers in the economy, that’s not pro-growth economics. That’s cronyism. That’s corporate welfare.”

— Paul Ryan

“That ain’t workin’. That’s the way you do it. Get your money for nothing, and your chicks for free.”

— Mark Knopfler

Credits and Debits

Debit: I see the only US employment gains from the past year went to those with a high school diploma — or lower. That wouldn’t be so bad if the bulk of those positions were manufacturing jobs. But they’re not.

Debit: Don’t look now, but the madness is back — homeowners are taking out mortgages to buy bitcoin, cars and fine wine. The Financial Times is reporting that British homeowners looking to make a quick profit are once again borrowing against their property to invest in stocks, bonds, property and other investment alternatives. Uh huh. I think I’ve seen this movie before.

Debit: Speaking of fast money, has the stock market bull market finally reached the euphoria phase? Well, it has if the most recent Yale Survey is any indication: 100% (!) of institutional investors, and 99% (!) of individual stock buyers, expect higher stock prices a year from now. Nope … no irrational exuberance there.

Debit: Frankly, it’s really no wonder everybody is so bullish on stocks: As Zero Hedge points out, since the collapse of Lehman Brothers in 2008, the world’s central banks have bought $10.8 trillion in assets. I know. And you thought rising stock, bond and property prices were value-driven.

Debit: To be fair, some stocks have been struggling lately. For example, Starbucks shares have plunged more than 17% since June. Hey … Do you think the fact that most Starbucks stores have four additional stores within one mile of their own location has something to do with that? If it doesn’t, it probably should.

Debit: Meanwhile, thanks to daily intervention by the European Central Bank, European junk bond yields are now equivalent — and in some cases, lower than — 10-year Treasuries, which further affirms the insanity currently going on in the bond market.

Credit: As Wolf Richter notes: “When no one can price risk anymore, when there’s no apparent difference anymore between Euro junk bonds and US Treasuries, then all kinds of bad economic decisions are made and capital gets misallocated.” Well … yeah. But, Wolf, the bond bulls on Wall Street insist that you’re just howling at the moon.

Credit: Of course, almost everybody agrees that Euro junk bond yields being equivalent or lower than 10-year US Treasuries is utterly inconceivable, but there is one possible explanation that nobody other than me seems to be considering: This all makes perfect sense if the bond market is actually signaling that US Treasuries are now junk too. Think about it. Am I crazy? Or crazy like a fox.

Credit: The sad reality is, with corporate profits and commercial bank solvency almost completely dependent now on a tight correlation between asset prices and central bank liquidity, the entire global financial system is more reliant than ever on the world’s central banks to hold the markets together — with monetary baling wire, duct tape and string.

Debit: Unfortunately, all of that dastardly central bank liquidity from the Fed’s printing press also facilitates an American scourge that runs rampant today: crony capitalism. Then again, I’m quite certain there are at least some people out there who don’t think crony capitalism is such a bad thing. (Psst. And it’s not a coincidence that they’re also very rich people.)

Debit: After all, if you don’t own a sustainable business that earns regular profits, you can still become filthy rich as long as you’re connected to pols in Washington and the state capitals. Just ask Tesla and SpaceX CEO, Elon Musk; nearly half of his estimated $11 billion net worth — yes, that’s billion, with a ‘B’ — is due to government subsidies taken from the taxpayers’ pockets. Is this a great country, or what?

By the Numbers

As E! Online notes, “Nothing could be further from the reality of the public at large than a star-studded getaway.” Very true … as evidenced by some recent celebrity R&R bills:

$137,720 Cost of Brad Pitt and Angelina Jolie’s family trip to Thailand, including $126,000 for one week at the Amanpuri Beach Resort.

$196,470 Cost of Jennifer Lopez and Alex Rodriguez’s trip to France, including $185,000 for private jets between Los Angeles, Nice and Paris.

$230,000 Cost of Beyonce and Jay Z’s babymoon in Bora Bora.

$443,000 Cost of Kim Kardashian and Kanye West’s vacation in the Bahamas, including $176,000 for a house rental on a private island.

$475,000 Cost of Julianne Hough and Brooks Laich’s honeymoon in the Seychelles and Kenya, including $21,000 for a one-week safari.

Source: E! Online

The Question of the Week

[poll id=”176″]

Last Week’s Poll Result

On average, how many times do you withdraw money from an ATM each month?

• Never (38%)
• 1 (31%)
• 2 (15%)
• 4 or more (9%)
• 3 (6%)

More than 1100 people responded to last week’s question and it turns out that roughly two in five Len Penzo dot Com readers never use an ATM. Neither do I; in fact, I can’t remember the last time I pulled cash from one. For many people, the ATM is a significant reason why they have trouble keeping their finances on an even keel.

Useless News: Big Brother Cometh

Seen on an Internet comment board this week … Big Brother is finally here, which is why it won’t be long before future telephone conversations resemble something like this:

“Hello! Gordon’s pizza?”
“No, sir; it’s Google Pizza.”
“So I have a wrong number?”
“No, sir. Google bought it.”
“OK. Then take my order please …”
“Well, sir, do you want the usual?”
“The usual? Do you know me?”
“According to caller ID, the last 12 times you ordered a thick crust pizza with sausage and extra cheese.”
“Yes! That’s it!”
“May I recommend ricotta, arugula with sun dried tomato instead?”
“No, I hate vegetables.”
“But your cholesterol is 274.”
“And how do you know that?”
“Through the subscriber’s guide. We have your blood tests for the last seven years.”
“Okay, but I don’t want an arugula pizza; I already take medicine.”
“You haven’t taken the medicine regularly. Four months ago, you only purchased 30 tablets at Drugs Online.”
“I bought more from another pharmacy.”
“It’s not showing on your credit card.”
“I paid in cash.”
“But you didn’t withdraw that much cash according to your bank statement.”
“I have another source of cash.”
“This is not showing on your last tax form … unless you got it from an undeclared income source.”
“Bloody hell? Stuff Google, Facebook, Twitter, and WhatsApp. I’m off to an island without the Internet.”
“I understand, sir, but you’ll need to renew your passport first; it expired five weeks ago …”

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. North Dakota (2.13 pages/visit)
2. South Dakota (2.08)
3. Iowa (1.87)
4. Arkansas (1.75)
5. New Hampshire (1.66)

46. Montana (1.23)
47. New Mexico (1.21)
48. Vermont (1.20)
49. Rhode Island (1.19)
50. Missouri (1.11)

Whether you happen to enjoy what you’re reading (like my friends in North Dakota …) — or not (ahem, Missouri … for the third month in a row.) — please don’t forget to:

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(The Best of) 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

Tara had something she wanted to get off her chest:

“Yeah, you’re full of hot air. Another blogger who thinks he’s a big shot and is going to tell the world how it is.”

The only big shot around here is the Honeybee, and she reminds me of how full of it I am every day.

I’m Len Penzo and I approved this message.

Photo Credit: brendan-c