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.
Here’s a friendly tip: If you’re going to be out of town on any of the twelve days of Christmas this year, try not to miss Day Five.
Okay … and with that, we’re off and running!
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences.
— Proverbs 22:3
Credits and Debits
Debit: Did you see this? Apparently, four out of five American workers have less than one year’s salary salted away for retirement. Yes, that’s 80%! Even worse, more than 100 million working-age Americans also have no retirement accounts whatsoever — that includes 401(k)s, IRAs, or pensions of any kind. The good news is they can still count on our rock-solid Social Security system to be there many years from now. Oh, wait …
Debit: It’s a poor excuse, but perhaps the reason so many Americans have nothing saved for their golden years is because the average joe earns only $37,000 a year — give or take a few thousand. You can bet most CEOs have no such worries. After all, Facebook CEO Mark Zuckerberg earns $37,000 per minute; although that doesn’t impress Amazon CEO, Jeff Bezos — he earns the same sum every 28 seconds.
Debit: In other news, the national housing slowdown has spread to Las Vegas and Phoenix, where prices still haven’t reclaimed their pre-crisis peaks. Home sales in Vegas slowed 12% in November compared with a year earlier, while the share of listings with price cuts climbed to 23% in October; that’s up from 11% a year earlier. There’s a lesson there for those who care to look … not unlike the lesson learned here:
Debit: By the way, the Vegas and Phoenix housing markets are only now beginning to see price declines, but the housing slowdown actually began earlier this year in the hottest US markets like Seattle and Denver; even so, prices there are still 30% to 70% above their previous peaks.
Credit: With the US economy showing signs of real cooling, expect surging federal government expenditures and falling tax revenues as the decline worsens. In fact, Chris Hamilton warns that “Already-swollen issuance of public debt since 2007 is moving from a steep angle to an exploding vertical upward trajectory, (with) the much feared debt crisis directly ahead.” Uh oh.
Debit: Heck, even former Fed chair Janet Yellen is warning that “we could have another financial crisis,” citing leveraged loans as a primary area of concern. Yes, this is the same Janet Yellen who proclaimed in June 2017 that she expected no new financial crises “in our lifetime.” Hmm. Either Ms. Yellen is getting senile, or the Grim Reaper is suddenly a lot closer than most people think.
Credit: David Lipton, the IMF’s deputy director, says that he also sees a financial system crisis on the horizon that the world is unprepared for, despite the fact that we’ve had a decade to prepare since the last meltdown in 2008: “I see storm clouds building and fear the work on crisis prevention is incomplete.” The good news is, after the banks go belly-up, he’ll still have a promising career as a tin-foil hat-wearing blogger.
Debit: Speaking of meltdowns, the stock market tanked again this week. The Dow plunged 497 points, or 2%, on Friday. Meanwhile the S&P 500 declined 1.9%, sinking to its lowest level since April. The S&P is now down 11% this quarter; its worst since 2011. Ouch. For what it’s worth, the S&P has only finished the final quarter of the year with a loss of 10% or more ten times in the past 90 years.
Credit: But as Dave Kranzler notes, nobody should assume the stock market’s fate hinges on a trade deal between the US and China because the trade war is only a symptom of “an insanely overvalued stock market resting on a foundation of collapsing economic and financial fundamentals.” Sad, but some of us have seen this movie before:
Credit: Then again, between tariffs and weaponizing the dollar-based financial system to impose political sanctions, the US is alienating many nations. As Bloomberg notes, Russia is now working with other countries to develop an alternative to the SWIFT financial system after threats that their access could be targeted through sanctions. Such an alternative would end a monopoly that helps maintain dollar dominance.
Credit: Of course, like all things in life, everything is a matter of perspective. Paraphrasing Russian president Vladimir Putin’s point of view, he says the world isn’t ditching the dollar; instead, it’s the dollar that’s ditching the world. That’s certainly another way to look at it. Regardless of how you see it, one thing is certain: Eventually the dollar as we currently know is going to ditch everyone of us.
The Question of the Week
[poll id="245"]
Last Week’s Poll Result
What is your favorite personal finance board game?
- Monopoly (49%)
- Life (22%)
- Something else. (17%)
- Settlers of Catan (11%)
More than 1700 Len Penzo dot Com readers answered this week’s survey question and it turns out that essentially half of them say that Monopoly is their favorite money board game. Not me; I prefer the game of Life. Mainly because the game can be played from start to finish in under an hour!
(The Best of) By the Numbers
FedEx, UPS and the US Postal Service (USPS) delivered a record number of packages during the 2017 holiday season:
15,000,000,000 Pieces of mail the postal service will deliver between Thanksgiving and New Year’s Day.
400,000,000 The number of packages FedEx will deliver over the holidays.
750,000,000 The number of packages UPS will deliver during the holiday season.
850,000,000 The number of packages the postal service will deliver over the holidays.
10 Percentage increase in the number of packages the postal service is is delivering in 2017, compared to last year.
6,000,000 The number of packages the postal service will deliver on Sundays this December.
Source: USA Today
Useless News: Long Cold Winter
One day in early September the chief of a Native American tribe was asked by his tribal elders if the coming winter was going to be cold or mild. So the chief asked his medicine man, but he too had lost touch with how to read the signs from the natural world around the Great Lakes.
In truth, neither the chief or the medicine man had any idea about how to predict the coming winter. Because of this, the chief decided to take a modern approach — so he called the National Weather Service in Gaylord, Michigan.
“Yes, it’s going to be a cold winter,” the meteorological officer told the chief. Consequently, the chief went back to his tribe and told the men to collect plenty of firewood.
Two weeks later the chief decided to call the scientists at the National Weather Service again and ask for an update. “Are you guys still forecasting a cold winter?” he inquired.
“Actually, we now think it’s going to be colder than normal this year,” the weather officer told him.
As a result of this brief conversation the chief went back to the tribe and told them that it was imperative that every able-bodied man, woman and child should try to collect as much wood as they could possibly find.
A month later the chief called the National Weather Service once more to make sure that the coming winter was still going to be a really cold one. “Yes,” he was told, “In fact, it’s going to be one of the longest and coldest winters ever.”
“How can you be so sure?” the chief asked.
The weatherman replied: “Because the Native Americans of the Great Lakes are collecting firewood like crazy.”
(h/t: Mel)
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. Nunavut (2.00 pages/visit)
2. Nova Scotia (1.89)
3. Alberta (1.81)
4. British Columbia (1.69)
5. Yukon Territory (1.50)
9. Manitoba (1.39)
10. New Brunswick (1.37)
11. Ontario (1.35)
12. Northwest Territories (1.33)
13. Quebec (1.05)
Whether you happen to enjoy what you’re reading (like those crazy Canucks on the frozen Nunavut tundra) — or not (ahem, you hosers in Quebec) — please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
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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
Apparently, Jason Bauman wasn’t impressed with my article highlighting things you didn’t know about ATMs. I say that because before Jason moved on, he took the time to leave this brief comment:
“Your [sic] a moron!”
Oh, the irony.
If you enjoyed what you read here, please forward this to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: (coffee) breweddaily.com
Hi Len,
Poooor Homer. LOL!
Thanks for another great cup of joe.
Sara
You’re welcome, Sara! Merry Christmas!
Nothing will work once things get out of hand. Dear Fed, enjoy your dwindling semblance of control, as long as you can.
These people have pretty much destroyed everything. This can’t end nicely irrespective of whether they think or not of the plan B that they have pulled off.
Their Plan B only managed to delay the inevitable, Sam.
Only speculators and millenials think the housing market only goes up. History says otherwise. I remember the 1980s when RE dropped about 40% but the Fed let the banks go under, About 1000 financial shysters went to jail and the market corrected in about 5 years and was stronger afterwards. This time its much different .
As 2007 showed us, what comes first is the wave of “price reduced” signs that begin popping up everywhere, then comes the brown lawns.
I get weekly updates from a realtor based on certain search criteria I provided to him, and the number of homes with price reductions is definitely increasing. I think the first ones I saw started about a year ago.
For the last 20 years or so people have had this weird notion of buying a house as an asset, and that’s not what it is. It’s a HOME! That’s why you get a tax break on mortgage interest. Why not focus on the important stuff? Are you interested in a house to make money or provide a home?
I completely agree with you, Blue Dog. I don’t think it’s a coincidence that the attitude switch you speak of coincided with the Fed’s penchant for holding interest rates lower longer than necessary, thereby creating the last two housing bubbles.
I’m in the same house I bought 32 years ago. A house is a house – it’s not an apartment. A home is where people put down roots.
Interest rates have been rising for two full years and prices have been climbing faster than incomes even longer than that. Logic dictates this is unsustainable. One could argue that the market might level off, but history has shown the market goes up and down. Prices are only going down from here. If you’re going to sell, nows the time because once this really gets going the downtrend is going to feed on itself.
we have declining birth rates as well. that’s not a good long term trend for the housing market.
WA and Stan: I think you both make good points.
“The good news is, after the banks go belly-up, (David Lipton will) still have a promising career as a tin-foil hat-wearing blogger.
Some of us will do better, IMO. Some real, exchangeable wealth in the form of precious metal.
… but, the consequences for savers and pensioners who are relatively well off will include increasing resentment by the “have nots”:
https://www.zerohedge.com/news/2018-12-15/festering-social-rift-over-pensions
I have buddies that barely save anything in their 401k. They put in 3% to get the 3% and that’s it. Their reason, why save in a 401k, when I get a pension and social security in retirement <—- man they have it coming!