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 …
“With the exception of only the gold standard period, practically all governments in history have used their exclusive power to issue money in order to defraud and plunder the people.”
— Friedrich Von Hayek
“Every gambler knows that the secret to survivin’ is knowin’ what to throw away, and knowin’ what to keep. Because every hand’s a winner, and every hand’s a loser, and the best that you can hope for is to die in your sleep.”
— “The Gambler” lyrics by Don Schlitz
Credits and Debits
Debit: Just in time for cold-weather season: Natural gas prices are at a four-year high, after climbing 18% on Thursday — that was the largest one-day percentage gain since 2004, and the largest price increase in dollar terms since 2007. You can bet if prices keep climbing I’ll be asking Santa for a warm coat this Christmas. Or at least a nice sweater.
Debit: I wonder if Santa knows that, according to the US Census Bureau, last year 52% of American children under age 18 lived in households in which at least one person received benefits from a means-tested government program. And if you think that’s surprising, more than 115 million Americans of all ages are receiving some form of government assistance. Ho ho ho.
Debit: Did you see this? Following yet another downgrade by JPMorgan, shares of General Electric fell to $7.99 last week — that’s what it was selling for way back in 1995. How the mighty have fallen. Yes, this is the same GE that regularly has the largest tax return in the US; GE’s 2005 return was 24,000 pages, and 237 megabytes when submitted electronically. And you thought your taxes were tough.
Credit: Actually, as Michael Santoli notes, GE’s long-term technical position is much worse today than it was in 1995:
The latest plunge in $GE pretty decisively broke an 86-year uptrend for the stock. (Chart courtesy of Jeff deGraaf of @RenMacLLC.) pic.twitter.com/H0iQc5Urlm
Michael Santoli (@michaelsantoli) November 13, 2018
Debit: For a bit of perspective, GE’s market cap is now $70 billion, which makes it the 80th largest company in the S&P 500. And while that may seem impressive, it’s just the opposite when you consider that, in 2003, GE was the largest company in the index — and the world between 1993 and 2005 — with a market cap of $296 billion. Those who think Google, Amazon and Apple are invincible should remember that.
Credit: So what happened to GE? Too much red ink. As Bill Blain notes, US corporations have gorged on cheap debt for a long time, using it all to buy back their own stock or payout the leveraged buyout funds that own them. As a result, “Converting equity into debt to give cash to owners means they haven’t built new plants to make stuff that will repay debt. And that multiplies their vulnerability to rising interest rates.”
Credit: It’s no secret that the Fed has been grossly distorting credit markets for a decade, which is why MN Gordon warns, “The attraction of fake money is too much to pass up. Why save and invest when you can borrow and spend? Yet, now, as credit tightens and fake money becomes scarce, busts, bankruptcies, and bailouts will become the order of the day.” He’s right, folks. Think: Twitter and Tesla, to name two.
Debit: Of course, it’s not just Tesla; with few exceptions, the entire automobile industry has become dependent on fake money. So it shouldn’t be surprising that passenger car sales in China are on course for their first yearly decline in nearly 30 years — despite China’s claim that annual GDP is still growing at more than 7%. Then again, if you believe China’s GDP figures, you’ll probably believe this too:
Debit: Speaking of China, according to Bloomberg, soon-to-be-published research will show that 22% of China’s urban housing stock is unoccupied. That amounts to more than 50 million empty homes. You can take this as a textbook example of how too much credit leads to malinvestment. It’s also a ticking time bomb; hopefully, the banksters know how to diffuse it. If not, I guess they can always refer to this instructional video:
Debit: Finally … remember the story of the homeless vet who gave his last $20 to a woman whose car had run out of gas in a dangerous Philly neighborhood? That, in turn, led to a GoFundMe campaign for the veteran that generated $400,000. Well, apparently it was all a lie. The proceeds are gone too; squandered by the woman and her hubby on gambling junkets, designer purses and a BMW. It’s all so sad, really. But I’m not surprised.
The Question of the Week
[poll id="241"]
Last Week’s Poll Result
Are you a millionaire?
- Not yet.(79%)
- Yes (20%)
- I’m not sure. (1%)
More than 1600 Len Penzo dot Com readers answered this week’s survey question and it turns out that 1 in 5 of them are members of the Millionaire’s Club. Wow! As a point of comparison, there were an estimated 11 million millionaires in the US last year — or roughly 3% of all Americans.
By the Numbers
With 20% of my readers officially millionaires, I think it’s only prudent to share some figures regarding the official estate and gift tax limits for 2019 that were announced by the IRS this week:
40% The US federal estate tax rate.
$11,400,000 The US estate and gift tax exemption for individuals. (It’s doubled for married couples.)
$15,000 The annual gift exclusion for Americans; that’s unchanged from last year.
1890 The estimated number of taxable estates this year.
52,000 The number of taxable estates 18 years ago, when the estate tax exemption was just $675,000.
Source: Forbes
Useless News: Eyes on You
Late one night a burglar broke into a house. While he was sneaking around he heard a voice say, “Jesus is watching you.”
The burglar looked around, but he saw nothing.
After creeping around the house a little more, the burglar once again heard, “Jesus is watching you.”
This time, the burglar noticed in a dark corner a cage with a parrot inside. So the burglar asked the parrot, “Was it you who said Jesus is watching me?”
The parrot replied, “Yes.”
Relieved, the burglar asked, “What is your name?”
The parrot said, “Clarence.”
“That’s a stupid name for a bird!” the burglar said. “What kind of idiot names a parrot Clarence?”
The parrot answered, “The same idiot who named the rottweiler Jesus.”
(h/t: mystery guy)
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. Manitoba (1.54 pages/visit)
2. Alberta (1.51)
3. Nova Scotia (1.48)
4. Quebec (1.46)
5. British Columbia (1.41)
9. New Brunswick (1.29)
10. Nunavut (1.25)
11. Prince Edward Island (1.13)
12. Northwest Territories (1.00)
13. Yukon Territory (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Manitoba, eh) — or not (ahem, you hosers living on the frozen Yukon tundra) — please don’t forget to:
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(The Best of) 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 this guest post from my daughter, Dana passed along this friendly suggestion to Nina:
“Nina, you might want to consider charging your dad for the blog posts … Just an idea. Keep up the good work!”
I also received this note in my inbox from Charles:
“I hope you’re paying Nina for her writing services.”
Nina gets $15 for every article she writes. That may not seem like much, folks — but her benefits package is absolutely boffo!
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c
Especially good post this week. Stock buybacks do not care about price. The goal is executive enrichment thru artificially higher stock prices with borrowed cash. It’s just a skimming operation.
That sums it up nicely, WA. Glad you enjoyed this week’s edition.
Len,
Cutting a blue or red wire to stop the next time bomb won’t work. The bankers will have to choose between the GOLD or SILVER wire. And they will both do the trick!
Sara
Yep … you can’t lose with either one. Silver though is the better deal … you just have to have the stomach to take the continued beating it will receive until the current system goes belly up.
Stock buybacks are another form of malinvestment. No different than building 50,000,000 spec houses that nobody asked for. When companies borrow cash, slash R&D budgets, and lay off employees to fund these buybacks, it is a form of fraud and it needs to be stopped.
I think stock buybacks should be illegal. We need to write our congressmen.
Agree, but it will never happen. Buybacks are a big part of our financialized fake economy.
Twas a time when stock buybacks actually were illegal. I think they changed the rules in the early 80s.
There’s nothing wrong with buybacks per se, but when you’re borrowing billions to buy back the stock at record high prices, it’s not the best use of funds.
The trouble with stock buybacks is they suffer from the same weakness that befalls fiat currency, Steve: The people who hold fiat and stocks rely on the trustworthiness of the government and CEOs, respectively, to resist the temptation to exploit those paper instruments for ill-gotten gains. It’s a temptation that always proves too much for humans in power to overcome.
Still trying to figure out why anybody would ever donate to GoFundMe. Have you seen the people getting rich off of them lately? I’m sure many pleas are legit but it seems to me most are not. Like anything I guess it is buyer (donator) beware.
That it is, Catherine. By the way, GoFundMe gets 10% of every campaign – so that means they got $40,000 from the homeless vet scam. It would be nice to see them return that to the folks who contributed. Ten cents on the dollar is better than nothing.
” … in 2003, GE was the largest company in the (S&P 500) index …”
Jeffery Imelt became CEO of GE in 2001 and proceeded to ride it down.
But, In 2011, Obama name him Jobs Czar; His task was to to create more American jobs.
At the time, GE had more employees abroad than it did in the U.S. and after his appointment as Jobs Czar, Imelt continued to move jobs from the U.S. to China, among other places. For example in late July, 2011, General Electric announced it’s moving its 115-year-old X-ray business from Waukesha, Wisconsin to Beijing, China.
In 2018, Obama credited himself for causing the recent resurgence in U.S. jobs.
Amazing, isn’t it?
Rising interest rates reveal who is swimming naked when the tide goes out.
That it does. GE has been — if you’ll pardon the pun — exposed. And there’s more to come!