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.
Time has almost run out on 2017, so let’s get right to it, shall we?
“Year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instill in us.”
— Hal Borland
“And now we welcome the new year. Full of things that have never been.”
— Rainer Maria Rilke
Credits and Debits
Debit: If you’re hoping 2018 will be a profitable year for your investments, think again: According to market analyst David Collum, a vicious market cycle will soon be completed where we regress to the mean. Collum says between 2009 and 2016, US GDP growth has been tracking the Great Depression, “So you can be thrilled your 401k has appreciated — but it’s sitting on an air pocket because nothing has improved.”
Credit: Did you see this? Last month, a Pennsylvania utility customer got her monthly electric bill and saw that she owed $284 billion. Yes, billion. No, she wasn’t mining bitcoin. Anyway … after a quick phone call, the electric company knocked nine zeroes off the statement; the actual balance was $284.
Credit: Meanwhile, the Wall Street Journal is wondering if the world’s central banks are about to lose control of interest rates. It’s a fair question — but anybody who has invested in bonds better hope not. Stocks too for that matter. At least this time.
Debit: Of course, the auto industry has used the Fed’s artificially-low interest rates to boost sales, but at least one car salesman is now warning that his industry’s business model has “morphed into an ugly free for all” as automotive credit standards have disappeared to help manufacturers achieve market growth at any cost. As a result, “People are buying cars they can’t afford or shouldn’t even have been able to buy.” Deja vu?
Debit: On a somewhat related note, one in three working-age Americans between 23 to 63 share a home with a roommate — or their adult parents. That’s up from 21% just a dozen years ago. Uh huh. By the way, as a precaution, I just warned my 20-year old son, Matthew, that he better not get any bright ideas.
Debit: In case you’re wondering why so many adults live with a roommate — or Mom and Dad — the reason is simple: According to the latest Case Shiller data, every single US metro area saw home prices climb higher relative to last year, while 16 of 20 major U.S. cities experienced home year-over-year price growth of 5% or higher. Unfortunately, that’s double the rate of average US wage growth. Sustainable? I think not.
Debit: Speaking of wages, the average private sector worker in America earned $58,726 last year. Compare that to the average federal worker’s salary of $86,365 in 2016. Think about that.
Debit: Meanwhile, there are more signs that the end of the petrodollar is coming. Officials at the Shanghai International Energy Exchange say they still plan to go live with a crude-oil futures contract denominated in yuan any day now — thereby allowing oil producing nations to bypass the US dollar for the first time since 1973. If that contract does become a reality, then Americans can expect higher prices on imports in 2018.
Debit: Despite all of the disturbing economic news, including the rapidly unfolding macroeconomic news that portends a dismal future for the petrodollar and, by extension, a decline in Americans’ future standard of living, this week Yahoo Finance boldly declared 2017 as “the year the financial crisis officially ended.” Well … okay.
Credit: Than again, maybe Yahoo is right. After all, this December’s final trading day saw the S&P 500 close higher than the previous month for the 13th consecutive time, including a “perfect year” of 12 monthly positive returns — which has never happened before. Not surprisingly, the S&P is now at its most overbought level since 1959.
Credit: By the way, it’s not just Wall St. that’s in a good mood; after many years, it appears Main St. is too. I say that because Mastercard is reporting that shoppers spent over $800 billion during this holiday season; that’s more than ever before. In fact, holiday sales in stores and online between November 1 and December 24 rose almost 5% — that’s the fastest year-on-year pace of increase since 2011. Not too shabby.
Debit: So has the financial crisis really ended? Or is the US economy an illusion — aided by the biggest mountain of consumer, corporate and government debt the world has ever seen, and abetted by the macroeconomic ignorance of 99% of the general population?
Credit: Ron Paul believes it’s the latter; and if that ain’t bad enough, he expects an upheaval similar to the Soviet Union’s 1989 economic collapse — although he doesn’t believe the US will disintegrate into separate countries. Of course, nothing is certain — and I’m sure most folks think Paul is off his rocker — but you’ve got to admit, the fact that such thoughts are even being openly discussed suggests something is surely amiss.
By the Numbers
Here’s the annual performance summary for several selected assets in 2017:
– 9.9% The US Dollar
– 1.7% 10-year Treasury Note
+ 5.6% Silver
+ 13.0% Gold
+ 19.4% S&P 500
+ 25.1% Dow Jones Industrials
+ 28.2% Nasdaq
+ 1355% Bitcoin
Source: CNBC; MarketWatch
The Question of the Week
[poll id="195"]
Last Week’s Poll Results
Are you a saver by nature, or do you have to force yourself?
- I’m a saver by nature. (76%)
- I have to force myself. (24%)
More than 1400 people responded to last week’s question and slightly more than 3 in 4 Len Penzo dot Com readers say saving comes naturally to them. I guess that’s to be expected for most people who enjoy reading personal finance blogs.
Useless News
For those who don’t follow me, here’s some traffic that hit the Twitter feed yesterday …
Uh oh … my daughter just ratted me out. https://t.co/pAJTGdwQvb
— Len Penzo (@LenPenzo) December 30, 2017
My dad has a Marriott rewards card and he needed to stay 75 nights by the new year to stay a platinum member but he only has 74
so he’s going down the street, checking into the hotel by our house, taking the shampoos, then coming back home
— nina (@ninaapenzo) December 28, 2017
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
After reading last week’s article highlighting so-called rules of thumb that are actually old wives’ tales, Cameron Marvel left this comment:
“Years ago, some famous celebrity (Zsa Zsa Gabor, Elizabeth Taylor, Joan Collins?) was asked about the two month salary rule for an engagement ring. She said that a man should buy as nice a ring as he can afford, because being broke isn’t sexy.”
I wonder if the large number of young able-bodied men these days who would rather live in their parents’ basement than work know this.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-
We live in interesting times, don’t we Len?
Thanks for another great edition of Black Coffee. My Saturdays wouldn’t be the same without them!
Sara
Thanks for being a loyal reader (and commenter), Sara.
If that lady had solar panels installed she would have got a $284 billion REBATE check instead. LOL!!!
True story: When I was a patent examiner, I occasionally got cash awards and a certificate for “outstanding service”.
As a joke, I submitted a suggestion that the award certificates might be displayed more if they were presented in frames.
Result: Another award certificate and more cash!
Brilliant! I assume the follow-on certificate was framed!
Naw – I did the deed; i admit it.
But all subsequent certificates were framed, paid for by
the good ol’ taxpayer.
Too funny, RD. Makes you wonder if you might have been better off suggesting the cash awards be accompanied by an all-expenses-paid vacation in the Caribbean!
Those were called “International Patent Conferences” and were reserved for the Commissioner and the Assistant Commissioners.
But of course. I should have known. LOL
Interesting thought, B-52!
“but youve got to admit, the fact that such thoughts are even being openly discussed suggests something is surely amiss.”
Very true. Can you imagine a Congressman (retired or not) talking about a collapse of the US in the 1950s, 60s, 70s or 80s? How about the 1990s?Now this kind of discussion can be found (or at least the topic is broached) almost everywhere including very mainstream media sites. If everything was great this topic wouldn’t be talked about much if at all.
I remember not too long ago — actually it was back in 2008, I read this story in the Wall St. Journal by a Russian academic who was predicting that the US would break apart. At the time I thought it was a laughable assertion. Frankly, I thought the guy was a loon for even suggesting such a “ridiculous” notion.
Of course, back then I really had no idea how our financial system actually worked. Now I do.
Today, I think it is a very real possibility.
I don’t see what the fuss is about because Janet Yellen told us that she doesn’t expect another financial crisis in her lifetime. So relax. It’s OK to resume watching your regularly scheduled episodes of Dancing with the Stars and the NFL.
Her prediction was even bolder, Oscar — she said she doesn’t expect another financial crisis in our lifetime.
(And you folks think I’m crazy.)
Bitcoin up 1355% in 2017! Here’s to similar returns in 2018. All aboard!
LOL. Let’s see … if bitcoin repeats its 2017 performance in 2018, they’ll be priced at nearly $200,000 each. We’ll have to wait and see.
As for me, I’m not boarding the bitcoin train. I think there’s a bridge out on the main line.
Len, i sympathize with you – daughters are quick to exploit foibles, aren’t they?
A publication that shall remain nameless here was publishing some gawdawful lefty stuff and it made me so mad I tore out the freebee subscription mailer from their magazine in doctor’s offices or wherever I found them and subscribed their reporters.
My daughter thought that was so funny she wrote a letter to the editor and that was the end of that.
Yeah … nothing gets by Nina. I actually got a kick out of her tweeting about it.
If interest rates ever rose much above where they are today NOBODY would be able to afford new American pickups. As it is now the car industry needs to offer 7 years at 0% financing to keep them moving off the lots.
One day not too long ago I hit the pause button to read the fine print on one of those American pick-up truck tv ads that was touting financing of zero (or near-zero) down and 0% for 7 years. It said the payment was $14 for every $1000 financed. That’s still a payment of $840 per month (assuming $60k truck). So, yeah … I suspect there won’t be a lot of new pick-up trucks being sold in the future if interest rates creep up even a little bit.
I don’t think the US Dollar is coming to an end, but the day when it’s no longer the global reserve currency is nearly upon us. Global reserve status is what justifies the existence of at least 75% of the dollars in the world today, and the same amount of the USD’s purchasing power. That’s the trouble as you say Len. The USA’s standard of living, its ability to deficit spend on guns and butter, and its huge advantage in the financial world depends on that global reserve status.
If the US dollar loses 75% of its purchasing power from here in short order, then for all intents and purposes the dollar is done. They can either stick with the same currency (federal reserve notes), or do a total reset and issue something new. Regardless, there are going to be a lot of unhappy people.
Is platinum status really worth the price you paid for the hotel room you didn’t stay in?
Actually … yes, it is. Believe it or not, I ran the numbers and I would have been foolish to not do what I did. I may write up a separate article explaining the dirty details of what I did and the justification for doing so.
As long as the “markets” are up, the central banks are still in control. I don’t think the WSJ fully grasps the power of digital currency, or the fact that central bankers can distort pricing any way they wish with a few keystrokes.
Totally agree with this ^^^^^
The central banks are in control until they aren’t. I’d like to see them try and control the bond market if a panic erupts. I don’t think there is any way they will ever be able to counter that stampede; the market is just too big.