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 weekend! Okay, away we go …
While boasting of our noble deeds we were careful to conceal the ugly fact that by an iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.
— Horace Greeley
The future ain’t what it used to be.
— Yogi Berra
Credits and Debits
Credit: Did you see this? A woman won $10,000 after discovering a hidden contest in the often-ignored fine print of a travel insurance contract. No, really. However, as one commenter on the story wryly observed: It’s one thing to read the contract; but getting an insurance company to honor it is a completely different story. (h/t: Thom Paine)
Debit: In other news, thanks to elevated mortgage interest rates, the house-flipping industry continues to get dicier by the day, as profits from housing-market speculation fell to their lowest level in seven years. And for those who are wondering if all of those home flippers who have been riding the Fed-induced decade-long low-interest-rate gravy train have finally started heading for the exits, well … see for yourself:
Debit: By the way, housing isn’t the only industry facing smaller profits. After several years of American auto sales at or near all-time highs, the annualized February vehicle sales rate drove off a cliff, with its worst reading in 18 months. See what I did there?
Credit: Anyway … if declining auto and home sales weren’t signs that we’re heading for a recession, maybe this observation from David Rosenberg regarding February’s US retail sales will convince you:
What a retail sales report! 4 months in a row of decline in furniture/home furnishings; 5 months of decline in electronics/appliance sales; clothing at a 10-month low; gas sales at a 15-month low; electronics at an 18-month low; furniture at a 20-month low. All shutdown related?
David Rosenberg (@EconguyRosie) March 11, 2019
Debit: Meanwhile, the millennial generation is deeper in debt than any other generation that has come before them — at least when compared to a similar point in time. In fact, millennials are more than $1 trillion in debt. Compared to Gen X, millennial mortgage debt is about 15% lower, and their credit card debt is 33% less. However, their student loan debt is 300% higher; and, sadly, most of those degrees won’t provide a decent ROI.
Credit: So with more fresh currency being conjured out of thin air worldwide than ever before, why is the Main St. economy beginning to sputter? Well … last week Rick Rule eloquently explained it in a single sentence: “Our ability to continue business as usual is beginning to be constrained by arithmetic.” Yes it is, although “strangled” is a much better term — and the noose is quickly tightening.
Credit: Focusing the spotlight on the Fed’s QE program, Tom Luongo notes that money printing is a failure “because when you paper over reality you don’t fix the underlying problems. The losses are still there, hidden in plain sight, held at mark-to-model prices, on central bank balance sheets.” But I’m sure Tom will change his tune after he learns about the magic money tree (MMT) that everybody is raving about. Or not.
Credit: Economist Jeff Diest has a modest proposal for the Fed: “Return the country to ‘ordinary’ monetary policy. If in fact QE saved the country and wasn’t merely an artificial process of juicing the economy and monetizing debt, it can and must be fully unwound. Until then, we can’t know if economic growth is real or artificial.”
Credit: Of course, after initially implementing QE, the Fed promised they would unwind their balance sheet “at the appropriate time.” That was way back in 2010 — so why aren’t they doing it now, a full decade after the economic crisis supposedly ended? Could it be they’re afraid if they do unwind it fully, this would be the result?
Debit: Speaking of economic crises, you can add the Big Apple to the list of US cities careening toward bankruptcy. Economist Milton Ezrati warns that, “New York City is running a deficit and could be in a difficult spot if we have a recession, or a further flight of (wealthy) individuals because of tax reform.” I know; the odds of those things happening are slim and none … at least according to everybody who still believes in the tooth fairy.
By the Numbers
In case you weren’t paying attention, Sunday is St. Patrick’s Day. Here’s a few facts on this happy holiday:
55% The percentage of Americans who plan on celebrating St. Patrick’s Day this year.
81% The percentage of people who say they plan to wear green.
40 Pounds of dye required to tint the Chicago River green.
3 St. Patrick’s Day’s ranking among the most popular drinking days, after Mardi Gras and New Year’s Eve.
4.2 The average number of drinks consumed per person on St. Patrick’s Day.
13,000,000 Pints of Guinness that will be consumed on St. Patrick’s Day this year worldwide. That’s 819% more than usual.
153% The percentage increase in total beer sales on St. Patrick’s Day.
70% The percentage increase in cabbage shipments during St. Patrick’s week.
32,600,000 The number of Americans who claim Irish ancestry.
1737 The year of the first St. Patrick’s Day parade, held in Boston.
Source: NewsTimes
The Question of the Week
[poll id="259"]
Last Week’s Poll Result
What is your credit score?
- 800 or higher (51%)
- 740 to 799 (25%)
- 670 to 739 (12%)
- Less than 670 (10%)
- I’m not sure (3%)
More than 1500 Len Penzo dot Com readers answered last week’s survey question and it turns out that, slightly more than 3 in 4 of them have a credit score classified as good or excellent. Hooray! Another 1 in 10 are considered subprime borrowers, with credit scores of 669 or less. The good news is, the fact that those folks are perusing personal finance blogs suggests that most of them won’t be considered subprime borrowers for very long.
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: Small Talk
As the trip was a long and quiet one, a lady stopped the car and asked an old Navajo woman who was walking if she would like a ride.
With a silent nod of thanks, the woman got into the car.
Resuming the journey, the lady tried in vain to make a bit of small talk with the Navajo woman. The old woman just sat silently, looking intently at everything she saw, studying every little detail, until she noticed a brown bag on the seat next to the lady.
“What’s in bag?” asked the old woman.
The lady said, “It’s a bottle of wine; I got it for my husband.”
The Navajo woman was silent for another moment or two. Then speaking with the quiet wisdom of an elder, she said, “Good trade.”
(RD Blakeslee)
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. Saskatchewan (5.95 pages/visit) !!!!
2. Nova Scotia (1.78)
3. British Columbia (1.56)
4. Newfoundland and Labrador (1.55)
5. Quebec (1.52)
9. Ontario (1.39)
10. New Brunswick (1.37)
11. Yukon Territory (1.33)
12. Alberta (1.31)
13. Nunavut (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Saskatchewan, eh …) — or not (ahem, you hosers living on the frozen Nunavut tundra) — please don’t forget to:
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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 reviewing several of my blind taste test articles, including the ice cream comparison I published earlier this week, Mister wrote in to express concerns about one of the panelists; specifically, my dog, Major:
I’ve read several of your product surveys and I notice a trend with all of the dog’s evaluations. I suspect he’s lost his sense of taste or smell.
Well … that would certainly explain why he considers cat poop to be such a delicacy.
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
Len,
If the Millennials are not buying houses, who is going to buy all of the homes that the Baby Boomers will be looking to sell in the coming years? Seems like a recipe for much lower prices.
Thanks for another great cup of joe!
Sara
I wouldn’t worry about that, Sara. Any house that needs to be sold will sell … at the right price!
QE is financial heroin and the Fed has been the economy’s drug dealer since the financial crash. They’ve been handing out QE like candy and the economy (and stock markets especially) has become addicted. Like heroin, over time ever increasing fixes of QE are needed to maintain the high. Meanwhile, the negative side effects are increasing. Eventually, this is going to kill the system.
Peter Schiff has been using a similar analogy for a long time, Cowpoke. He’s right … the big question is: When is the dose that finally kills the junkie going to be administered?
Lots of big cities are in the same boat as NYC. The private sector has a natural tension between management and labor that doesn’t exist in the public sector, which is why public sector unions and the politicians they support are the cause of their money problems. Too many pension promises were made that can’t be delivered. The chickens are coming home to roost.
You are right, Mr. Knight. An elected politician who has been elected is not bestowed with a license to lie, cheat, and steal. What has happened is our elected officials go to the bargaining table with public union heads and strike unrealistic deals backed by taxpayers who don’t have a seat at the same table. Until there are consequences for this nothing will change.
I am not sure how the taxpayers are going to be expected to bail these pensions out. The burden would be unbearable. It isn’t politically tenable either. Think about it: The government raising taxes on its citizens — most of which who have no pensions or significant retirement savings of their own — to maintain lavish retirement benefits of public sector retirees, many of whom can retire at age 50, or shortly thereafter, with annual six-figure COLA payouts. I would think it will be far easier for politicians to reduce those promised benefits to something more in line with what the private sector receives.
Once the market crashes (if ever), almost ALL pension funds will be bankrupt, if only because they’ve bought up so much crap since 2009 desperately looking for yield.
Yes, Steve, that is just one of the many sad consequences of a decade of near-zero interest rates and multiple rounds of QE imposed by the Fed.
Loved the explosion video! What was that?
It was a chemical fire and resulting ammonium nitrate explosion at a shipping facility in Tianjin, China, circa 2015. You can read all about it here:
https://en.wikipedia.org/wiki/2015_Tianjin_explosions
Just saw an interview with Marc Faber. He say the recession started last year. I think he is right.
He very well may be, Stan.
“… we have nationalized a system of oppression …” – Horace Greely
Greely is perhaps most remembered for saying : “Go West, young man!”
Out of populated places with controlled lives and into a fresh place which can become what you make of it.
These days, the closest thing to the old West may be Alaska and I might have settled there, had I discovered it at a younger age. (To his credit, Greely did not say “Go West, old man…”)
But these days, the spirit of Greeley’s advice can still be found in sparsely populated places, here and there in the lower 48.
Dave, you are a treasure trove of cool info! Thank you for sharing that.
I think millennials get a bad rap these days.
How many problems that we face today are a result of millennials’ doing? High tuition costs? Dollar’s purchasing power? High cost of living? 22T$ US govt debt? Great Recession? Wealth disparities? Pension fund bankruptcies? SS, Medicare, Welfare “takers” bankrupting USA?
The economics and statistics of a college degree do not lie when you look at aggregated lifetime earnings or unemployment rates by college degree. We cannot be looking at the single plumber or electrician in a suburban or semi rural / rural area as an example to write off college education.
Im not saying every college degree is the same or that some times, trades are a better option or that people should pay 10s – 100s of Ks for non-STEM degrees … Im saying atleast millennials are paying into an education instead of fancy homes and cars … and are sadly going to be the people left holding the bag and enjoying no SS, no Medicare, massive levels of government debt, etc after today’s takers (GenXers, GenYers, Baby Boomers) are done with them.
The median 401k balance of a 40-49yr old today is 37K. Seriously? … after 25-30yrs of productivity and healthy doses of QE spiking? I don’t think GenX/Ysers are exactly equipped to question millennials’ supposed financial choices …. especially after their apathy or inaction or irresponsible personal and voting choices have brought us to today’s America.
(And for the record, Im GenX/Y by the way).
No one told any Gen X/Y to go to an expensive school. There is a thing called work that all students can do. As a Gen Xer, I see my peers paying student loans and living a life i wont ever have yet they are in woeful debt.i have none, I was raised by a depression era grandma anda Vietnam veteran. I cant imagine spending the way they do. Get off my lawn : )
“The economics and statistics of a college degree do not lie when you look at aggregated lifetime earnings or unemployment rates by college degree.”
Unfortunately, Kyron, that data is badly skewed by those who got college degrees when they actually did all but guarantee better wages upon graduation — not to mention a much better ROI. The majority of today’s college degrees can’t provide that kind of surety. Anyone who gets anything other than a STEM degree should strongly make sure they are going to get a decent ROI before committing to “higher” education.
@ CS & Len: There are 2 parts here. 1st is the choice to go to school and the 2nd is the general irresponsible spending (expensive school, ROI, not working while going to school, lifestyle inflation, etc). I dont condone the 2nd just like you.
Len, you made a good point on skewed statistics but that has to be true over 60M college+ and 90-100M high school- folks (all 60M people or most of them had to graduate at those wage guaranteed ROI numbers ….). I highly doubt it. So, as a side exercise, I decided to google employment rates for millennials by education and found these links. These may not be the most researched but showed up first in the search. Check them out.
https://nces.ed.gov/fastfacts/display.asp?id=561
https://www.pewsocialtrends.org/2014/02/11/the-rising-cost-of-not-going-to-college/
I think the data is still saying that there is a correlation even for recent millennial graduates between education and earning power / unemployment / poverty rates. Is that causation? If so, how much tuition you would pay for this differential earning power * staying employed over 20 years? –> fair questions.
It appears to me that differential earning of 15.5K$ per year and 17% lower unemployment rate (unemployment is catastrophic …. 45K$ earning differential) over 20 yrs is a hefty dollar amount. Compare that to something exorbitant like 50-75K of in state college costs today, I think Im seeing a statistical ROI across the whole population of college graduating millenials. Every college graduating millenial will not beat every high school only millenial …. those cases are too individual. But you have to look at statistics for the trend.
Good Morning Len…
It all begins and will start the ending with….China.. ; )
1. https://www.cnbc.com/2019/03/20/chinese-companies-had-record-amount-of-corporate-bond-defaults-in-2018.html
2. https://www.reuters.com/article/us-china-parliament/china-to-slash-taxes-boost-lending-to-prop-up-slowing-economy-idUSKCN1QM02Y
3. https://www.wsj.com/articles/chinas-economic-slowdown-broadens-despite-government-support-11552541759
Then sprinkle in some more housing
4. https://www.marketwatch.com/story/this-bubble-era-mortgage-trick-could-smash-major-us-housing-markets-2019-03-18?mod=mw_theo_homepage&mod=mw_theo_homepage
And a Fed and Central Banks hell bent on ruining us with this Credit Bubble and you have the makings of a financial nightmare.
5. https://www.marketwatch.com/story/when-the-us-falls-into-a-recession-a-credit-bubble-will-explode-2019-03-20?mod=mw_theo_homepage
“Paper money eventually returns to its intrinsic value; zero” __Voltaire