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.
We’ve got a little more than three weeks until Christmas.
And with that, let’s get this party started!
“How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?”
Credits and Debits
Debit: Did you see this? Nearly 1 in 4 Italian banks — 114 in all — have non-performing loans (NPLs) that exceed their tangible capital. And if that ain’t bad enough, 24 of those Italian banks have NPLs that total 200% (!) or more of tangible assets. Then again, I’m sure it’s nothing that more central bank money printing can’t fix.
Credit: Speaking of central banks, last week, Russia’s Central Bank announced that the BRICS countries are considering a single gold trade system early next year. The announcement is yet another sign that the US dollar’s days as the world’s reserve currency is officially on borrowed time.
Credit: In other news, at 8.7 years, we’re approaching the longest bull market for balanced 60/40 equity/bond portfolios since the Roaring 20s, when 9.1 years passed without a 10% total drawdown. Could this mean another Great Depression is just around the corner? Well, maybe … if history is any guide.
Debit: One worrying sign is that the top 10 contributors of the S&P 500’s bull run accounted for 33% of its performance. Even more alarming is that all of those companies have seen their respective price-to-earnings ratios expand this year — in some cases dramatically. That suggests there aren’t enough high-performing companies left to keep the party going much longer. We’ll see.
Debit: Stock and bond prices aren’t the only assets that are soaring. Home prices are too. In fact, the average US home price just topped $400,000 for the very first time. If only wages would rise fast enough to keep pace. The average US home, at $400,000, now costs almost seven times the average US household income of $59,000.
Debit: Purchasing power — at least with respect to houses — has a long way to get back to the 1960s, when the median home price was less than three times median household income. Today, it takes almost 4.5 years of work to afford the same home.
Debit: Homes today are more expensive than ever, but when it comes to a lack of affordability, they can’t hold a candle to Obamacare. Oh, sure; the troubled “healthcare” law may be a good deal for those who are being subsidized — but the hard working folks who are actually required to foot the full premiums can’t afford it.
Debit: Meanwhile, pop superstar Katy Perry posted a picture of her and investing legend Warren Buffett on Twitter this week with this caption: “nbd asking Warren Buffet [sic] his thoughts on cryptocurrency.” Shortly thereafter, bitcoin reached yet another all-time high this year: $11,395. Yes, that’s kind of pricey … but it’s still $280,000 cheaper than shares of Buffett’s Berkshire Hathaway Class A.
Credit: For those of you not keeping score at home, bitcoin ended November up 49% — after posting a 52% gain in October. For the year, the cryptocurrency has delivered a return of more than 900%. And now pop singer Katy Perry is jumping on the bitcoin bandwagon. Nope … no bubble there!
Credit: If it does turn out that Katy Perry’s cryptocurrency tweet was the catalyst that led to the ultimate top of the bitcoin bubble, I suppose that will officially make her “the Queen of Pop.” I know. So sue me.
Debit: With bitcoin’s mania currently in full bloom, it’s no wonder that bitcoin mining is now using more electricity than 159 individual countries. Furthermore, if it keeps increasing at this rate, bitcoin mining will consume all of the electricity in the world by February 2020. No, really.
Credit: Of course, bitcoin’s gains pale in comparison to two other cryptocurrencies; litecoin is up 1900% in 2017, while ethereum has a year-to-date return of nearly 5000%. What’s that? No … the “zero” key on my keyboard isn’t stuck.
Credit: By the way, if you’re looking for bargains, you can still get a troy ounce of gold — that barbarous relic! — for just $1300. And if that busts your budget, an ounce of silver can be had for under $17. No, really. Considering silver was selling for $50 an ounce in 1980, it’s no wonder many people consider silver to be the most undervalued asset in the world. Best of all, unlike bitcoin, it’s wealth insurance par excellence.
By the Numbers
Bitcoin certainly seems to be in the manic stage of a classic bubble. Here’s how many days bitcoin took to reach each $1000 milestone on its frantic journey to $11,000:
1789 $0 – $1000
1271 $1000 – $2000
23 $2000 – $3000
62 $3000 – $4000
61 $4000 – $5000
8 $5000 – $6000
13 $6000 – $7000
14 $7000 – $8000
9 $8000 – $9000
2 $9000 – $10,000
1 $10000 – $11,000
Source: Zero Hedge
The Question of the Week
Last Week’s Poll Results
How much do you plan to spend on Christmas gifts this year?
- $100 to $1000 (65%)
- More than $1000 (24%)
- Less than $100 (11%)
More than 1200 people responded to last week’s question and almost 1 in 4 of them say they will be spending more than $1000 on Christmas gifts this year. Hopefully, they won’t still be paying for them by the time next Christmas rolls around.
Insider Notes: The Real Reason Why Bankers Hate Cash
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Other Useless News
Programming note: Unlike most blogs, I’m always open for the weekend here at Len Penzo dot Com. There’s a fresh new article waiting for you every Saturday afternoon. At least there should be. If not, somebody call 9-1-1.
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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
Ashley had this to say after reading my post explaining why you’ve got nobody to blame but yourself if you can’t live on roughly $40,000 per year:
You, sir, are an idiot.
If you say so, Ashley … but you know I’m right.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c