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 President’s Day weekend! Okay, away we go …
Let us all be happy, and live within our means — even if we have to borrow the money to do it.
— Charles Farrar Browne
If you think nobody cares if you’re alive, try missing a couple of car payments.
— Earl Wilson
Credits and Debits
Debit: Did you see this? If a task force created by Chicago Mayor Ron Emanuel gets its way, some Chicago families could start collecting a $1000 check every month with no strings attached. And why not? “Getting $12,000 worth of free government checks each year to spend on whatever I want will make me want to get off the dole as soon as possible,” said NO ONE EVER.
Credit: Apparently, the Chicago task force isn’t aware that Finland’s socialist government just cancelled a two-year program that provided an annual guaranteed basic income (GBI) of more than $7600 to 2000 jobless people after it failed to boost employment. Uh huh. The good news, according to officials, is it did improve the recipients’ well-being. As if anyone would get depressed from two-years worth of free lunches.
Debit: In other words, it took the authorities in Finland two years and $2.5 million to learn what most people with even a modicum of common sense already knew: Redistributing the wealth of productive citizens to people who aren’t is not a path to Utopia. Even so, you can bet that the folks who still think GBI is the answer will also complain that their cash no longer buys what it used to after it’s implemented. (h/t: NumberNone)
Credit: Perhaps the GBI trial balloon released in Chicago is a big reason why Gallup says Americans’ optimism about their personal finances has climbed to the highest level in 16 years; 69% now say they expect to be financially better off at this time next year. In fact, there was only one time in 114 previous polls since 1977 where Americans were more optimistic about their personal finances. Wow.
Credit: On the other hand, US Treasury Secretary Steve Mnuchin isn’t very optimistic. After all, as macroeconomist Lance Roberts observes, “Given that it’s highly unusual for the Treasury Secretary to call the heads of banks and the ‘Plunge Protection Team’ to try assuage market fears, it raises the question: What does the Treasury know that we don’t?” I think I’ve got the answer, Lance. But we should probably ask this guy … just to be sure:
Debit: One thing is certain: Officials within the Fed and US government are well aware that national, corporate, and consumer debt has reached all-time highs. They also know that at some point, the debt and credit party that has been going on for the past decade is going to come to an abrupt end. Some day. Eventually. At least that’s what my tin foil hat keeps telling me.
Debit: Despite the reports of high consumer optimism, there are signs consumers are already tapped out. One warning sign is especially troubling: 7 million Americans are now delinquent on their car loans by 90 days or more. What makes this particularly serious is that people tend to prioritize car loans — even more than a mortgage — because they need them to get to work and earn a paycheck. Uh oh.
Debit: Meanwhile, the US National Debt topped $22 trillion on Tuesday. I know. The good news is, unlike the people who have gone three months or more without making a car payment, the US can always print what it needs. The bad news is, unlike the people who have gone three months or more without making a car payment, the US can always print what it needs.
Credit: The media says the Fed’s $4+ trillion QE program saved us from the Great Financial Crisis. But as Chris Martensen notes, instead of addressing the GFC’s root cause: “We’ve literally papered over our problems with printed money — (and) all the central bankers have to show for it is the widest wealth gap in history coupled with stagnant wages.” In other words, in reality, the economy is … well:
Credit: Of course, as it becomes increasingly obvious that the so-called “cure” actually did more harm than good to the global economy, the Fed is beginning to feel the pressure. In fact, it is now openly suggesting that the US dollar’s role as the world’s dominant reserve currency won’t last forever. No, really. A little more than a decade ago, such an admission by the Fed was utterly unthinkable.
Credit: Then again, this week MN Gordon got right to the point when he declared: “It’s time for central bankers to stop bullshitting and admit they failed.” It’s a great sentiment — but I’m not going to hold my breath.
By the Numbers
Until it was cancelled this week, the largest public infrastructure project in the country was the California boondoggle dubbed the “Bullet Train to Nowhere” by critics. Here are a few numbers:
53% Percentage of California voters who, in 2008, approved a $10 billion bond for an 800-mile high speed rail line between Los Angeles and San Francisco. (No, I wasn’t one of them.)
$45,000,000,000 Estimated cost in 2008 to build the high-speed rail line connecting San Diego, San Francisco and Los Angeles.
$77,000,000,000 The latest revised estimate to complete the high speed rail line — from Anaheim to San Francisco only.
119 Miles of high-speed rail currently under construction in California’s Central Valley.
8 Number of years originally slated to build the entire high-speed rail project.
22 The number of years the project was expected to take, based upon the most recent estimated completion date of 2029.
$55 Projected one-way ticket price in 2008 for a two and a half-hour high-speed rail trip from San Francisco to Los Angeles.
$75 The one-way ticket price for a 90-minute plane flight from San Francisco to Los Angeles today.
Source: The Mercury News
The Question of the Week
[poll id="254"]
Last Week’s Poll Result
Has the winter where you live been colder or warmer than usual?
- Colder (46%)
- Warmer (30%)
- About the same. (23%)
More than 1400 Len Penzo dot Com readers answered this week’s survey question and it turns out that, for almost half of them, this winter has been colder than usual. On the other hand, 3 in 10 say it’s been untypically warm. So there.
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.
Useless News: Honest Abe
A father noticed that his teenage son was spending way too much time playing computer games. So one day, in an effort to motivate the boy into focusing more attention on his schoolwork, the father said to his son, ”You know, son, when Abe Lincoln was your age, he was studying books by the light of the fireplace.”
The son replied, ”And when Lincoln was your age, Dad, he was the President of the United States.”
(h/t: Cowpoke)
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. New Brunswick (1.94 pages/visit)
2. Quebec (1.62)
3. Nova Scotia (1.60)
4. Alberta (1.56)
5. Saskatchewan (1.52)
9. Newfoundland and Labrador (1.36)
10. Northwest Territories (1.35)
11. Nunavut (1.33)
12. Prince Edward Island (1.25)
13. Yukon Territory (1.00)
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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 controversial rebuttal to an equally-controversial article about being poor on another website, rather than explaining why she disagreed with my commentary, Kathy decided to write this:
Are you an idiot or just talking about something you know nothing about?
Kathy, I’d give you a clever answer — but I refuse to have a battle of wits with an unarmed individual.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c
” As if anyone would get depressed from two-years worth of free lunches.”
I would. They are not free. I’m the one paying for them, eaten by somebody who has not, for whatever reason, earned them.
It’s often said these freebies are “taxpayer funded”, but they are not, actually. They are funded by government debt. How, then, am I paying for it?
By the dissipation of our national character and the eventual failure of the fiat money system which “funds” the debt.
Pretty soon, I think, all of us will suffer the consequences of this national profligacy – disastrous social disorder; “Yellow vests” ad infinitum.
Politicians don’t care about anything other than maintaining power. Promising free money to the masses is the first trick in the book.
We certainly live in interesting times. The increasing gap between rich and poor, both home and abroad; the yellow vests in France; and US politicians openly promoting socialist policies is a symptom of our dying, corrupt debt-based monetary system. This too shall pass … but the piper will have to be paid first.
People who understand how it “works” call it Guaranteed Basic INSANITY.
So let me get this straight, Len. There is a city out there that’s drowning in debt, with pensions that are flat broke, and it now wants to go even deeper into debt so they can give people a monthly stipend to do absolutely nothing. Am I missing anything? If not, I think Sam nailed it. Insanity.
Well, they’ve been doing it for decades via public housing, medicad, EIC, etc……at least now it’s right out in the open, flat just giving folks money. I give ’em a point for being honest about it.
I think you’re spot on, Cowpoke.
Hi Len,
I can’t believe more than 75% of people enjoy saving more than spending. I am a rabid saver/stacker but if I am being honest I still enjoy spending more than saving!!
Sara
I said spending is more fun because it’s hard to get fired up when your savings earn almost 0% interest.
I hear you. There was a time not too long ago when you could get a $100,000 CD at your local bank and earn $5,000 a year. Not now. These days you’re lucky to get $1,000.
I get your points, Mikey and WA. However, for those brave enough to tie up their cash for a year or two, there are other alternatives. For example, I was shopping for CD rates for my mother-in-law a few weeks ago and I actually found one offering 2.7% for one-year.
Saving is so passe these days, especially with those under 35. It’s all about living for today, FOMO and buying “experiences.”
That’s one way to look at it, Sara. However, many people get a great deal of satisfaction by saving the fruits of their labor for the future.
Hi Len! Thanks again for your great insight. Always a pleasure.
I am late to the party, lost power for a week after we got smacked with a low elevation snow storm here! It makes me very glad that I am an avid “person who preps” as the impact, while uncomfortable, was not too dramatic.
Now on to other items…with regards to the Auto Loan defaults etc?
The Systemic Risk is growing…Did you see this? Chinese Bond misses? Yikes!
https://www.bloomberg.com/news/articles/2019-02-11/two-large-chinese-borrowers-are-said-to-miss-bond-payments
And hey anyone seen the price of Gold lately? LOL!
Even with the market climbing back up that sucker is way up.
Other news? Pension nightmares are growing. Taxpayers could be on the hook.
https://www.chicagotribune.com/news/opinion/editorials/ct-edit-pensions-cook-county-maria-pappas-20190214-story.html
Glad I moved mine at CalPers…they are down again (- 3.5%) for this quarter. Which makes me wonder how they can promise 6% annually.
Keep up the good work Len and everyone else? Keep buying gold silver, keep cash on hand, live as debt free as you can and make sure you are prepped for whatever.
(BTW there is a good book I was reading that had a decent aspect of financial issues: Deep Winter by Thomas Sherry)
Cheers!
Good advice, TQ. Thanks for the links … Almost everywhere you look the debt-based monetary system is beginning to show signs of severe strain, as the nasty side effects from the exponential nature of all the accrued interest payments is beginning to rear its ugly head.
Looking back, I think this is the year historians will point to as the beginning of the end for the fiat US dollar standard and the greenback’s position as the world’s premier reserve currency.
Could be….or at least the start of it.
I personally think we have just a bit more time.
I’m thinking 2020 will really tell us where this massive wind will blow. But I do agree we are already seeing cracks in the structure. Now it will be all about “true timing” and seeing the winds and the ways they shift……
At least I got my pension out of the quagmire of uncertainty. That’s a major bonus. Though we did map out on spreadsheets how we will recoup any and all items over the next year (or more) in order to make up any lost winnings from interest I may have been privy too.
We figure as long as we (now) have “zero debt”, any and all income can be socked away (and buy PMs) to have an adequate savings. After all I still have 10 years to grow that nest egg back up. So once the dust settles I’ll be able to take that and add it to any of my retirement winnings that are left after the financial earthquake.
As for the rest….I have moved most of my finances all around…no eggs in one basket for me anymore…
I moved money back out of my 403b ( part of my old 401k) into a standard IRA, so I can have more control over the choices of assets and such. The 403b had 27 funds (all expensive!) and no choice of FDIC insured cash accounts…
This way the chunk of change I made in my 401k will sit now in low expense index ETFs and cash (30% is what Jim recommends). This is the best I can do with what I cannot touch for some time still.
The other item was to move our big accounts out and into more savvy online savings (offering higher rates and decent CDs)….this way I still have basic checking, but not all of it in the ONE bank (BOFA) that can get smacked with that “Bail In” baloney that our dear leaders agreed to at the G20 in 2014! (people should read up on that, yes depositors are considered in the same boat as “shareholders” when it comes to assets of the bank)
Of course we’ve also been stocking up on PMs, paid off the debt and have cash on hand.
Its the best I can do. It’s not like I can take all my winnings and hide it under the bed!
Can’t live like that, but I can limit my exposure to things and to ensure I have more avenues of access that just one bank, one retirement account etc…
Cheers Len and thanks for all the great articles!