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.
I hope everybody is having a great weekend! Okay, away we go …
“The road of excess leads to the palace of wisdom.”
— William Blake
“Low demand and high supply means a drop in the value of anything, including the dollar.”
— Robert Kiyosaki
“The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is.”
— Winston Churchill
Credits and Debits
Credit: Did you see this? A sunken ship has been found off Korea that allegedly carried $130 billion worth of gold — that’s roughly 100,000,000 ounces, or 3100 metric tonnes! Yes, that’s technically possible, but highly improbable for several good reasons; one of the best being that it’s the equivalent of almost half the gold (supposedly) in Fort Knox. Talk about putting your eggs in a single basket!
Debit: You can bet the gold in that sunken ship would come in handy for folks looking to buy their way into the top 5% of the US home market. That’s because Realtor.com says the entry fee to get into that exclusive club is now a cool $1 million. Nope … no inflation there. No, siree. Not even a whiff.
Debit: In other news, only five stocks have supplied 91% of the gains on the S&P this year; at the start of the week, these stocks contributed the most to the S&P gains in 2018: Amazon (+35%), Netflix (+21%), Microsoft (+15%), Apple (+12%) and Facebook (+8%). Then again, I guess that’s to be expected from a weighted index. Just remember, the concept works in reverse during bear markets too; that won’t be so fun.
Credit: Investors can thank central banks for the never-ending cash stream that continues flooding into the market to buoy stocks. Unfortunately for stock investors, interest rates must remain low to keep that cash flowing into the markets. But inflation is the fly in the ointment. Eventually, the Fed is going to have to choose between supporting stocks or defending the currency — and it won’t be stocks.
Debit: Despite what you’re being told, the economy isn’t as great as some would have you believe. If it was, why is food stamp usage as a share of the population where it was in 2008, in the midst of the deepest economic malaise since the Great Depression, despite the US allegedly being in a state of “full employment”? (Psst. Here’s a hint:)
Credit: As macroeconomics guru Bill Holter notes: “Without credit and without derivatives, valuations of almost all assets would be tiny fractions of what they are today.” Holter also warns that systemic risk has continually grown over the years because the majority of what society considers to be real wealth are actually very high risk paper “assets” that will go — presto! — “poof” when the debt bubble pops.
Credit: Current Fed policy is not conducive to sustaining the economic Ponzi scheme it has been trying to protect since the dollar’s anchor to gold was broken in 1971. As financial analyst Dan Kurz notes, “If the Fed continues its trajectory on both the interest rate and quantitative tightening/bond sales fronts, then the fabricated and overstated economic recovery will implode even sooner.” Uh oh.
Debit: Needless to say, the global trade war isn’t helping either, as American tariffs are accelerating the move away from the dollar as Asia’s sole trade and reserve currency. Huh. Imagine that.
Debit: For some reason, the potential loss of the dollar’s reserve currency status doesn’t seem to bother America’s decision makers, as the US doubled down this week by threatening to tax every single product imported into the US from China — $500 billion worth of goods in all. Maybe they don’t have a problem with a sharp reduction in Americans’ living standards. If not, they will.
Credit: Of course, nothing lasts forever — and that includes “The Almighty Dollar.” This week macroeconomics expert Jim Rickards warned that, “The US wanted diplomatic and military clout and it got it with the dollar, (but) it will soon be a victim of its own success. While the US was bullying the world with dollars, the world has been quietly preparing a new non-dollar system.” The clock is ticking, folks. Are you ready?
Debit: The long-term degradation of the world economy will continue to accelerate until the international monetary system is finally reset — and it will be reset. The only question is whether it happens amid the chaos of the currency crisis that’s heading our way or, hopefully, in a preemptive orderly fashion. Regardless, the unprepared will be unable to react in time, because the reset will come like a thief in the night.
By the Numbers
This week Forbes released its 2018 List of Highest Paid Celebrities. Here are a few highlights:
$6,300,000,000 The cumulative pre-tax earnings of the Top 100 paid celebrities; that is 22% more than the previous year.
$285,000,000 The pre-tax annual earnings of boxer Floyd Mayweather, who topped this year’s list.
17 The number of countries represented by the list’s Top 100 celebrities.
11 The number of entertainers on the list who earned at least $100 million.
$35,000,000 The minimum earnings to make this year’s Top 100 list.
Source: Forbes
The Question of the Week
[poll id="224"]
Last Week’s Poll Result
Chocolate, vanilla or strawberry?
- Chocolate (40%)
- Vanilla (34%)
- Strawberry (26%)
More than 1400 Len Penzo dot Com readers answered this week’s survey question and it turns out that chocolate is the Flavor King — but not by much, as almost as many people say they prefer vanilla, with strawberry placing a respectable showing in third. Frankly, I like ’em all!
If you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
Useless News: Hiring Practices
My son was flunking out of college so I told him, “You will marry the girl I choose.”
He said, “No.”
I told him, “She is Bill Gates’ daughter.”
He said, “Yes.”
I called Bill Gates and said, “I want your daughter to marry my son.”
Bill Gates said, “No.”
I told Bill Gates, “My son is the CEO of the World Bank.”
Bill Gates said, “Okay.”
I called the President of the World Bank and asked him to make my son the CEO.
He said, “No.”
I told him, “My son is married to Bill Gates’ daughter.”
He said, “Okay.”
And that’s exactly how politics works here in America. Thus began the practice of hiring morons to work in influential positions of government.
The practice remains unbroken to this day.
(h/t: pabste)
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. Prince Edward Island (2.00 pages/visit)
2. Quebec (1.84)
3. Nova Scotia (1.56)
4. Northwest Territories (1.54)
5. Alberta (1.46)
9. British Columbia (1.23)
10. New Brunswick (1.17)
11. Saskatchewan (1.15)
12. Nunavut (1.07)
13. Yukon Territory (1.05)
Whether you happen to enjoy what you’re reading (like those really crazy canucks on the Prince Edward Island, eh … for the second month in a row!!) — or not (ahem, you hosers living on the frozen Yukon 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 the results of my my ketchup taste test, Ronni had this to say about Heinz’ ill-fated foray into odd-colored ketchup options:
“Heinz’ wacky ketchup colors bombed. I’ll take the red Heinz, please.”
On a related note, I had friend who once rubbed ketchup in his eyes. In Heinz sight, that wasn’t a good idea either.
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c
I think Trump knows rough seas are ahead. He was criticizing the Fed this week and complaining about them raising rates.
The tariff war being waged right now is MAD (Mutually Assured Destruction) in action. If the stock market bubble pops with Trump in charge, he’ll be a one term president because if the stock market bubble pops, the rest of the US economy will go down with it. Trump shouldn’t have taken credit for the stock market bubble.
Totally agree with you, Bobby. He noted it was in a bubble when he was running for president. He shouldn’t have changed his tune.
Len,
I enjoyed the illusion video so much I had to watch it twice! That last one was really weird. Great job here as always.
Sara
I know, right? Freaky!
“I had friend who once rubbed ketchup in his eyes. In Heinz sight, that wasnt a good idea either.”
I once had a friend who rubbed chopped pickles in his eyes. Pickle processors didn’t relish the idea either.
Strange. You should have peppered him with questions as to why he would do such a thing!
…and another friend hated spicy condiments, but he finally mustard up enough courage to try some …
Enough with this a-salt on the English language!
*chuckle*
Re: food stamps still being at high levels
Some people legitimately need them, but I think they are widely abused. I base that on my experience as a grocery store cashier when I was younger.
The food stamp crowd would buy steak and lobster. Then when they’d get done “paying” for their groceries they would go to the courtesy booth and out came the cash for lottery tickets and cigarettes. Food stamps should have restrictions. Only buy fresh fruits and veggies, bread, milk. No fast food, chips, soft drinks, etc, etc, etc. See if that doesn’t reduce the participation rate.
Back when food stamps were actual stamps (vs the plastic debit card issued today), the holder could get a certain amount of cash in change…..present a $10 stamp for 5 bucks worth of stuff, get $5 back in cash change. They would then use that to buy tobacco, candy, soda, etc. Saw it many times standing in line behind them.
Today, they have to re-sell the stuff bought with an EBT card, and then use that to buy what they want.
Psssssst: “Wanna buy some cheese ?”
Timothy: I totally agree. When I worked as a checker, I saw the same thing on occasion.
Andy: I remember when food stamps came in coupon books too and people had to tear them out — so it was obvious who was getting government assistance at the checkout counter. With the EBT cards, that is no longer obvious — so any social stigma that came with food stamp usage has been eliminated.
The Almighty Dollar may be dying but it is still the king currency. I have been waiting for its demise since 2009. Don’t know the exact date, but only that the day is coming. The end of any fiat currency is hard to predict to the exact year, let alone a date. All I know is $21 trillion in debt, plus $100 trillion at its most conservative in unfunded liabilities is a “dead currency walking”. When the BRICS finally decide to trade outside the dollar in favor of local currency swaps, the dollar is finally finished. The exact catalyst for this changing of the guard isn’t clear to me, but when it does come, I’ll be one of those people laughing the hardest at those who said the dollar is unbreakable!
The dollar’s demise — and the reckoning that it ushers in is indeed coming, Johnny. It’s simple math.
That being said, I have to give the Fed credit; they have done a masterful job to date keeping the system propped up, but they’ve just about used up all of their tricks. Can they keep the illusion going for another five years? I sincerely doubt it — but only time will tell.
I thought it was game over when we hit 10 trillion bucks in federal debt a dozen years back…..and here we are at 21 !
I’m starting to think the figure doesn’t matter….and a quadrillion figure (15 zeros) is entirely possible within my lifetime.
Go big or go home, right ?
The numbers matter, Andy. Credit must keep expanding but the quality of the debt is getting worse with each passing day. The thing with exponential functions is things seem fine and then the cascading event that overwhelms the system occurs in relatively short order.
Len,
I think 2021 is the year that has been chosen for the reset. Libor is to end then as Lynette Zang thoroughly explains in her interviews. I dont think the current system lasts past 2021 anyhow, just my opinion. What do you think about the Libor ending Len?
Jared
I am going to go out on a limb and say I think a new system will be in place by 2020.