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.
Well … another glorious week has come to an end. Let’s get right to it …
“Credit has a wicked way of magnifying a person’s defects. Even the most cautious man, with unlimited credit, can make mistakes that in retrospect seem absurd. But an average man, with unlimited credit, is preeminently disposed to going full imbecile.”
— MN Gordon
Credits and Debits
Credit: I’m sure the great majority of the general public couldn’t tell you what the G-20 is — so it is probably a safe bet that very few people noticed that the latest G-20 communique removed their long-standing pledge to refrain from competitive currency devaluations — a.k.a. currency wars. That’s just another sign that the international monetary system — and the US dollar that “anchors” it — is on its last legs.
Debit: In other news, a new study warns that oil prices could rise to $200 per barrel in the next 12 to 18 months. If that’s not bad enough, the analysis also predicts a 2020 economic collapse based on those rising oil prices, plus a diesel fuel shortage. Wow. It’s a good thing Ford decided in April to stop selling every sedan model except the Mustang and Focus in favor of expanding their truck and SUV offerings.
Credit: One thing is certain: If there is an economic collapse, it’s going to have to wait a little while longer because last quarter’s GDP print came in at 4.1% — that’s the fastest pace in four years. Hooray!
Debit: On the other hand, don’t get too excited, because there are a growing number of signs that all is not well with the US economy. For example, California produced just 800 new jobs in June. That wouldn’t be so bad if California’s population was equivalent to, say, Poughkeepsie or Woonsocket — but it’s not.
Debit: Perhaps the Golden State’s poor employment climate is why sales of both new and existing houses and condos there last month plunged 12% from a year earlier — despite SoCal home prices reaching an all-time high. Then again, I’m sure that’s nothing all those “easy money” home flippers need to worry about; the data is probably just one of those statistical aberrations … or something.
Debit: California ain’t the only place that is suddenly having trouble finding homebuyers for over-priced real estate. In New York City, even the cheapest homes are stuck waiting for one of those once-plentiful greater fools home shoppers to swoop in and save them.
Debit: Did you see this? Before Wednesday’s close, Facebook (FB) was racing along, trading at a new record high. Then it announced a revenue miss and projected slowdown — and its stock almost immediately fell 24%, wiping out $132 billion in market value and erasing all of its post-Q1 earnings gains. Imagine that.
Credit: Yes, Facebook’s furious free fall happened in the blink of an eye. Fortunately for us, the entire episode was caught on tape:
Credit: By the way, this Wednesday’s FB plunge made Mark Zuckerberg $16 billion poorer. I know. It also put Facebook shares in a bear market. So how big is Facebook’s $132 billion market-capitalization haircut? Well … as Franklin Sanders observed, “That’s more than the GDP of Puerto Rico. Or almost the entire New York state budget. Or (nearly) two-thirds of the 1929 Black Tuesday market crash.” Ouch.
Debit: Speaking of companies with questionable futures, Tesla will almost certainly never turn a profit. Cheap credit — coupled with the feel-good false narrative of “clean” transportation — is the only thing keeping Tesla in business; it’s a zombie company that requires an endless stream of investor cash and indirect taxpayer subsidies just to keep the lights on. Oh, yes … we were warned many years ago about this:
Debit: In fact, Tesla’s woes are so bad at the moment that Tesla is now asking suppliers for cash back to prevent a corporate liquidity crisis. Yep. Tesla is not only burning through cash, but it’s still having trouble producing cars in the numbers and quality they promised — which is why Tesla is quickly becoming one of the world’s most-shorted stocks.
The Question of the Week
[poll id="225"]
Last Week’s Poll Results
How much do you typically tip your restaurant server for average service?
- 16% to 20% (75%)
- 15% or less (23%)
- 21% or more (2%)
More than 1500 Len Penzo dot Com readers responded to last week’s question, and it turns out that 3 in 4 of them say they tip their servers somewhere between 16% and 20% for average service. Put yours truly in the group doling out 15% for unremarkable service — I reserve 20% for excellent service and 25% or more for exceptional service. And I’m happy to say that I usually get excellent service!
(The Best of) By the Numbers
The summer movie season is in full bloom. Looking back, how many of the 10 biggest movies of 2005 (box office gross) have you seen?
1 Star Wars – Episode III: Revenge of the Sith ($380 million)
2 The Chronicles of Narnia: The Lion, the Witch, the Wardrobe ($291 million)
3 Harry Potter and the Goblet of Fire ($290 million)
4 War of the Worlds ($234 million)
5 King Kong ($218 million)
6 Wedding Crashers ($209 million)
7 Charlie and the Chocolate Factory ($206 million)
8 Batman Begins ($205 million)
9 Madagascar ($194 million)
10 Mr. & Mrs. Smith ($186 million)
Source: Box Office Mojo
Useless News: Millennial Marriage
Dearest Dad,
I am coming home to get married soon, so get your checkbook out.
I’m in love with a boy who is far away from me. As you know, I am presently living in Australia … and he lives in Scotland. We met on a dating website, became friends on Facebook, had long chats on Whatsapp. He proposed to me on Skype,and now we’ve had two months of a relationship through Viber. My beloved and favorite Dad, I need your blessing, good wishes, and a really big wedding!
Lots of love and thanks.
Your favorite daughter,
Lilly
***
DAD’S RESPONSE:
My Dearest Lilly,
Like, wow! Really? Cool!
I suggest you two get married on Twitter, have your honeymoon on Tango, buy your kids on Amazon, and pay for it all via PayPal.
Oh … and when you get fed up with this new husband, sell him on eBay.
Love,
Dad
(h/t: billhilly)
Other Useless News
Here are the top five articles viewed by my 20,821 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- How I Live on Less Than $40,000 Annually: John from Maryland
- Why I Run My Household Like a Business (and Why You Should Too)
- Why Extended Warranties for New Tires Are a Waste of Money
- Are Two Household Incomes Really Better Than One?
- Save Extra Money at Amazon by Using This Simple Chrome Extension
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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
This week someone calling himself The Man from Snark felt the need to write in with this question:
“Are you lactose intolerant?”
Never mind that … I’m dying to hear about life in Snark! Isn’t that near Liechtenstein?
I’m Len Penzo and I approved this message.
Photo Credit: spreadshirt.com
Len, I’m addicted to your weekend round ups. Also, I am curious to know if the Facebook stock drop the biggest one ever. Thanks.
Yes, it was when measured in terms of market capitalization:
https://www.cnbc.com/2018/07/26/facebook-on-pace-for-biggest-one-day-loss-in-value-for-any-company-sin.html
However, that appears to be in nominal terms. The referenced articles notes that Intel market cap fell $91 billion in a single day back in 2000. Based on my inflation calculator, adjusting for inflation would make Intel’s one-day market cap destruction slightly larger.
Tesla should have gone out of business 5 years ago. Every Model 3 Elon Musk is producing is losing money. I believe Tesla has a bigger market cap than Ford even though Ford sells something like 1000 times more cars and actually turns a profit! We live in strange times.
Like the old Pintos of the 70s, Tesla’s blow up on impact. Where do the green earth and granola crowd think all of those batteries that go into those cars end up when their life is over? I guess they have no problem putting them in a landfill. Oh wait, you can’t do that, so where will they go? As for the bogus “saving energy” claim, where do people think the energy to charge them comes from? The electricity fairy? These people are insane in so many ways.
Tesla = Theranos
JB: Theranos and Tesla aren’t comparable, IMO. Theranos was blatant fraud, offering a product never really existed. Tesla offers a real product that caters to a particular niche of people — albeit an unprofitable one. And that’s the real problem: Elon Musk runs a company with a business case that doesn’t close — yet he is stringing along investors with lots of hype and promises that will most likely never be kept.
James: The trouble with Tesla is that electric vehicles can’t compete economically with gasoline and diesel powered vehicles. So they need subsidies and/or people willing to pay extra for the “privilege” of driving those vehicles. With the subsidies being removed now almost everywhere, Tesla’s pool of potential buyers is shrinking — so is going to have an even harder time selling cars. The other trouble with Teslas are their long-term costs to operate, which current owners will be forced to deal with after the warranties expire; those costs have been extensively documented on the Internet.
“Oh … and when you get fed up with this new husband, sell him on eBay.”
Tatjan is preparing to show her paintings, but she told the venue host she wouldn’t sell the portarit of me which appears on “Grandfather Says”.
But she said the host could have me for free …
I love that painting, RD. Your wife is a very talented lady.
ps – it makes a nice avatar too!
Thank you Sharon – I’ll tell her what you said.
I like that painting too!
Thanks, Len. I’ll tell her that, too.
Len, you don’t really believe the GDP numbers. You preach that here almost every week. In 2000 GDP was $10 trillion with 135 million in the US workforce. Today GDP is about $20 trillion and there are about 155 million people working. There is no way 20 million extra workers increased GDP by $10 trillion.
Of course not, WA; the GDP number is all smoke and mirrors.
As to your observation, almost all of the additional $10T in GDP was not the result of increasing the workforce by 20 million additional workers (another dubious figure) — but by the magic of … wait for it … trillions of dollars in new debt!
This will be clear to everyone when the credit markets freeze up like they did in 2008 — only this time the results will be much worse.
It’s not just So Cal with a falling home market. It’s No Cal too.
https://www.cnbc.com/2018/07/25/san-francisco-bay-area-june-home-sales-fall-to-lowest-point-in-4-years.html
I missed that one, Mike. Thanks for pointing that out!
Len,
The sidebar ads went from scantly clad women to plastic surgery gone bad! LOL
Those are some creepy photos! but I digress…
…now back to your personal finance discussion…
I know … even I am getting freaked out by those photos!