Black Coffee: Figures Don’t Lie

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 everyone is enjoying their weekend! In the meantime, let’s get this show on the road so I can start mine …

The English language has 112 words for deception, each with a different shade of meaning: collusion, fakery, malingering, self-deception, confabulation, prevarication, exaggeration, denial.

— Robin Marantz Henig

A farmer returning home in his wagon, after selling a load of corn, is a better indication of the economy than a nobleman riding in his chariot to the opera.

— ancient proverb

Credits and Debits

Debit: A new study by the Netherlands’ Central Bank found that, “Loose monetary conditions strongly increase the top one percent’s income and vice versa. In fact, following an expansionary monetary policy shock, the share of national income held by the richest 1% increases by approximately 1 to 6 percentage points.” File that little factoid under ‘D’ for ‘duh!”

Debit: In other news, it only took the S&P 500 just 215 days to reach a new all-time high after its December mini-bear-market nadir — thanks to a desperate Fed agreeing to permanently backstop the market in order to maintain the wealth-effect illusion and avoid a financial crisis. Unfortunately, as the debt continues to pile up faster than the economy expands, that’s going to be an ongoing — and growing — challenge.

Credit: As Jesse Colombo warns, “Although central banks have created an unusually long economic cycle by keeping monetary policies so loose for so long, there’s no escaping the eventual correction of the tremendous excesses and malinvestments that have built up. Believing that the Fed has tamed the business cycle is extremely naive and will be disproven in the not-too-distant future.” I agree — but I’m also beginning to wonder.

Credit: This week MN Gordon surveyed the US economic landscape and assessed it thusly: “The unemployment rate is currently 3.6%. Real GDP increased 3.2% (last) quarter. The S&P 500 and the Nasdaq recently hit all-time highs. Given these numbers, shouldn’t the Fed be normalizing monetary policy?” Of course, they should. The $222 trillion question is: Why aren’t they?

Credit: According to financial analyst Jeffrey Snider, the Fed’s decision to stop raising rates is glaring proof that the “booming economy” is a sham: “The financial system isn’t fixed and it never was. And without a monetary system in good working order you better believe the global economy is in danger. Again.” Speaking of shams, here’s one that never had a chance:

Credit: If you dig beyond the rosy data we’re being fed, it’s obvious that the economic decline is accelerating. Why? Because, as Brandon Smith notes, “Governments and central banks deliberately promote certain indicators as the signals we should care about while ignoring a host of other fundamentals that don’t fit their ‘recovery’ narrative. (And) when these indicators don’t read well, they rig the numbers.” Imagine that.

Credit: The government wants us to focus on GDP, the U3 unemployment rate, and the CPI, which make things seem like all is well; but it’s no coincidence that these figures, which are dutifully reported by the mainstream media, are also the most misleading economic indicators. However, more useful data showing full warehouses, slowing cargo traffic, and rising debt delinquencies reveal what’s truly happening.

Debit: Meanwhile, the percentage of banks reporting stronger demand for corporate and industrial loans tumbled to the lowest level since the 2008 financial crisis. So, as Zero Hedge notes, “Either nobody needs debt to fund expansion and new projects anymore, or businesses are so worried about the future and their ability to repay that they’re refusing (new) loans.” Um, it’s just a hunch, but … my money is on the latter.

Debit: Here’s one more negative indicator: Nearly 7% of US home sales in the last quarter of 2018 were sold by flippers — that’s the most since 2002. Uh huh; even higher than during the last insane housing bubble. And the percentage of flippers who saw their investment backfire is the highest since 2009. In fact, 45% of all flippers in San Jose lost money in the fourth quarter. Heck, it’s gotten so bad, even dogs are impersonating them:

Debit: And, finally … the median income of private-sector and self-employed workers in 2017 was $46,797 and $50,383, respectively. Meanwhile, government workers had median earnings of $53,435 — yes, 14% more than the private sector. That’s odd, because public servants earn far less than those in private industry … or so they say. Then again, in today’s make-believe world, it’s hard to believe anything we’re told anymore.

By the Numbers

The latest US unemployment data continue to indicate that all is well with the American workforce — but is it really? Here are a few more data points for your consideration:

13 Consecutive months in which available jobs have outstripped the number of people out of work and searching for a job.

3.6% The official unemployment rate; this is based only on the percentage of Americans who are actively looking for a job.

7.3% The unemployment rate if you include those who can only find part-time positions and discouraged workers who stopped looking entirely.

22.4% Percentage of Americans over age 55 currently in the US workforce.

16.8% Percentage of Americans over age 55 who were in the US workforce in 2006.

63% The current labor force participation rate.

1979 The last year that the labor force participation rate was as low as it is today.

Source: Forbes

Last Week’s Poll Result

What percentage of your investment portfolio is allocated to stocks?

• 51% to 75% (31%)
• More than 75% (22%)
• 1% to 25% (19%)
• 0% (17%)
• 26% to 50% (10%)

More than 1600 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than half of them have more than 50% of their portfolio committed to the stock market. Meanwhile, at the other end of the spectrum, almost 1 in 5 have no exposure to equities.

The Question of the Week

[poll id=”267″]

Useless News: Accountants and Engineers

Three engineers and three accountants were traveling by train to a conference.

At the station, the three accountants each bought tickets and watched as the three engineers bought only one ticket.

“How are three people going to travel on only one ticket?” asked the Chief Accountant.

“Watch and you’ll see,” answered the Chief Engineer.

And with that, they all boarded the train and the accountants took their respective seats, but the three engineers all crammed into a restroom and closed the door behind them.

Shortly after the train departed, the conductor came around collecting tickets. He knocked on the restroom door and said, “Ticket, please.” Then the bathroom door opened just a crack and a single arm emerged with a ticket in hand; the conductor took it and quickly moved on.

The accountants saw this and they all agreed it was a quite clever idea. So, after the conference, the accountants decided to copy the engineers on the return trip so they could save some money too. When the accountants got to the train station, they bought a single ticket for the return trip. That’s when the accountants noticed, to their astonishment, that the engineers didn’t buy any tickets at all.

“How are you guys going to ride without a ticket?” asked one of the perplexed junior accountants.

“Watch and you’ll see,” the Chief Engineer replied.

When the six professionals boarded the train, the three accountants crammed into a restroom, and the three engineers crammed into another one nearby.

The train departed and, shortly afterward, one of the engineers left his restroom and walked over to the restroom where the accountants were hiding. The engineer then knocked on the door and said, “Ticket, please.”

(h/t: Mikey)

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. Hawaii (1.68 pages/visit)
2. Connecticut (1.64)
3. North Carolina (1.63)
4. Louisiana (1.60)
5. Arkansas (1.58)

46. Illinois (1.23)
47. Delaware (1.21)
48. Montana (1.20)
49. Alaska (1.13)
50. Wyoming (1.03)

Whether you happen to enjoy what you’re reading (like my friends in Hawaii) — or not (ahem, Wyoming … for the third month in a row!) — 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 out to me at: Len@LenPenzo.com

After reading my article on the ethics of keeping found money, Chester summarized his own thoughts on the matter:

The government finds no remorse in stealing from taxpayers. Politicians find no remorse stealing from their constituents … And considering the government has stolen almost $75,000 from me during my lifetime, I say ‘finders keepers.’

Only $75,000, Chester? If that’s true, please send me your accountant’s phone number.

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