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 this week …
“Remember the Golden Rule: Whoever has the gold, makes the rules.”
— anonymous
Credits and Debits
Credit: Faced with Ontario’s mandatory 21% hike in minimum wages that became effective on January 1st, and with hourly rates rising from $11.60 to $14, employees at two Tim Hortons locations owned by the children of the franchise co-founders reduced employee benefits and eliminated paid breaks in order to help offset the higher cost of doing business. Imagine that.
Debit: Meanwhile, in the People’s Socialist Paradise of Venezuela, chaos now reigns at local supermarkets as the government has implemented price controls in a desperate attempt to stop the hyperinflation of its nearly-worthless currency — which is like pouring gasoline on a house fire. In fact, price controls never work — unless the ultimate objective is widespread shortages and long lines. Forward, amigos!
Debit: Did you see this? The International Monetary Fund warned that 22% of US companies are at risk of default should there be even a modest rise in borrowing costs. That could pose a problem if the “Bond King,” Bill Gross, is correct: he says the multi-decade bull market in bonds officially ended this week. We’ll see; many bond market tops have been called in the past 10 years — but not by anyone as credible as Gross.
Credit: In the meantime, there’s a growing chorus of pundits out there who believe that everyone should quit complaining and enjoy the world’s seemingly never-ending debt-fueled party. As M.N. Gordon notes, “We’re in the twilight of the debt bubble age. Embrace it. Love it. What choice do you have, really? There’s nothing anyone can do about it.” Actually, there is: you could start preparing for the eventual hangover.
Debit: Houston taxpayers are certainly embracing the debt bubble — they’ve committed $1 billion — yes, billion— to a bond offering designed to reduce the underfunded condition of its municipal employees’ pension. Then again, the $1 billion is only a stop-gap measure — the equivalent of renting a few more fingers to plug the ever-increasing number of holes in the dike.
Credit: Of course, as Dave Kranzler points out, “pension underfunding” is a euphemism for “debt obligation,” as the bond merely, “shifts wealth from the taxpayers to the retired public employees.” A more rational approach, he says, “would be to cut beneficiary payments or force larger (employee) contributions. The problem is, (that) might cost elected officials their jobs.” Maybe — but those pols would get my vote.
Debit: Despite the fact that the pension crisis has been well-publicized, 6 out of 10 CalPERS retirees and 8 out of 10 New York City retirees have bought into the illusion that their pensions are fully funded. Sad. Ignorance is bliss, I guess.
Credit: I’ll bet more than a few people have finally woken up and smelled the coffee after California’s governor hinted that pension cuts were a real possibility. On second thought … maybe they haven’t.
Credit: In other news, Alasdair Macleoud observed that, “Last week, China’s central bank Governor met the Saudi finance minister, presumably to agree (on) the date when Saudi Arabia will begin accepting yuan for oil sales to China, (which) certainly suggests that the end of the Nixon/Saudi (petrodollar) deal is in sight.” That it does. And with the potential impacts to American wallets, it should be huge news — but it’s not.
Credit: With the continued deterioration of the dollar-based international monetary system, it’s probably not a coincidence that Russia has decided to show off its gold hoard — all 1800 metric tons of it. Assuming all of the photos in this article are real — and I have no reason to believe they aren’t — it’s certainly an impressive stash. Here’s one picture to whet your appetite:
Source: RussiaEnglish.com (click to enlarge)
Debit: As for the US, it claims to have 8333 metric tons of the yellow metal — more than any nation in the world. But if you’re looking for similar photos of the Fort Knox gold — which hasn’t had a proper in audit in almost 70 years — well … don’t hold your breath. Here’s the photo released by the US Mint after Treasury Secretary Steve Mnuchin dropped by Fort Knox last year to “verify” all of the gold was there:
Source: US Treasury (click to enlarge)
Debit: Frankly, that publicity photo doesn’t instill a lot of confidence but, hopefully, America still has every bar of gold it claims to have — not just the one proudly displayed by Secretary Mnuchin — because one day the nation is going to need it. And I suspect sooner rather than later.
By the Numbers
The 2018 Winter Olympic Games in Pyeongchang, South Korea are less than a month away. Here’s some of the more intriguing numbers associated with the Winter Games:
48 Distance in miles from Pyeongchang to the DMZ.
3000 Athletes who will be competing at the Winter Games this year.
0 The number of athletes from Russia who will be competing at the 2018 Winter Games.
15 The number of disciplines the Olympic athletes will be competing in.
377 The number of Winter Olympic medals earned by German athletes; that’s more than any other nation.
7500 The number of runners taking part in the torch relay throughout South Korea.
50 Percentage of Olympic tickets that were still unsold as of mid-December 2017.
Source: DW.com
The Question of the Week
[poll id=”197″]
Last Week’s Poll Result
Which would you rather have?
- More wisdom. (39%)
- More time. (32%)
- More money. (24%)
- More intelligence. (5%)
Who knew? More than 1300 people responded to last week’s question and so it is that 2 in 5 Len Penzo dot Com readers, if given the choice, would rather have more wisdom than intelligence, time or money. I would too … the big question in my mind is at what age do those who prefer more wisdom begin wishing they had more time.
Useless News: Cajun Math
A Cajun man wants a job, but the foreman won’t hire him until he passes a little math test.
Here is your first question, the foreman said. “Without using numbers, represent the number 9.”
“Without numbers?” the Cajun says, “Dat is easy.” And proceeds to draw three trees.
“What’s this?” the boss asks.
“‘Ave you got no brain? Tree and tree and tree make nine,” says the Cajun.
“Fair enough,” says the boss. “Here’s your second question. Use the same rules, but this time the number is 99.”
The Cajun stares into space for a while, then picks up the picture that he has just drawn and makes a smudge on each tree. “‘Ere you go.”
The boss scratches his head and says, “How on earth do you get that to represent 99?”
“Each of da trees is dirty now. So, it’s dirty tree, and dirty tree, and dirty tree. Dat is 99.”
Now the boss is getting worried that he’s going to actually have to hire this Cajun, so he says, “All right, last question. Same rules again, but represent the number 100.”
The Cajun stares into space some more, then he picks up the picture again and makes a little mark at the base of each tree and says, “‘Ere you go. One hundred.”
The boss looks at the attempt and says, “You must be nuts if you think that represents a hundred!”
The Cajun leans forward and points to the marks at the base of each tree and says, “A little dog come along and poop by each tree … So now you got dirty tree and a turd, dirty tree and a turd, and dirty tree and a turd. That make one hundred.”
(h/t: abguy4)
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. Rhode Island (3.30 pages/visit) (!)
2. South Dakota (3.21) (!)
3. North Dakota (2.62)
4. West Virginia (2.53)
5. Delaware (2.30)
46. Utah (1.37)
47. Oklahoma (1.36)
48. Missouri (1.34)
49. Mississippi (1.33)
50. Montana (1.17)
Whether you happen to enjoy what you’re reading (like my friends in Rhode Island …) — or not (ahem, Montana …) — please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
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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 a recent article here offering 8 ways to tame your credit card debt, Jason added one more to the list:
“Or, you could fake your death and live out the rest of your days under an assumed name.”
Good one. Have you ever considered starting your own personal finance blog?
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
It is important that we have a complete inspection and public accounting of all the gold in Fort Knox. While we’re at it the Federal Reserve needs to be audited too.
I’d be surprised if the US has half the gold it claims to have. Mnuchin’s trip to Ft. Knox was pure theater and I’m not sure what it proved. It seemed to raise more questions than answers.
@Paul: I agree that an audit of America’s gold reserves is badly needed. I suspect the Treasury’s hands will be forced when the dollar comes under duress. I also think instead of auditing the Fed, we should just abolish it!
@Bill: I’d be surprised if the US has all that it says it does too. I’ve heard that another problem with the US gold is that much of it is less than “good delivery” quality (i.e., less than .995 fineness or higher).
I made it into the weekly roundup! How exciting! As far as starting my own personal finance blog, as long as lenpenzo.com is around, theres really no need.
On another note, if Mom or Dad is reading this, relax, I know you cant fake your death every time you have a problem:-)
Yes, you did, Jason! Well done, sir!
Hi Len! I’m happy the weekend is finally here. While everything seems to be slowly melting down, I’ll just continue to keep my head down and collect silver on a steady basis!
Sara
Good for you, Sara. And I’m doing the same thing.
Anyone old enough to remember the gas shortages of the 70’s knows price controls don’t work. The long lines and rationing people had to endure in those days were because of price control laws.
Of course the side effects of interfering in a free market with price controls only make things worse. Instead of working to understand the real reason why prices are so high, the government passes a new law or regulation to fix the latest symptoms.
Take health care for example. The original problem was World War II wage controls, which caused employers to get around the problem by offering health insurance bennies. Instead of recognizing wage controls were the problem, the government decided to let the benefits be untaxed income. What followed from that is that some people were left out in the cold because because their employers didn’t offer health care bennies, so the government tried to help them by creating Medicaid and Medicare, and all of the regulations needed to make sure health insurance and health care fit their plans.
Next up was Obamacare. It tried to fix the symptom of poor people who had no health care at all, mainly because they weren’t employed. It created artificial markets with even more regulations that tried emulate real markets. Never mind that real markets would be better and more efficient. Why they never decided to fund poor people directly seems stupid, but there was more money to be made by the politicians and insurance companies if they went with Obamacare. As always the middle class ends up paying the price because the rich have enough money to bypass the system and the poor end up taking advantage of the subsidies.
@WA: Great point. I was just a kid in the 70s, but I remember the long lines. In California, you could only buy gasoline on odd or even days, which was determined by your car’s license plate number. Despite the rationing the lines were long. And to think it all could have been avoided by simply letting the price rise to stem demand! The higher prices, in turn, would have encouraged oil companies to expand exploration which would eventually lead to additional supply and lower prices. The free market is a beautiful thing when it is allowed to work.
@Gary: That is an excellent observation. Thank you for taking the time to share it.
“…the big question in my mind is at what age do those who prefer more wisdom begin wishing they had more time.”
Interesting question, which is put out of mind by young people. Nothing wrong with that – living without undue care, when youre young.
But if one does think about it, More than age controls the transition in individual cases.
Too many young veterans of our military forces, who have seen and suffered the worst of human butchery, dont want any more time at all – they are taking their own lives in heartbreaking numbers.
People facing terminal illness might want more time regardless of their age.
A few cloistered individuals might seek additional wisdom without regard for time, money or intelligence.
If I am representative of most healthy people (OK, so my mental health has always been suspect), more time comes increasingly to mind at the age when ones physical and mental powers have noticeably declined, which is more a function of health than age, which is, in turn, limited by one’s genetics.
So its true, I think: “if you want to live to old age, choose your parents carefully”.
Thanks for taking a stab at my question, Dave. I think your answer makes a lot of sense. As an octogenarian, you definitely did a good job picking your folks!
Re. pensions: Nothing less than a public revolt will put and end to these unsustainable, government defined benefit pension plans and a few judges with the balls to rule that, like everything else in life, pension promises CAN be broken (especially fiscally impossible promises). You can’t get blood from a stone.
You can’t get blood from a stone, but that won’t stop a lot of people from trying, Flounder!
Took some Crypto profits and purchased another ounce of Gold, I do however continue to purchase silver by dollar cost averaging monthly. I feel like Im beginning to run out of time and dont have near enough, but I have more then 95% of our population.
I think were at the door!
God Bless everyone here for whats to come.
Good for you, Jared! I think those who have as little as 5% of their net worth in physical precious metals (excluding home equity) will do no worse than break even if there is a currency crisis down the pike. Like you, I think a devastating financial storm is just off shore; I’ll be utterly shocked if we don’t begin feeling its effects before the end of this year, or next year at the latest — and bond, dollar index, and commodity technical indicators are strongly suggesting that is indeed the case. There is just too much debt sloshing around and not enough growth to sustain the charade.
To be sure, 2018 looks like it will be an interesting year economically. I’m not convinced the China will begin its oil for yuan contracts. Seems like the date keeps getting pushed back. If they do start I believe impacts to dollar will be gradual.
You could be right, Cowpoke. Only time will tell.
I understand the skepticism and pessimism on your blog. I really do. But this bull market might go another solid year on earnings improvements alone due to the corporate tax restructure. I sure hope your readers keep all their options open, and don’t just keep looking for the apocalypse. They might miss out on another 20% upside year. Or we could all crash and burn by May. Point is, no one knows for sure.
I appreciate your comment, Scott. Your words intimate that I’m advocating a 100% commitment to any single asset class; I’m not.
Of course, nobody knows for sure what is going to happen in the future. All I am trying to do is point out that there is plenty of smoke billowing from the theater rooftop. At some point, enough people will finally notice and run for the exits, only to find that the door to safety is far too small to let them all out in time. I understand that the movie currently running on the silver screen is quite enjoyable. The question everyone needs to determine for themselves is how much more of the show they want to see while the building is burning down.
Len,
I am sensing its very near. But having little financial acumen- ( I get all I know from reading you and I only understand a portion of your blog !)- I am wondering what this means in terms of practical steps. Most of my modest retirement savings is in cash or very low risk investing. I have a little physical gold/ silver. My house is paid off. I cant even figure out if I am a sitting duck or being wise. I am not prepped up for the civil unrest but working on that with items and steps from something you published awhile ago. I have 3 jobs.My husband is still working at almost 70. I forget about all this for awhile in the crush of life, then read here, get reminded and try to move forward in my confusion. I live in an east coast city with very high crime and am concerned about the armed robberies, carjackings, etc happening more and more in my own neighborhood. No lights for a few nights would be a disaster here. Thanks for the education you have provided here and how obvious it is that you really care about helping others fare well through this. If you or any readers have any other advice for me, I am all ears ! I want to stop being fearful and just do all I can. Thank you !
Kim, thank you for the kind words. Please don’t be fearful. You sound like you’ve got your financial house in order and your wealth insurance is in place — that is half the battle! Continue down the responsible, prepared path you are on; I am positive the world is going to carry on, just as it has during the countless other monetary resets in history.
Thanks Len, it actually helps to hear those words. I veer between being too anxious to invest in anything because of the strong sense it is about to collapse and anxious that being in cash and such low risk stuff that doesn’t grow is foolish! That plus confusion about what is really wise- are we going to have inflation or deflation?, etc equals paralysis on my part, which I detest.So I will continue reading and preparing!