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 …
Money is stored labor. Labor is part of human life. To devalue money is to debase life.
— John Kenneth Galbraith
The last duty of a central banker is to tell the public the truth.
— Alan Blinder, former Fed Vice Chairman
Credits and Debits
Debit: Did you see this? A new survey has found that 49% of all millennials say their spending habits are driven by their friends bragging about their purchases on social media; compare that to just one-third of Americans in general. Sad. Hey … I wonder if the advertising world has caught on to this; if not, they’re missing out on a slam-dunk marketing opportunity.
Debit: In other news, the world economy has been in a significant slowdown for a quite awhile now. How slow, you ask? Well … the best way to visualize the dire situation that the world economy finds itself in is it to look at global trade, which has tumbled to levels last seen during the 2008 financial crisis. See for yourself:
Debit: I see Uber went public last week. But as Bill Holter notes, “Never mind Uber has lost $10 billion over the last three years, and they really have no business plan to earn one thin dime going forward. But Wall Street peddles whatever crap they can peddle. In fact, over the last year roughly 80% of all new issues were for money-losing operations.” Then again, such shenanigans are expected when financial services exceed 20% of GDP.
Credit: Meanwhile, MN Gordon observed this week that, “After a decade of increasing wealth inequality, the masses have reached a moment of certain hopelessness. Currently, people are after an ounce of hope they can latch onto; a means to an easier way is in high demand. Hence, fresh pitchers of Kool-Aid like MMT are being served up to meet this unquenchable thirst.” Wow. That’s so poetic it would make TS Eliot jealous.
Debit: Last week the Fed warned that credit standards continue to slip, as loans to firms with especially high debt now surpasses previous peaks seen in 2007 and 2014. According to a Fed spokesman, “The historically high level of business debt and concentration of debt growth among the riskiest firms could pose a risk to those firms and their creditors.” Uh huh. Thanks for that wickedly astute insight, Captain Obvious.
Debit: Speaking of risk, the latest Social Security balance sheet update reveals that its liabilities are $43 trillion larger than its assets — that’s $9 trillion more than last year. No, really. As a result, America’s national pension plan is now underfunded by 33%; and funds are expected to be exhausted by 2035. The good news for millennials is that SS can remain solvent indefinitely if the retirement age is raised to 105.
Debit: Of course, America’s general fund has fiscal issues too. The Congressional Budget Office forecasts that, starting in 2020, the US will never again see an annual budget deficit of less than $1 trillion. Considering the IRS will collect more than $3.6 trillion this year, it’s clear that the US isn’t in this predicament because of insufficient tax rates. The truth is: America has a spending problem.
Credit: Here’s another nugget of fiscal reality: deficits do matter. This week Michael Lebowitz warned that central bank policies “come at the expense of their currencies, since their value is what supports trust in the currency and allows it to retain its functional purposes — (but) current policy throws all trust to the wind.” Yep. Unfortunately, although the banking sharks are sowing the wind, we’ll all get to reap the coming whirlwind:
Credit: Don’t be fooled; despite the central banksters’ reckless fiscal and monetary policies, they’re macroeconomically “woke.” The proof is in their actions, as the world’s central banks have drastically reduced their purchases of US Treasuries, while simultaneously increasing their gold purchases. Why? Because they know the debt-based paper currencies they issue are in their death throes. Just don’t tell that to Ben Bernanke:
Credit: The bottom line is that gold and silver are essential for liberty; they’re also unparalleled wealth protection, which is more critical than ever. As Alasdair Macleod notes, “Failure to control monetary debasement invalidates the concept of a state-issued (fiat) currency.” Precious metals have been used as money for 5000 years because they maintain their value over time. Despite his testimony, Ben Bernanke knows this. It’s imperative that you do too.
By the Numbers
This week Forbes released its annual summary of the world’s biggest 2000 companies. Here are the top ten industry sectors in terms of total companies that made the list. Do you notice anything in particular about three of the five biggest industries? (Hint: They make up 28% of the 2000 largest companies.)
10 Food, Drink & Tobacco (75 companies)
9 Utilities (84)
8 Business Services & Supplies (88)
7 Consumer Durables (90)
5 (tie) Materials (102)
5 (tie) Insurance (102)
4 Oil & Gas Operations (110)
3 Construction (123)
2 Financials (145)
1 Banking (308)
Last Week’s Poll Result
How much was your federal income tax refund this year?
- More than $1000 (48%)
- I didn’t get a refund. (32%)
- $1000 or less (20%)
More than 1500 Len Penzo dot Com readers answered last week’s survey question and it turns out that, just under half of them got a juicy tax refund from the IRS totaling more than $1000. On the other hand, more than a third didn’t get any refund at all, including yours truly; I actually ended up writing a small check to the tax man this year.
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.
The Question of the Week
Useless News: The Biplane Ride
Stumpy and his wife Martha went to the state fair every year.
Every year Stumpy would say, “Martha, I’d like to ride in that there biplane.” And every year Martha would say, “I know, Stumpy, but that biplane ride costs ten dollars, and ten dollars is ten dollars.”
One year, Stumpy and Martha went to the fair and Stumpy said, “Martha, I’m 75 years old. If I don’t get a ride in that biplane this year I may never get another chance.”
Martha replied, “Stumpy, that there biplane ride costs ten dollars, and ten dollars is ten dollars.”
The pilot overheard the old couple and said, “Folks, I’ll make you a deal; I’ll take you both up for a ride. Now … if you can stay quiet for the entire ride and not say one word, then I won’t charge you — but if I hear so much as a peep, then it’s ten dollars.”
Stumpy and Martha agreed to the pilot’s terms and up they went.
The pilot did all kinds of twists and turns. Then he did several barrel rolls and a couple of dives, but not a word was heard. So the pilot did all of his tricks over again.
Still, not a word.
After they landed the pilot turned to Stumpy and said, “By golly! Mister, I did everything I could think of to get you to yell out, but you didn’t make a sound.”
Stumpy replied, “Well, I was gonna say something when Martha fell out, but ten dollars is ten dollars.”
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. Newfoundland & Labrador (2.10 pages/visit)
2. Quebec (1.78)
3. British Columbia (1.73)
4. Manioba (1.71)
5. Ontario (1.62)
9. Nunavut (1.50)
10. New Brunswick (1.39)
11. Prince Edward Island (1.33)
12. Yukon Territory (1.25)
13. Saskatchewan (1.13)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Newfoundland & Labrador, eh …) — or not (ahem, you hosers living on the frozen Saskatchewan tundra) — 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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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 my article highlighting tips to consider before hiring a concrete contractor, Mrs. Wilson wrote:
You rock, Len!
Heh. I see what you did there, Mrs. Wilson … but thanks for the sediments.
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
RD Blakeslee says
“… more than a third didn’t get any refund at all.”
Way to go, if you can work it out.
That way, you haven’t given the gov’mint an interest-free loan, nor do you owe interests and penalties to it.
Exactly. If you break even (you get no refund and you owe nothing) then you’ve actually scored. Many people completely forget this. They have become used to saving via Tax refunds. Which is wrong, you’re giving the Govt a loan interest free for a year.
If you got more back then expected? Adjust your W2s…if you owed more? Also adjust your W2s. Chances are good you’re getting more in your paycheck now.
Len Penzo says
I used to be a big fan of using tax withholding as a means of forced savings, but I’ve since changed my mind. Now I do my best to not loan out to the taxman any more than I have to every year.
I do think, however, that it is a useful tool for those who lack the discipline to save.
I think the answer to your By The Numbers question is 3 of the top 5 don’t make anything. What do I win Len?
Len Penzo says
Bingo, Susan! As for your “prize” … it’s only the bragging rights until the next time I offer up a By the Numbers quiz!
Sam I Am says
The stock price says Uber is a multibillion $$$ company even though it’s never turned a profit. Since I have a positive net worth, does that make me a trillionaire?
It’s Groundhog Day. We’re back in the dot com bubble again. The only difference is back then some of those companies were actually making money.
Len Penzo says
The insanity in the markets is truly unbelievable at this point. Historians are going to look back at this period of time and wonder how anybody could have bought into all of the BS being sold to the public by the Wall St.
Len Penzo says
In today’s world, reality is all about how we feel. So if you feel like a trillionaire, then I guess you’re a trillionaire! Congratulations!
Silver is going to out perform gold in percentage gains. It’s way under valued to the historical ratio to gold.
ps – I am not related to “Mrs. Wilson”
Len Penzo says
Agreed! The silver to gold ratio is now a tad over 88 — there have been only a few brief moments in history when silver has been that cheap relative to gold.
The Dark Knight says
The central bankers of the world are the only people who have full access to inside information and what they are buying is gold.
Len Penzo says
Good point, DK.
The Social Security problem can be quickly fixed by raising the payroll tax income cap.
RD Blakeslee says
Or, as somebody said on zero hedge this morning, raising the retirement age to 110.
Wait! Len said raise it to 105 here. Somebody is stealing his stuff!
Len Penzo says
I believe that is true, Cowpoke, but it has always been a political hot potato — at some point, they will probably have no choice.
Sara King says
I’m late this weekend. Was out of town attending a wedding!
Thanks for another great cuppa. It’s just as good on Sunday as it is on Saturday!