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 …
“A farmer returning home in his wagon, after selling a load of corn, is a better indication of the economy than a nobleman riding in his chariot to the opera.”
— old proverb
Credits and Debits
Credit: Did you see this? The total market capitalization for cryptocurrencies fell by $18 billion over the course of three days last week. In fact, bitcoin ended last week 5% lower, while two other popular cryptos — ripple, and ether — were down 12% and 18%, respectively. According to CNBC, the plunge has left many wondering if bitcoin is really a safe haven — or a risk asset. Psst. Hey, CNBC … It’s a risk asset.
Debit: In other news, events are now being held across America where low-income borrowers with poor credit are being offered no-down payment, low interest rate loans. We’ve been down this road before and — in case anyone has forgotten — it led to the Great Financial Crisis of 2008. I guess bankers have short memories. In the meantime, the credit party rolls on. Although it’s beginning to look a little like these shindigs:
Debit: Unfortunately, all of this loose credit — especially to borrowers with dubious finances — will eventually come back to bite the lenders. Oh, and there’s also a growing risk that dollar credit will seize up globally, devastating countries that rely on borrowed dollars to cover their deficits.
Credit: Of course, loose credit — abetted by the world’s central banks — is the lubricant that is keeping risk asset engines such as stocks and corporate bonds running smoothly (read: constantly increasing in value). But here’s the rub: The global monetary backdrop is only becoming less accommodative. As a result, the markets are plagued by growing technical and structural problems, which have led to greater volatility.
Credit: Speaking of growing structural problems, financial analyst Dave Kranzler is warning that market cracks are growing larger with each passing day: “What should frighten market participants, policy-makers and everyone else is that the 10-yr yield soared last (week) despite the big sell-off in the Dow and S&P. That reflects financial market problems that are not superficially apparent.” Uh oh.
Credit: After looking closely at recent macroeconomic indicators, Lance Roberts goes a step further: he believes “something just broke” in the financial system — and the culprit is rising interest rates. In fact, Roberts says because we’re in a rising rate environment, things aren’t as rosy as they seem. “The underlying economic growth story isn’t nearly as strong as reported,” he says. Don’t spoil the illusion, Lance.
Credit: Needless to say, as the world’s central banks continue to tighten the easy-money spigot that, until last year, has been wide open, it’s only a matter of time before the artificial stock market gains that resulted from the ensuing flood of money will evaporate as well.
Credit: Meanwhile, Hungary’s central bank just announced a 10-fold jump in their gold reserves; that’s the first time the Hungarian central bank increased its gold reserves since 1986. But I’m sure that’s not any reflection of their concern about the international monetary system. Nope. Not at all.
Credit: Then again, maybe it is a sign of concern. After all, the International Monetary Fund sounded downright alarmist in its latest Global Financial Stability report, stating that, “Large challenges loom for the global economy to prevent a second Great Depression.” And if you want a second opinion, well … the other arbiter of global risks, the Bank for International Settlements, comes to a similar conclusion. So there.
Debit: By the way, if the warnings make you feel uncomfortable, go ahead and ignore them and focus on the really important stuff — like dressing up your pooch for Halloween. This year, pet owners will spend $500 million on animal costumes this Halloween. I’m sure it’s purely a coincidence that the amount of money spent on outrageous pet outfits has more than doubled since the Great Financial Crisis.
Last Week’s Poll Result
How much will you spend on Halloween candy, costumes and decorations this year?
- $0 (43%)
- $1 to $20 (38%)
- More than $20 (19%)
More than 1500 Len Penzo dot Com readers answered this week’s survey question and it turns out that slightly less than 1 in 5 of them will spend more than $20 on Halloween this year — and fully 43% say they won’t spend a single dime. I’ll be spending less than $10 on candy this year — I just hope there is still some left to hand out by the time the trick-or-treaters come knocking on my door!
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.
The Question of the Week
[poll id="237"]
(The Best of) By the Numbers
The time for summer barbecues has passed, but the World Series gets started in a few days. With that in mind, here are a few facts and figures on hot dogs:
20,000,000,000 Hot dogs consumed by Americans each year — that’s 70 per person annually.
35 Percentage of hot dogs eaten between Memorial Day and Labor Day.
2 European cities that claim to be the birthplace of the modern hot dog. (Vienna and Frankfurt)
1900 Year “hot dog” first appeared in The Oxford English Dictionary.
$2500 Daily revenue for a Big Apple hot dog cart at W. 67th St. and the West Dr. on a typical summer Saturday.
$50 Amount the same NYC hot dog cart brings in on a typical winter day.
$266,850 Annual fee charged by NYC Parks for a hot dog stand at the same location.
$300 Amount Nathan Handwerker borrowed in 1916 to start a hot dog stand at Coney Island.
$82,900,000 Nathan’s Hot Dogs revenue in 2013.
Source: NBC News
Useless News: Drugstore Shoppers
Two young boys walked into a drug store one day, picked up a box of tampons and proceeded to the checkout counter.
The pharmacist at the counter asked the older boy, “Son, how old are you?”
“Eight,” the boy replied.
The man continued, “Do you know what these are used for?”
The boy replied, “Not exactly, but they aren’t for me. They’re for him. He’s my brother. He’s four.”
“Oh, really?” the pharmacist replied with a grin.
“Yes,” the boy said. “We saw on TV that if you use these, you would be able to swim, play tennis and ride a bike. Right now, he can’t do none of that.”
(h/t: RD Blakeslee)
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 …) — 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 my list of 18 tips to consider before buying home, life and car insurance, Olivia left this comment:
“I think that a sign of a good insurance provider is the ability to listen to you. The bad part is nobody ever listens to me.”
Olivia, I think every parent with a teenager knows exactly how you feel.
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c
Hi Len,
Thanks again for making my weekend mornings so enjoyable. I love my Black Coffee!
Sara
And thank you for taking the time to say “hi” every week, Sara.
It seems like every month there is a new story about another nation increasing their gold reserves. Somebody on ZH said something that makes me think there’s a fire in the attic and we just don’t know it yet. They said the only entity that can legally trade on inside info is a central bank and they are buying physical gold.
“Fire in the attic” … I like that, Cowpoke. Will be stealing that phrase.
As for your comment about central bankers buying physical gold … they love to pretend gold isn’t important, but if that was true, then why do they hold it? (That’s a rhetorical question.)
The next Depression isn’t coming. The breadlines are already here but nobody sees them because they’re hidden by welfare, EBT, WIC, SNAP, and other government assistance programs.
The Great Depression (the one before the one we’re in now) was caused by the government NOT allowing markets to clear. We already have the same problem today. Markets are not being allowed to clear.
I wasn’t putting blame on welfare as the cause of the Depression, but you’re right. It would have been a lot more painful in 2008 had the markets been allowed to clear. The system would have recovered within a few years and all would be well now. But all they did was paper over the same problems with more debt.
And since those markets were not allowed to clear back in 2008, when they finally do clear, the pain is going to be much much worse.
Watching the stock market with all of the crazy ups and downs the past few weeks has made me wonder. If the market goes down for the count like Joe Frazier then the pension funds go with it. If that happens, then anyone and everyone who relies on a pension fund that depends on the stock market as most are will have no pension. People who have more traditional IRA type pension funds will be out of luck too.
Got Gold and Silver?!
No gold. But I started stacking silver last year!
I’m afraid you are eventually going to be proven correct, Peter. But there is insurance for that kind of catastrophic failure. Judging from the comment thread, you and Jared both know what that is!
To me the topping bubble in the real estate market is the biggest sign that a change is coming. Change is an unstoppable force that has a life of its own.
Pedro: Change in the housing market is being driven by … wait for it … higher interest rates. As I’ve mentioned here many times before, the price of money eventually affects all other markets (up or down).
You say “it’s only a matter of time before the artificial stock market gains that resulted from the ensuing flood of money will evaporate as well.”
I’m confused because stock markets outperform in times of hyperinflation. Venezuelas stock market has been the top performing market the past 2 years.
Steve, those stock market gains in a hyperinflationary environment you refer to are in nominal terms — not real terms.
In other words, although the numeric value of the stock increases, the purchasing power of those stocks still end up being reduced because the value of the currency they’re denominated in is falling faster than the increase in the price of the stocks.
That being said, you’re always better off holding stocks than cash in a hyperinflationary environment because when it comes to paper assets, the currency falls to its intrinsic value (worthless), while the intrinsic value of a single corporate stock share is equivalent to a fractional ownership claim of a real business.
While “prepper” practices are not exactly on topic, I believe some of their less drastic ideas could well supplement posession of hard money in disastrous times.
Thanks in part to the Mormon traditions (they advocate storing a year’s worth of food), there are online markets offering a year’s supply of freeze-dried, hermetically sealed foodstuffs.
Totally agree, Dave. Everyone should have at least a few months of food stored up; it’s not that hard and the financial burden can be reduced by building stores up gradually. I’ve managed to build up a six month supply for my family and it definitely provides peace of mind.