Black Coffee: Separating the Sheep from the Goats

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.

Let’s get right to it this week …

Money is stored labor. Labor is part of human life. To devalue money is to debase life.

— John Kenneth Galbraith

Divorce is the one human tragedy that reduces everything to cash.

— Rita Mae Brown

If wisdom were measured by the size of the beard, the goat would be a philosopher.

— Danish proverb

Credits and Debits

Debit: Amazon CEO and founder, Jeff Bezos, announced he and his wife are divorcing after 25 years of marriage. Barring the presence of a prenup, Bezos’ net worth is set to drop by half — that would see him lose the “world’s richest man” crown to Bill Gates, forcing him to settle for being “only” the world’s fifth-richest. His wife, however, would become the world’s richest woman.

Credit: On a related note, last week Amazon overtook Apple and Microsoft to become the world’s largest company. Unfortunately for Mr. Bezos, while Amazon now sells more stuff than ever, they still haven’t penetrated the quicky-divorce market. Yet.

Debit: Looking at the other end of the socioeconomic divide, a new study has determined that 4 in 5 American workers are living from paycheck to paycheck. Yes, yes … I know exactly what you’re thinking:

Debit: But seriously, how can so many working people be living from paycheck to paycheck in a “booming” economy? For the answer, look no further than our corrupt, debt-based fiat monetary system; American living standards have been steadily dropping ever since the US dollar’s anchor to gold was broken in 1971. And things will only continue to get worse while the current monetary system remains in place.

Debit: By the way, those American workers who are barely making ends meet will be dismayed to learn that JP Morgan is now pegging the odds of a recession at 60% within the next year. What makes this notable is two months ago the very same JP Morgan forecast a 60% chance of recession … two years from now. Did I mention that unemployment more than doubled during the last recession in 2009? It did.

Debit: Indeed, the crashing oil, banking and utility sectors, coupled with slumping home and auto sales, are now at levels not seen since 2008. Of course, this suggests the global economy is headed for a severe recession, which explains the recent rotation into US Treasury bonds — and the resulting decline in interest rates. That makes perfect sense, especially with global confidence in the dollar stronger than ever. Oh, wait …

Credit: Hedge fund manager Harris Kupperman warns that, “When the (stock) bubble unwinds, it will be fast and vicious as there is no natural buyer for a money losing business that’s run out of capital. It took half a decade to create the Internet bubble, yet it all vaporized in a few months; this bubble will collapse at a similar rate.” That’s bad news for companies like Uber, Tesla, and Twitter. Probably Amazon too.

Debit: Falling stock prices are bad news for pensions too. Thanks to the Fed’s decade-long low interest rate policy, the only hope pension managers had of meeting 8% return goals was by stretching into high-risk assets, which are now imploding. The US pension funding shortfall — public and private — is now $6.2 trillion. If the last two cycles are any indication, the next market downturn could see that triple. Yikes.

Debit: With the stakes so high, it’s no wonder Fed chairman Jay Powell announced last week that rate hikes are off until further notice and that he’s even looking at scaling back the Fed’s liquidity-draining quantitative tightening program. Since then, stocks have been rallying. Hard. As macroeconomist Jim Rickards notes, “If you need proof that today’s rigged markets still require Fed support, there it is.” Uh huh. Speaking of unwelcome support …

Credit: Meanwhile, Fitch is threatening to cut the United States’ AAA credit rating. According to Fitch’s global head of sovereign ratings, James McCormack, “There is a meaningful fiscal deterioration going on. If this shutdown continues … we may need to start thinking about whether that is consistent with AAA.” Psst. Hey, Mr. McCormack … that “fiscal deterioration” has officially been in hyperdrive for a decade now.

Credit: So, with the US economy now completely dependent on the Fed’s printing press, it’s no wonder that the world’s largest hedge fund manager, Ray Dalio, all but admitted last week that the US dollar’s time as the global reserve currency is coming to an end. No, he didn’t say when. Frankly, I don’t think he’ll have to wait too long.

By the Numbers

Here’s a summary of investment returns by asset class in 2018:

0.0% US Treasury Bonds

-1.5% Gold

-4.4% S&P 500

-4.4% Nasdaq

-6.0% Dow

-8.6% Silver

-11.0% Russell 2000

The Question of the Week

[poll id=”249″]

Last Week’s Poll Result

What is the brand of your mobile phone?

• Apple (42%)
• Something else. (33%)
• Samsung (20%)
• I don’t own a mobile phone. (5%)

More than 1400 people responded to last week’s question and it turns out that, when it comes to mobile phones, slightly more than twice as many Len Penzo dot Com readers own Apple as Samsung. Another third own a different brand, while 1 in 20 say they don’t have a mobile phone. I’ve got an Apple, but I didn’t pay for it — my employer did!

Useless News: The Forbidden Island

A Frenchman, an Englishman, and a New Yorker launched an expedition and discovered an uncharted island.

Unfortunately, the island was home to a tribe of cannibals. Soon enough the three men were ambushed and overrun. They were then tied up and taken to see the tribe’s chief.

“You were forbidden from setting foot on this island!” the chief said. “We’re going to eat you and use your skins to build a canoe. However, we’re not without compassion — we’ll let you choose how you’re going to die.”

The Englishman said, “Give me a gun.” So the cannibal chief handed him a gun. The Englishman then raised the gun to his head and yelled, “God save the Queen!” before blowing his brains out.

The Frenchman and the New Yorker watched as the cannibals proceeded to skin the dead Englishman.

Inspired by the Englishman’s bravery, the Frenchman then said, “Give me a sword.” So his wish was granted and he yelled “Viva la France!” before impaling himself.

The cannibals then skinned the Frenchman.

Finally, it was the New Yorker’s turn. “Gimme a fork!” he demanded. The cannibal chief complied, and the New Yorker then jabbed himself over and over with the fork until he was covered with thousands of blood-oozing holes.

Puzzled at the spectacle he just witnessed, the cannibal chief asked the New Yorker, “So … any last words?”

“Yeah,” said the New Yorker. “There goes your God damn canoe!”

(h/t: resistedliving via Zero Hedge)

Other Useless News

Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

1. New Mexico (3.13 pages/visit) !!
2. West Virginia (2.65) !
3. Alaska (2.18)
4. Idaho (2.11)
5. Arkansas (1.86)

46. Hawaii (1.23)
47. Oklahoma (1.20)
48. Vermont (1.19)
49. Mississippi (1.14)
50. Wyoming (1.04)

Whether you happen to enjoy what you’re reading (like my friends in New Mexico) — or not (ahem, Wyoming …) — 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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And last, but not least …

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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

From Terri, who left an urgent request in my inbox this week:

Pick me! Pick me! Pick me! PICK ME!

Okay, Terri … I’m picking you! But if this ends up being the highlight of your week, then we really need to talk.

If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.

Photo Credit: brendan-c