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.
Well … another glorious week comes to an end, so let’s get this party started, shall we?
By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
— John Maynard Keynes
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
— Alan Greenspan
Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.
— Sam Ewing
Credits and Debits
Debit: On August 13, 1979, Businessweek published a cover story entitled “The Death Of Equities.” Not long after, the 40-year secular bull market in stocks began. Many analysts consider those magazine cover stories to be contrarian indicators; the logic being that, by the time a trend has gained enough attention to warrant a cover story, the financial worm is ready to turn. And this week, Bloomberg came out with this:
Debit: In their story, Bloomberg asks, “Did inflation perish of natural causes; a weak economy? Was it killed by central banks with high interest rates? Or is it not dead at all, soon to return with a vengeance?” The magazine editors suggest their answer by depicting inflation as a dead dinosaur on its cover. Ironically, here in the real world, most people understand that inflation actually looks more like this:
Debit: But, seriously … It’s enough to make you wonder if these editors ever shop for groceries, pay rent, go to the doctor, or have kids in college. They obviously haven’t bought a home lately either — despite last month experiencing the first year-over-year decrease in US home prices since February 2012. I know … but it’s still never been a better time to buy a house! At least that’s what all of the realtors keep saying. Heh.
Credit: Anyone who insists that inflation is running at less than 2% annually — as the government’s highly flawed CPI figure suggests — should have their examined. The Chapwood Index, which reports the unadjusted actual price fluctuations of the top 500 items Americans buy in the 50 largest US cities, currently shows double-digit inflation raging in 21 of those 50 metropoles. But, yeah … inflation is dead, folks.
Credit: By the way, you can also see inflation in the stock market, which saw both the S&P 500 and Nasdaq Composite indices hit new all-time highs this week. Hey … who knows? Maybe trees truly can grow to the sky.
Credit: Speaking of inflating markets, after seeing its stock price skyrocket more than 5% on Thursday, Microsoft’s market capitalization surpassed the $1 trillion mark. The company joins Apple and Amazon as the only members of the trillion-dollar club. For now. Then again, if trees don’t grow to the sky, it’s possible there will come a day in the near future when nobody will be in the club.
Debit: Of course, the world’s central banks will continue propping the markets because, if they ever lose their lofty valuations, there’ll be unacceptable collateral damage. For example, it’s why the Bank of Japan is not only the top shareholder now in 23 companies, but it’s also among the top 10 holders for fully half of all Tokyo-listed enterprises — and they’re on pace to own almost all of them in under three years. No, really.
Debit: One sure victim of collateral damage from potential falling asset prices are woefully underfunded US government pensions. Consider Chicago: In 2005 there were only 1.4 active government employees for every retired pensioner; today, there are just 1.05. And if the trend continues, in less than two years there will be more pensioners draining cash from Chicago’s pension funds than active workers putting money in.
Debit: But wait; Chicago’s plight is only getting worse. The city’s population has been in a steady decline since 2014, which means its massive pension debts are falling on a smaller base of taxpayers. Needless to say, most people can see in advance exactly how the Chicago pension story is going to eventually end … but for those who aren’t sure, let’s go to the tape:
Credit: On a related note, a recent survey found that 80% of millennials worry Social Security won’t be there for them when they retire. When you consider the government already admits that, if nothing changes, the Social Security fund will be broke by 2034 — if not sooner — then I’d say those millennials know what they’re talking about.
Debit: Amazingly, despite Americans’ fears over Social Security, 23% of US workers admit that they don’t save a cent from their paychecks. Zip. Zero. Nada. How can that be? Well … 13% blame student loan debt, and another 13% blame credit card debt. Curiously, 0.0% blamed their inability — or unwillingness — to save even one lowly dollar per week on misguided personal priorities. Imagine that.
Credit: Here’s the bottom line, folks: If you’re relying on the government for your financial security in retirement, it’s time to stop. Now. Because the math makes it perfectly clear that the only entity you can count on regarding your future financial security — especially in your golden years — is you.
The Question of the Week
[poll id="265"]
Last Week’s Poll Results
What is the best age for a person to get their first credit card?
- 21 or older (49%)
- 18 to 20 (31%)
- 17 or younger (10%)
- Never (10%)
More than 1500 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 10 of them believe that the best time for people to get their first credit card is before they reach the age of majority. On the other hand, another 1 in 10 think the best course of action is to never get a credit card. Although I disagree with that sentiment, when it comes to the best age for getting your first credit card, I’m not sure there is a right answer; it really depends on a person’s ability to responsibly handle plastic.
If you have a question you’d like me to ask the readers here, send it to me at Len@LenPenzo.com — and be sure to put “Question of the Week” in the subject line.
By the Numbers
Former MLB star Eric Byrnes played 420 holes of golf in 24 hours this past Monday and Tuesday at Half Moon Bay Golf Links in California. Here is a breakdown of his world record performance:
14,367 Calories burned.
106 Miles walked.
24 Pars.
2 Birdies.
116 The score of his lowest round. (Round #8)
168 The score of his highest round. (Round #23)
1 Clubs used. (An 8-iron.)
$50,000 Amount Byrnes’ golfing marathon earned for charity.
Source: Golfweek
Useless News: Cocktails for Three
Three blonde party girls sat down at the bar in a tavern. The first blonde tells the bartender, “I’ll have a BM, please.”
Puzzled, the bartender asked, “A what?”
To which the first blonde replied, “A Bloody Mary! Duh!”
Then the second blonde told the bartender, “I’ll have a JC.”
Again, the bartender was stumped, so he asked, “What is a JC?”
The second blonde smacked her lips and then responded, “Duh! It’s a Jack Daniels & Coke!”
Finally, the third blonde, asked the bartender for something called a “Fifteen.”
Of course, the bartender never heard of that drink either, so he said, “Okay … you stumped me again. What on Earth is a 15?”
Shaking her head in disappointment, the third blonde replied: “Well, duhhhh! It’s a Seven & Seven!”
(h/t: Salamander)
Other Useless News
Here are the top five articles viewed by my 25,643 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- The 5 Most Misleading Grocery Items Shoppers Waste Money On
- The 10 Best Things I Ever Bought
- How to Teach Your Kids to Be Personal Finance Losers (in 6 Easy Steps)
- $10,000 Richer, a Georgia Teacher Shows Why It Pays to Read the Fine Print
- 9 Crazy Tax Deductions that the IRS Eventually Accepted
Hey, while you’re here, 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!
2. Make sure you follow me on Twitter!
3. Subscribe via email too!
And last, but not least …
4. Consider becoming a Len Penzo dot Com Insider! Thank you.
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
After reading a recent Len Penzo dot Com post that shared some clever ways to save money on pet care, Deb left an important tip of her own:
I would add: Never feed your small dog any fatty people food.
Good point, Deb. And don’t feed them fatty people either.
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
I think it’s only Apple and Amazon (not Google) that have been in the trillion dollar club until Microsoft joined them.
Good catch, ark!
It’s fixed. Thank you.
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”
– Alan Greenspan
IMO, the first sentence is correct when applied to fiat money. The second is debatable.
Individuals saving physical gold ARE safely storing value. Same with other long-lived “hard” assets, land for example.
I agree with you, Dave. To be clear, Greenspan’s entire quote was referring specifically to currency.
While they both are stores of value, the big difference between gold and land, is that gold is money. Gold is more liquid too.
I only save in gold and silver now, I just don’t see the fiat system still being here in another 20 years when I near retirement age. I am however dabbling a little in pot stocks to see what happens with a large expanding sector. I also still hold some Litecoin just to see what happens.
At some point the powers-that-be are going to have to revalue the dollar price of gold to reliquefy central bank balance sheets — of course, the downside to that is such a move will come at the expense of everyone else in terms of a sharply devalued dollar and lower living standards — especially for those who haven’t protected themselves by buying a little wealth insurance (i.e., gold and/or silver) to ensure their long term dollar-denominated savings aren’t wiped out by the resulting higher inflation.
Hi Len,
Thanks for another great cuppa! I don’t worry about inflation or SS. I just keep stacking a little silver every month. THAT is my long term savings account.
Sara
Good for you. Slow and steady wins the race, Sara.
I agree inflation is much higher than reported by gov’t stats. You have to ask, how are people coping with it???
The answer is that most of them are using debt to make up the difference.
Sam, I personally know several seniors on SS and/or have corporate pensions with no COLAs who are using their life savings to make up the difference.
Here is the simplest way to measure inflation – If your wages stay the same, yet all your bills increase, you see inflation. Over the past 25 years or so, bills have increased by quite a lot. Incomes haven’t.
I can’t argue with that, DK.
As long as the fiat dollar remains king of the world, the government will always be able to print itself out of this problem. Our politicians who only care about power have already sold themselves to all the takers, who will continue to demand others to pay for them.
Yes, Steve, they can print any amount they want to cover the promises. Unfortunately for those banking on that as a solution, the government will not be able to preserve the purchasing power of the currency. So you may get a $2000 check, but that won’t be very valuable when a loaf of bread costs $500.
Here’s the secret: Live below your means, invest in things that have staying power and provide streams of income and your good to go. I wish I could just drop out of SS entirely, since there’s no way I’ll ever see a dime of it anyway.
I totally agree Greg! Pisses me off that they not only steal from me through income tax, but also ss tax! Every citizen could have so much more for themselves and to make matters worse I can’t even see where my taxes are helping. Infrastructure in this country is going to Hell and the university and schools are just dumbing our kids down.
You nailed it, Greg. Spending less than you earn goes a long way toward solving a lot of personal finance problems.
“Debit: Of course, the worlds central banks will continue propping the markets …”
Trouble is, the banks are losing control of interest rates …
https://www.zerohedge.com/news/2019-04-27/jpmorgan-we-are-approaching-point-again-where-us-banks-run-out-liquidity
… and the inflation in markets depends on continuous creation of money, lent at low interest rates.
Your question about the appropriate cash gift for a graduating high school senior, if it is your grandchild you give more or I do. Going broke on grandkids!
I don’t have any grandkids yet, John — but that makes sense to me.
Well, on a positive note. If the currency resets itself to greatly devalue dollar and inflation goes through the roof, I might be able to pay my 30 year mortgage in 6 months! : )