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.
Okay, away we go …
“We inflate our paper currency, we repair commerce with unlimited credit, and are presently visited with unlimited bankruptcy.”
— Ralph Waldo Emerson, The Young American, 1844
Credits and Debits
Debit: A couple weeks ago some lucky person who bought a lottery ticket in New Jersey, won a $521 million lottery jackpot. Even so, the winner may not be set for life because studies show that lottery winners are more likely to declare bankruptcy within five years than the average American. It’s true. In fact, nearly one-third of all lottery winners eventually end up declaring bankruptcy. Hmm. Why am I not surprised?
Debit: If you think that’s amazing, check this out: Yet another study found that people who live next door to a lottery winner see their own risk of bankruptcy increase by 2.4%. No, really. Apparently, this is because lottery-winner lifestyle upgrades end up inducing their neighbors to keep up with the Joneses … eses.
Debit: Speaking of bankruptcies, a new report from investor research firm Moody’s confirms that bankruptcies in the retail sector hit an all-time high during the first quarter of 2018. Sears and Claire’s are among nine retailers that defaulted on their debt during the first quarter, despite the healthy economy. Or should I say, “supposedly” healthy?
Debit: I say “supposedly” because although stocks are trying to make another run toward new highs, and the economy is at, heh, “full employment,” the yield curve for US Treasuries is falling at a rapid pace and will soon be inverted. And this week Fed governor John Williams admitted that “an inverted yield curve is a powerful recession signal.” Uh oh. Well … the bond market isn’t considered “the smart money” for nothing, folks.
Debit: In other news, despite Venezuela’s abundance of natural resources, two decades of socialism has resulted in a nation that is now unable to provide enough food for its citizens — proving yet again that socialism’s free-lunch mindset is an unsustainable proposition that can only lead to failure and misery. And you thought winning the lottery was risky.
Credit: Then again, even something as noble as trying to save just a small portion of your hard-earned money is riskier than ever these days …
Debit: For those who wonder why government pension systems are on the verge of collapse all over America, perhaps you should consider the case of Joseph Robertson; he’s an eye surgeon who retired as head of the Oregon Health & Science University last fall. The eye doctor also collects the state’s largest government pension: $76,111. Per month. I know. I just wonder if anybody in Oregon is going to make a spectacle of this.
Debit: Meanwhile, at $237 trillion, worldwide debt is now 327% of global GDP. It was less than $150 trillion just prior to the 2008 financial crisis. Even worse, if you include the $750 trillion of bank derivatives out there, then total global debt is $1 quadrillion. The good news is if Dr. Robertson’s pension has cost-of-living adjustments, I’m pretty sure he could single-handedly pay off every last penny of global debt in just a few short years. Okay, almost all of it.
Credit: In an honest monetary system backed by precious metals, such insane levels of debt and currency debauchery would be utterly impossible to achieve. And although the US dollar is no longer anchored to gold, the yellow metal should act as a foolproof barometer that reliably indicates the greenback’s — or any other currency’s — true purchasing power at any given time.
Debit: I say “should” because more virtual gold trades in a single day than the real physical stuff that’s actually mined in an entire year — that’s blatant proof that the true price of gold is being suppressed. Even worse, it’s a clear sign that our dollar-based monetary system is a total sham — which begs the question: How much longer can the US continue to run on fake money? Hey … I’m just askin’.
By the Numbers
Kids aren’t getting behind the wheel as much these days. But contrary to popular belief, its not just because smartphones and social media let them stay connected:
71% Percentage of high school seniors who have a drivers license; that’s the lowest percentage in decades.
15% Percentage of teens who cite being able to communicate online as a reason for not getting a license before 18.
36% Percentage of teens who say the main reason they’re not learning how to drive is the “overall cost.”
$350 The average cost of private driving lessons.
25% Percentage of teens in households with incomes below $20,000 who get their license before 18.
68% Percentage of teens who admit to checking apps while driving.
80% Percentage of teens who consider app use while driving “not distracting.”
Source: Wired
The Question of the Week
[poll id="211"]
Last Week’s Poll Result
What is your primary credit card?
- VISA (46%)
- Master Card (21%)
- American Express (15%)
- I don’t have a credit card (12%)
- Something else. (6%)
More than 1200 Len Penzo dot Com readers answered this week’s survey question and it turns out that slightly more than 1 in 9 of them don’t have any credit cards at all. Of those who do, more than half use VISA as their primary card.
Useless News: Hired Help
A successful rancher died and left everything to his devoted wife. She was a very good looking woman, and determined to keep the ranch, but knew very little about ranching, so she decided to place an ad in the newspaper for a ranch hand. Two men applied for the job.
One was gay and the other a drunk. She thought long and hard about it, and when no one else applied, she decided to hire the gay guy, figuring it would be safer to have him around the house than the drunk. He proved to be a hard worker who put in long hours every day and knew a lot about ranching.
For weeks, the two of them worked, and the ranch was doing very well. Then one day, the rancher’s widow said to the hired hand, “You have done a really good job and the ranch looks great. You should go into town and kick-up your heels.”
The hired hand readily agreed and went into town one Saturday night. However, one o’clock came and he didn’t return. Two o’clock and no hired hand. He returned around two-thirty and found the rancher’s widow sitting by the fireplace.
She quietly called him over to her. “Unbutton my blouse and take it off,” she said. Trembling, he did as she directed. “Now take off my boots.” He did so, slowly. “Now take off my socks.” He did. “Now take off my skirt.” He did. “Now take off my bra.” Again with trembling hands he did as he was told. “Now,” she said, “take off my panties.” He slowly pulled them down and off. Then she looked at him and said;
“If you ever wear my clothes to town again, I’ll fire you on the spot.”
(h/t: hillbilly)
Other Useless News
Here are the top — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Northwest Territories (2.00 pages/visit)
2. Newfoundland and Labrador (1.61)
3. Alberta (1.56)
4. Manitoba (1.49)
5. Quebec (1.47)
9. New Brunswick (1.33)
10. Nova Scotia (1.20)
11. Nunavut (1.13)
12. Prince Edward Island (1.09)
13. Yukon Territory (1.00)
Whether you happen to enjoy what you’re reading (like those really crazy canucks in the Northwest Territories, eh … for the second month in a row!!) — or not (ahem, you hosers living on the frozen Yukon Territory tundra) — please don’t forget to:
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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 me at: Len@LenPenzo.com
After reading last Monday’s blog article on the power of compound interest, Paul shared an observation of his own:
” Leaving money in savings accounts that yield low interest is actually costing us money!”
Agreed — but if you think that’s costing you money, then just wait until the bail-ins get here.
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c
A West Virginian who won a multi-million lottery awhile back eventually said “I wish I’d torn up the ticket”.
This theme reminds me of Edgar Allen Poe’s tale: “The Monkey’s Paw”, where the recipient of the paw’s magic is granted three wishes, but the third is always for death.
Sudden wealth from any source, an inheritance, maybe, carries with it great burdens.
Those wise enough to realize that deal objectively with the burdens and are not overwhelmed.
As for me, I enjoy the box of crackers I buy with what might be spent on a lottery ticket. As the saying goes: Just say’n”.
In the mid 1990s, there was a group of about 20 people where I work who pooled their money to buy a bunch of lottery tickets — and they won! One of the winners was somebody who I worked with on a daily basis. They ended up receiving annual checks of just under $10,000 — this was before they offered lump sum payouts — enough for a nice vacation or other splurge item every year, but not enough to retire early on. Maybe if one is going to win the lottery, that is the way to do it.
As a post script — I still work with the guy; his annual lottery checks finally stopped coming several years ago.
Something similar in my life, Len:
For a decade or so there was a natural gas play in this area and we received a delay rental on the rights to the gas under our land, amounting to several thousand dollars a year.
It’s now played out and never was enough to upset the apple cart, anyway.
Lotteries are a “stupid tax”. I played the lottery exactly one time, when the service station I worked at began selling them. Was I entertained, amused, or enriched? No. But I was one dollar poorer and I felt stupid for wasting my money. People say “you can’t win if you don’t play”. I prefer to say you can’t lose if you don’t play.
That’s my motto too, Luke. You have a much better chance of winning by taking your dollar to a casino and placing a red or black bet on the roulette table.
I always love how the lines grow when the Power Ball gets up in the mega millions….along with the odds. Buddy of mine tried to get me to play. I looked at him and asked:
“You ever been killed by lightning ? (Obviously not since we were still talking….ahahahaa) Or do you know anybody that has been killed by lightning ? Or even heard of anybody around here killed by lightning ??”
“Huh…what do you mean?”
“Well, almost every year, around 300 people get killed by lightning in the US, give or take a few. There are around 300 million people in the US, which means the odds of being killed by lightning are around 1 in a million. Yet, despite the fact in the 50+ years of your life YOU haven’t been, nor anyone you know, nor anyone around here even. I mean if you factor in that 50 years, the odds go down so low it scares me to even be standing next to you !
But in spite of WAY WAY much better odds of being killed by lightning, you’re willing to pay out hard earned money for a chance at 1 in (however hundred million the current one is). You starting to understand large numbers now ?? ”
Just shakes his head, and goes to buy tickets……. What can I say. Games for the mathematically challenged.
Another thing about large numbers is that the odds of winning are so big buying additional tickets barely move the needle when it comes to improving your chances. If the odds of winning the jackpot are 1 in 500,000,000 and you buy 100 tickets, your odds of winning are still 1 in 5,000,000. Big deal. The odds of getting struck by lightning are about 1 in a million!
Buying 100 tickets may give a 1 in 5,000,000 chance of winning, but you still have 499,999,900 chances to lose. If the odds were reverse, i’d buy the ticket.
All of these crazy pension payouts will not matter soon. Wall Street and the Fed are shaking in their boots because they know interest rate increases are coming at the worst possible time. The Fed has no choice but to raise them, but they are trapped. Demographics are already pointing to pension fund selling to cover obligations. That’s bad for the stock market. Making things worse are rising interest rates. They will trigger a sell-equity-buy-debt wave that will make the equity selling feed on itself. The pensions are doomed.
I think you’re right. The bulk of those pension investments should have been primarily in bonds, but nearly a decade of the Fed’s zero-interest-rate policy forced fund managers to move a larger chunk into equities. Throw in demographic changes and the pension funds — most of which are already massively underfunded (read: essentially bankrupt) really are a ticking time bomb.
Hi Len,
Thanks for another great edition of Black Coffee! I’ve never played the lottery in my life. I have a better chance of getting struck by lightening than winning.
Sara
Thanks, Sara. You actually have a better chance of being struck by lightning twice.
Re: Quadrillion dollar global debt. In a free market, rates should rise in response to debt increases and put the breaks on leverage. The Fed’s current rate hiking cycle means they are finally doing what the free market should have done once QE started. But if we had truly free markets in money, the debt would have never gotten this far out of hand.
Cowpoke, the QE was directly responsible for holding bond yields down. Much of that cash was going directly into the bonds, thereby raising bond prices (remember, yields move in opposite direction to the bond price).
Why would an eye surgeon need a pension in the first place, let alone one that pays almost $1,000,000 per year? Shouldn’t a well paid doctor have made enough during his career to cover his retirement savings without any help from the taxpayers?
One would think so, Annika.
Maybe the surgeon thought the lottery was the path to lifetime wealth.
“I just wonder if anybody in Oregon is going to make a spectacle of this.”
Well played, Mr. Penzo. Well played.
Why, thank you!