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.
And away we go …
“Faith is to believe what you do not see; the reward of this faith is to see what you believe.”
— St. Augustine
“The Bank collects all taxes, fines, loans and interest. The Bank never ‘goes broke.’ If the Bank runs out of money, the Banker may issue as much more as may be needed by writing on ordinary paper.”
— from the Rules of Monopoly
Credits and Debits
Debit: The median household income in Palo Alto, California, is $137,043. That’s more than twice as much as the US at large, but it’s still not nearly enough to buy a new house there because median home sale prices hit an all-time high at $2.67 million in 2017. Perhaps that’s why Palo Altans making $349,999 consider themselves ‘lower middle class.’ Heh. Cry me a river.
Debit: On a related note, ten miles south of Palo Alto is Sunnyvale, where a two bed, two bath, 848 square foot home was recently listed for $1.45 million. It sold in two days. For $2 million. That’s $2358 per square foot. By the way, if you think that signals a healthy housing market, I’ve got a 36 square foot backyard shed in Petaluma I’m selling for $999,999. Hey … realtors say it’s never been a better time to buy!
Debit: Those outrageous prices might also be why pending US home sales fell 4.7% in January — that’s the lowest reading since October 2014, and the biggest monthly decline since 2010. Uh oh. You know what that means: bad news for those house flipper television shows.
Debit: Speaking of plunging prices, the Dow ended a 15-month win streak after closing 380 points lower on the last day of February, snapping its longest monthly win streak in nearly six decades. Then the Dow kicked off the first two days of March by losing another 420 points on Thursday — and 71 more on Friday.
Credit: Some analysts are blaming the latest stock market decline on US plans to impose stiff tariffs on steel and aluminum which, naturally, drew sharp protests globally. Of course, there’s a difference between free trade and fair trade — and tariffs are a legitimate way to level the playing field. Never mind that the long decline of the US steel industry was primarily due to improving technology — not trade.
Credit: Meanwhile, Steve Westly, a former board member of the largest US public pension fund, made a stunning admission this week when he said, “The pension crisis is inching closer. CalPERS just voted to increase the amount cities pay to the agency. Cities point to possible insolvency if payments keep rising but CalPERS is near insolvency itself. It may be reform or bailout soon.” Yep. And I’m betting on “bailout.”
Credit: Too bad CalPERS simply can’t print all the cash it needs like the US does. Unfortunately, America has become so reliant on the printing press that, as David Stockman notes, “Uncle Sam’s scheduled debt this week will nearly equal his cumulative borrowing through 1970.” Uh huh. That covers every IOU generated during the nation’s first 188 years and 37 presidents — in the last week. Think about that.
Credit: Let’s face it; as Tom Lewis points out, “Few of us consider how extrinsic the value of money really is. At one time, our money was backed by the tangible value of gold or other precious metals, legal tender for anything of equal value. That’s not the case any longer. In reality, we are dealing in valueless fiat currencies.”
Debit: Of course, the US dollar has lost 97% of its value since the establishment of the Federal Reserve in 1913. And the greenback’s stewards decided to pull its gold backing in 1971, officially making the “Almighty Dollar” the king of all fiat currencies. Apparently, America’s monetary officials forgot the cardinal rule of reserve currency management:
Debit: If you want proof that the value of fiat currency is rapidly diminishing with each passing day, simply look to Pyeongchang, South Korea, which built a brand new 35,000-seat Olympic stadium last year for $109 million; it was used just four times. Now it’s being demolished. That puts its cost at an astonishing $10 million per hour of use. The evidence is damning — and hiding in plain sight. Yet few can see it.
Debit: You can bet other nations can see the dollar’s demise is rapidly approaching; that’s why it’s being abandoned as the global reserve currency, eliminating their need to hold dollars or Treasuries. As a result, foreign demand is drying up and Treasuries, notes, and bonds are being dumped, leaving the Fed as the primary buyer of US debt. That, folks, doesn’t bode well for the 37-year bull market in bonds.
Credit: … because it can:
By the Numbers
The 90th Academy Awards takes place on Sunday. Here’s some key facts and figures behind the movie industry’s biggest night:
8.5 Weight of Oscar statuette, in pounds.
13.5 Height of Oscar statuette, in inches.
19 Ceremonies hosted by Bob Hope, who has helmed more Oscars than anyone else.
21 Nominations earned by Meryl Streep, more than any other performer. This year, she earned a Best Actress nod for Steven Spielberg’s The Post; she has won three Oscars.
51 Nominations for composer John Williams, the most nods for a living person. He is nominated this year for Star Wars: The Last Jedi.
88 Age of Christopher Plummer, the oldest acting nominee ever.
$900 Current estimated value of the 24-karat gold-plated Oscar statuette.
$24,700 Estimated value of the Oscar’s red carpet.
$2,600,000 Estimated cost of a 30-second commercial during this year’s Oscars telecast.
$4,500,000 Budget of Best Picture nominee Get Out, which grossed $255 million globally.
Last Week’s Poll Results
What is the best way to pay for new road infrastructure and highway maintenance?
- Gasoline tax (56%)
- A combination of both (28%)
- Vehicle Miles Traveled tax (16%)
More than 1500 Len Penzo dot Com readers responded to last week’s question and it turns out that more than half of you say, when it comes to funding the highway system, a gasoline tax is the only way to go. I’m agnostic on this one, but if I had to choose, I’d go with the gasoline tax too.
The Question of the Week
Useless News: The Difference Between Thinking and Knowing
Two medical students were walking along the street when they saw an old man walking with his legs spread apart. He was stiff-legged and walking slowly.
One student said to his friend: “I’m sure that poor old man has Peltry Syndrome. Those people walk just like that.”
The other student says: “No, I don’t think so. The old man surely has Zovitzki Syndrome. He walks slowly and his legs are apart, just as we learned in class.”
Since they couldn’t agree they decided to ask the old man. They approached him and one of the students said to him, “We’re medical students and couldn’t help but notice the way you walk — but we couldn’t agree on the syndrome you might have. Could you tell us what it is?”
The old man said, “I’ll tell you, but first you tell me what you two fine medical students think.”
The first student said, “I think it’s Peltry Syndrome.”
The old man said, “You thought — but you are wrong.”
The other student said, “I think you have Zovitzki Syndrome.”
The old man said, “You thought — but you are wrong.”
So they asked him, “Well, old timer, what do you have?”
The old man said, “Well, I thought it was gas — but I was wrong, too!”
(h/t: boomer sooner)
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
After reading about how to avoid common art scams, our very own Tennessee Andy shared this bit of exciting news:
I’ve got (what I’m told) is the original “Dogs Playing Poker” … I wouldn’t let it go for less than a million.
I don’t blame you — but would you consider trading it straight up for my Elvis self-portrait on black velvet?
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c