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 … and with that, let’s get to it …
“Double, double toil and trouble; fire burn and caldron bubble.”
— from Shakespeare’s Macbeth
“There’s always something to think about in terms of problems that are dark and important and immediate and scary.”
— Kenneth Branagh
“Be afraid … Be very afraid.”
— Ronnie, from The Fly
Credits and Debits
Credit: Financial analyst Dave Kranzler got into the Halloween spirit this week. He noted that “a lot of skeletons in the closet suddenly pop out of ‘hiding’ when the stock market (falls).” In fact, Denver Dave says a growing trove of evidence suggests that, when it comes to a financial market collapse, it’s only a matter of time.
Debit: You can bet Wall Street is more than bit spooked, as stocks ended another horrific week sharply lower; in fact, the Dow and the S&P 500 are now in the red for the year. For the week, the Dow was off 3%, the S&P 500 fell 3.9% and the Nasdaq plunged 3.8%. In the spirit of the season, October has been … well, a bloodbath so far; the S&P has lost 8.8%, the Dow is down 6.7%, and the Nasdaq has shed 11%.
Credit: Here’s another scary indicator that could be predicting the next financial crisis is on the horizon: the Dow “Smart Money” Flow Index. What’s that, you say? Well, I’m not quite sure myself, but this definitely doesn’t look good:
Credit: Speaking of financial crises, Russia is doing its part to hasten a dollar collapse, as its alternative to the US electronic payment transfer system known as “SWIFT” has reached another milestone in its development. In fact, Russia announced last week that it’s ready to take on international partners in the quest to de-dollarize and end America’s leverage over the international financial system. Uh oh.
Credit: One thing is certain: Former Fed Chairman Paul Volcker says the US is in “a hell of a mess in every direction” — and he seems to blame the central bank. According to Volcker, there appears to be no “theoretical justification” for the Fed’s 2% inflation target. He’s right; it’s all theoretical ivory-tower academic bullshit … er, if I can be frank. Or should I say, Frankenstein.
Debit: Did you see this? A growing number of American banks are offering payday loans; the loans are typically $1000 or less and must be repaid within a few weeks — but they aren’t cheap. For example, US Bank charges customers who choose to automatically debit payments from their account $12 for every $100 borrowed. That’s an APR of 71%! By the way, US Bank’s regular savings account pays 0.01%. Woohoo!
Debit: And if you think 71% is a high interest rate, borrowers who opt for manual payments pay 88%. Curiously, ZeroHedge reports that, in marketing materials released by US Bank, a spokesman proclaims the usurious program is “the right thing to do for our customers.” Heh. Apparently, that mantra doesn’t apply to their customers who would rather save their cash than accumulate debt. Just sayin’.
Debit: Of course, the popularity of those high-interest loans isn’t surprising when you consider that the median yearly wage in the United States is now a paltry $30,533 — that’s less than $2500 per month. To put that another way, fully half of all Americans earn even less. Yikes. Now that’s what I call a true Nightmare on Elm Street.
Debit: Maybe that’s why new home sales in September plunged 13.2% from the year before — that’s the largest year-over-year drop since May 2011. And here’s more bad news: The median sales price decreased 3.5% year-over-year to $320,000, and the current supply of homes rose to 7.1 months — that’s the highest figure since March 2011. And if you think that’s scary, look at this:
Credit: According to his calculations, Charles Hugh Smith says it takes $106,000 to earn a middle class lifestyle today. If that’s true, it means four out of every five Americans don’t earn enough to get them out of the lower class, since a household income of $111,000 is the top quintile cut-off point. The only reason it doesn’t seem that way is most people are filling the void by living on cheap — and not so cheap — credit.
Credit: Then again, the lack of income can always be comfortably overcome by simply winning a billion-dollar lottery prize, like some lucky person did last week. After all, it’s almost impossible to squander a billion dollar jackpot. Yes, even after Uncle Sam and the state get done taking their “fair share.”
By the Numbers
By now almost everyone knows an unidentified South Carolina resident won the recent $1.6 billion lottery jackpot. Here’s a little more on the numbers behind that big prize:
$1,568,000,000 The actual value of the winning ticket, which was sold at the KC Mart in Simpsonville, South Carolina.
$50,000 Amount received by the owner of the KC Mart that sold the winning ticket.
180 Maximum number of days the ticket holder has to claim their prize.
$905,000,000 Jackpot payout if the winner chooses to take a cash lump sum.
$330,000,000 The amount owed in federal taxes on the lump sum payout — that doesn’t include state taxes.
$15,000,000 Rough approximation of how much the jackpot winner would earn per year if they accepted the cash-up-front prize and then invested the after-tax sum in Treasury bonds.
Source: Money
Last Week’s Poll Results
Did you buy a Powerball lottery ticket in the past week?
- Yes (33%)
- No (67%)
More than 1600 Len Penzo dot Com readers responded to last week’s question and it turns out that 2 in 3 of them say they did not buy a lottery ticket during the past week, despite the $1.6 billion grand prize. Neither did I.
The Question of the Week
[poll id="238"]
Useless News: Sunday Dinner
Three grown kids, all successful, agreed to a Sunday dinner in their honor.
“Happy Anniversary Mom and Dad,” gushed son number one. “Sorry I’m running late. I had an emergency at the hospital with a patient you know how it is, and I didn’t have time to get you a gift.”
“Not to worry,” said the father. “The important thing is were all together today.”
Son number two arrived. “You and Mom look great. Dad, I just flew in from Montreal between depositions and didnt have time to shop for you.
“Its nothing,” said the father. “We’re glad you were able to come.”
Just then the daughter arrived. “Hello and happy anniversary! Sorry, but my boss is sending me out of town and I was really busy packing so I didn’t have time to get you anything.”
After they had finished dessert, the father said, “There’s something your mother and I have wanted to tell you for a long time. You see, we were really poor, but we managed to send each of you to college. Through the years your mother and I knew we loved each other very much, but we just never found the time to get married.”
The three children gasped,”What? You mean we’re bastards?”
“Yep,” said the father. “Cheap ones, too”
(h/t: RD Blakeslee)
Other Useless News
Here are the top five articles viewed by my 21,021 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- Unique Halloween Treats Kids Love — But Rarely Get!
- How I Live on Less Than $40,000 Annually: Ryan from North Carolina
- 13 Yucky Halloween Treats Kids Would Rather Toss Than Eat
- 34 Financial Tricks to Help You Retire Early
- 3 Steps to Help You Prepare When Retirement Is Just Around the Corner
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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 on yucky Halloween treats kids would rather toss than eat, Erica left this comment:
“I see people with six month old babies trick or treating. Now come on, who’s really eating the candy?”
Beats me. But I know a lot of parents who would rather go to a bar on Halloween because they prefer boos over candy.
I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Len,
Thanks again for another great cup of Joe! Enjoyed the Halloween theme too!
Have a nice weekend,
Sara
Glad you enjoyed it, Sara. Have a spooktacular Halloween!
The savings rate offered by the banks are criminal. But whats a person to do? 0.01 pct is still more interest that putting the cash in your mattress and safer too.
My bank has a better interest payout than U.S. Bank but not by much. If you want to earn better interest rates on your savings you need to get a money market fund
If your saying long term buy gold and silver! The year 2000 gold was $200 and silver was $5. Now gold is $1230 and silver almost $15 at manipulated prices. It’s a no brainer!
Agree., Jared. For long term savings, physical precious metals is the obvious choice.
Yes, it the interest rate offered to savers is criminal. That being said, with the bail-ins that are planned for the next financial crisis, I’m not so sure holding your cash in a bank is safer than keeping it in a mattress considering the interest we’re being paid.
Len, regarding your numbers on the lottery: Mathematically speaking it’s always best to take the lump sum, but I’d still take the annuity. That way I can only go broke once a year!
I saw something that said once the jackpot gets above 500 billion dollars then the actual amount paid out for a winning ticket decreases because the odds of splitting the jackpot between multiple winners increases.
I think there is a lot of truth in that, Susan … although that wasn’t the case with the recent $1.6 billion jackpot.
LOL! Great point, Peter.
I think Mr. Smith is a bit off base if he thinks one needs to make $106k to reach the middle class. This blog has many examples of people living a middle class lifestyle on much less.
Good point, DK.
Here are more than 20 examples: https://lenpenzo.com/blog/40000-2
The stock market is being supported by the Exchange Stabilization Fund and direct purchases by the Fed. Once that stops the markets are coming down like the World Trade Center buildings did on 9-11. The globalists are running the show. They control the Fed and they hate Trump. If people can’t see what’s coming they need to pull their head out of the sand.
We’ll see. The good news is we won’t have to wait long to know if you’re correct.
Blue Dog,
I agree with you, the market is being lifted and manipulated by the fed. This minor hiccup in interest rate hikes is just the beginning.
Personally, I feel a lot of investors will pull out soon with rising yields in safer investments, and even greater effect with baby boomers retiring.
Re USBank in the debits, above: We have had one of their “cash back” credit cards for over ten years. They were among the first to offer 1% cash back and up to 5% on certain purchases (e.g. grocery stores), payable after $20 had been accumulated in your cash-back account. Others, e.g. Capital One, went to 1.5 % on all purchases, payable in any amount.
USBank’s response was to stay at 1%, payable only after $20 had been accumulated in your cash-back account, and to send out an oh-so-sincere questionnaire asking how they could serve us better.
Their response: Stayed at 1% payable after $20 was accumulated and changed their 5% cash back categories to merchandise credits at specified merchants only!
We have kept their card to enhance our credit score (long-time card holder) but don’t use it anymore.
They are even more greedy than most banks.