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 …
“Gold is an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters, upon an account which is not theirs, upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.'”
— Francisco’s “Money Speech” from Ayn Rand’s Atlas Shrugged
“Pizza makes me think that anything is possible.”
— Henry Rollins
“Don’t give me timing. Give me time.”
— Jesse Livermore
Credits and Debits
Debit: Did you see this? The most recent consumer sentiment survey by the University of Michigan found that young Americans are less optimistic than their parents. That’s the first time in the survey’s 60-year history that Americans younger than 35 said they actually have less consumer confidence than those aged 55 and over.
Debit: Perhaps younger Americans are pessimistic because they’re simply overreacting to rising gasoline prices. After all, the cost to fill up one’s tank is up across the country, and inching toward the highest pump prices in three years. California currently has the highest average pump price in the US at $3.51 per gallon. At the other end of the spectrum, Oklahoma’s motorized prairie schooners are currently paying just $2.37.
Debit: Then again, maybe millennials are feeling blue because the stock market finished the first quarter of 2018 in the red, ending a nine-quarter win streak. (See what I did there?)
Debit: That’s bad news for the Swiss National Bank (SNB) because, at the beginning of last quarter, it owned $11,589 worth of American stocks for every man, woman and child in Switzerland. That wouldn’t be so alarming if Switzerland’s population was 217, but it’s not — it’s more than 8 million.
Credit: So … how absurd is the SNB’s meddling? Well, as Zero Hedge observed: “If the Fed decided to invest $11,589 in the US stock market for every American citizen, they’d need to buy $3.75 trillion of stocks; almost doubling their already-inflated balance sheet.” The good news is, when it comes to raising cash, the Fed has never failed. That’s because it only costs 12 cents to print a hundy!
Debit: By the way, it’s not just the Swiss National Bank that is interfering with the markets by propping them up; the Bank of Japan (BoJ) and European Central Bank (ECB) are doing it too. In fact, the BoJ owns 77% of all ETFs (!), while the ECB has been buying Euro corporate bonds, thereby driving yields into the ground. Does anybody else see a problem with this? Anyone? (Aside from me and my tin foil hat brigade.)
Credit: As Charles Hugh Smith notes, “The current stocks-and-bonds game is for all the marbles (because) the status quo depends on valuations and interest rates remaining near their current levels for the system to function. If rates soar or stocks plummet, the game is over: pension funds collapse, tax revenues drop, debt defaults, and employment craters.” Meh. I ain’t gonna worry until I see something like this outside my window:
Debit: Meanwhile, the US just had its largest trade deficit since the 2008 financial crisis. How big was it? Godzilla big — in February the US had to borrow $57.6 billion. Ouch.
Credit: With that in mind, it’s no wonder that Chris Hamilton says the Q1 2018 was an economic disaster for the US. In fact, he calls it, “One of the worst quarters on record. Incurring over $621 billion in new debt to produce just over $100 billion in new economic activity is something only government could achieve.” Uh huh. And if you think American deficits are bad now, just wait until the economy enters a recession.
Credit: Actually, Hamilton underestimates the government’s penchant for “miraculous achievements.” For example, Mike Maloney aptly demonstrates how Big Government politicians provide an endless supply of “free” lunches for their clueless constituents:
Credit: Speaking of miraculous government achievements, Bill Holter has another one for you: “In (the last) six months the US borrowed an amount in dollars equivalent to six years worth of total global gold production!” Yep. And the only logical explanation is that the true price of gold in US dollars is actually significantly higher than it sells for today. Or, to put it another way: the US dollar is extremely over-valued.
Debit: Of course, Americans’ current artificially-high standard of living is being sustained by the over-valued US dollar — and America’s addiction to credit — which is exactly why China announced this week that it intends to soon begin paying for oil in yuan. In other words, the United States’ primary credit card company will be curtailing America’s credit line. And when enough credit eventually dries up, so will most Americans’ cushy lifestyle.
Credit: One thing is certain: Although our debt-based monetary system requires an ever-expanding debt load — and by extension, larger and larger annual deficits — America’s growing debt burden is now visibly straining the system. As a result, more people are realizing that there’s far more dollars out there than real assets available to buy. A tipping point is approaching; the only unknown is the day it finally gets here.
By the Numbers
Here are a few financial figures for the Masters — golf’s premier professional tournament — which was played this weekend in Augusta, Georgia:
$35,000,000 Estimated revenue from last year’s ticket sales.
$1214 The average ticket price for Sunday’s round during the past five years.
$1948 The cheapest available ticket in the marketplace on April 5th for Sunday’s round.
$5372 The average resale price for a ticket to this year’s Super Bowl.
$250 Price of the green jacket awarded each year to the tournament champion.
$682,000 The price that past-champion Horton Smith’s green jacked fetched at a 2013 auction.
$1,980,000 Prize money awarded to 2017 champion Sergio Garcia.
$198,000 The winning cut for Garcia’s caddy.
Insider Notes: The Gold-Silver Ratio
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Last Week’s Poll Results
Which price target for bitcoin is more likely to happen first?
- $2000 (63%)
- It’s a toss up. (27%)
- $20,000 (11%)
More than 1500 Len Penzo dot Com readers responded to last week’s question and more than 3 in 5 think more pain is in store for bitcoin investors — at least in the short term. Only time will tell, but I agree.
The Question of the Week
Useless News: A Gorgeous Woman Walks In to a Bar …
A 77-year-old man was having a drink in a bar when a gorgeous woman entered and sat down a few seats away. The girl was so attractive that he just couldn’t take his eyes off her.
After a short while, the girl noticed him staring, so she approached him.
Before the man could apologize, the girl looked him deep in the eyes and said to him in a sultry tone: “I’ll do anything you’d like. Anything you can imagine in your wildest dreams. It doesn’t matter how extreme or unusual it is; I’m game. But I want $100, and there’s another condition.”
Completely stunned by the sudden turn of events, the old man replied, “What’s the condition?”
“You have to tell me what you want me to do in just three words.”
So the man took a moment to consider the offer from such a beautiful woman. He then whipped out his wallet, put ten $10 bills in her outstretched hand, looked her square in the eyes, and said slowly and clearly: “Paint my house.”
(h/t: RD Blakeslee)
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 my article highlighting 9 things people routinely overpay for, Warren left this rebuttal to one commenter’s claim that “flying coach gets you there just as fast as first class”:
“Unless you have a short connection — then being able to exit sooner matters.”
I think there’s a bad joke in there somewhere, Warren, but I’ll just nod my head and agree with you.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c