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.
While you’re enjoying the extended Memorial Day weekend here in the good ol’ USA, please try to set aside a brief moment to honor the brave men and women who gave their lives in defense of our nation.
Okay … now let’s get this show on the road.
The masses have never thirsted after truth. Whoever can supply them with illusions is easily their master; whoever attempts to destroy their illusions is always their victim.
— Gustave Le Bon
What whiskey will not cure, there is no cure for.
— Irish proverb
Credits and Debits
Credit: Did you see this? Tesla just cut $3000 off the price of its Model S sedan, and $2000 off its Model X SUV. Unfortunately, reducing the prices of its two most expensive models have increased concern that interest in Tesla’s electric vehicles is rapidly waning. Despite consistently struggling to turn a profit, apparently Tesla actually believes it can stop the bleeding by further lowering prices and making it up in volume.
Credit: Speaking of Tesla, since topping out at $387.59 last August, its share price has plunged more than 50%; it closed the current week at $190.63. But I’m sure that has nothing to do with reports that the drive for cost cutting is now so severe that teams at several Tesla facilities have stopped purchasing office supplies including toilet paper. (Insert your own scatalogical joke here. No, go ahead; I’ll wait.)
Debit: By the way, Tesla isn’t the only stock that’s in the doldrums right now. The Dow finished the week in the red for the fifth consecutive time. Yep. The last time the Dow had a five-week losing streak was eight years ago; June 2011, if you want to be precise.
Credit: In other news, I see that Jeff Koons’ 41-inch tall “Rabbit” sculpture sold for $91 million last week; that’s the most ever for a living artist, breaking a record that was set just last year. As Jesse Colombo notes, “The art market (is) a barometer for the amount of froth in the global economy and financial markets. When the art market goes ballistic, that’s a sign of an economic cycle in its latter stages.” Anyway, here’s what $91 million (commission included) buys today:
Debit: Meanwhile, taxpayers in America’s ten biggest cities face an average burden of $50,000 in debt incurred by county, state and city government entities. New York and LA had burdens of $85,600 and $56,390, respectively. But it’s even worse for Chicago’s residents: they currently owe $119,110! You know, they say George Washington never told a lie. Then again, he never had to pay income or property taxes either.
Debit: The ever-increasing tax burden for big-city denizens is especially bad news for the 59% of millennials who are living paycheck to paycheck. The millennials also spend an average of $478 each month for restaurants, entertainment and luxury items — ironically, that’s 33% more than the financially better-off baby boomers.
Debit: One reason millennials are in such dire financial straits is because they make up the majority of the 43 million Americans saddled with student debt; in all, $1.5 trillion worth. As a result, the average American household with student debt now owes $48,000 — and 5.2 million borrowers are in default. Not surprisingly, the only true beneficiary of these government student loans has been the universities. Imagine that.
Debit: Also not surprisingly, American millennials are approaching middle age in worse financial shape than the baby boomers and Gen X. A new study found that millennial households had an average net worth of about $92,000 in 2016 — adjusted for inflation, that’s 40% less than Gen X households in 2001, and 20% lower than baby boomer households in 1989. Hey … it’s not supposed to work this way, folks.
Credit: The good news for millennials is, there’s plenty of affordable housing. Believe it or not, thanks to fanatic demand from millennials, Amazon has recently started selling DIY kits, as well as pre-built tiny homes — including a $7250 kit that can be assembled in eight hours. No, really.
Debit: But seriously, as Zero Hedge observes, “The tiny home craze among millennials is just more evidence that living standards are collapsing.” On the other hand, I know a guy who would disagree with that assessment:
Credit: Ahem. More to the point, Sven Henrich helps shine a white-hot spotlight on part of the reason why living standards are declining: We’re all paying for the constant central bank manipulation we’ve been subjected to since the Great Financial Crisis of 2008:
The end result of never letting the system clean itself out:
Highest debt levels ever (corp, consumer, govn’t), highest wealth inequality in our lifetimes, highest BBB rated debt yet the least growth compared to all prev. recoveries w/ 50% of the pop living paycheck to paycheck.Sven Henrich (@NorthmanTrader) May 21, 2019
Credit: Of course, that central bank manipulation, directly via a decade of low, if not negative, interest rates — and indirectly via stock market interference by the Plunge Protection Team — have painted central banks into a corner. As a result, Bill Fleckenstein says, “we’re stuck with policies that don’t work, but they’re afraid to change. As more people figure this out, it will have negative consequences for stocks and bonds.” At least in theory.
Credit: It may seem improbable at the moment, but one day the markets will overwhelm the central banks’ ability to keep the illusion that all is well. Thankfully, precious metals will be a guaranteed safe haven when that day finally comes — if they’re still available. One more bit of good news: 50 years ago, the inflation-adjusted price of silver was roughly $683 per ounce. It’s less than $15 today. Who says insurance isn’t cheap?
By the Numbers
Just in time to kick off the summer driving season, car-shopping and research site iSeeCars.com analyzed US fatality data for 25 million cars for model years 2013-2017 to find out which vehicles were most often involved in fatal crashes. Here are the top 10. (Note: the average fatality rate for all cars is 2.6 fatal accidents per billion vehicle miles.)
10 Dodge Challenger (5.8 fatal accidents per billion vehicle miles)
9 Kia Rio (5.9)
8 Nissan Versa (6.1)
7 Nissan 370Z (6.2)
6 Subaru BRZ (6.9)
5 Chevrolet Spark (7.2)
4 Kia Forte (7.4)
3 Honda Fit (7.7)
2 Chevrolet Corvette (9.8)
1 Mitsubishi Mirage (10.2)
Source: The Pittsburgh Post-Gazette
The Question of the Week
[poll id="269"]
Last Week’s Poll Results
Which ability would you rather have?
- Speak all languages fluently. (55%)
- Speak with animals. (45%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and — to my daughter’s dismay — it turns out that slightly more of them would rather be able to speak with any human than any animal. I don’t have the heart to tell her that I agree with the majority of my readers.
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.
Useless News: The Church Plaque
One Sunday morning, the pastor noticed a young boy was staring up at the large plaque that hung in the church foyer.
The seven-year-old had been staring at the plaque for some time, so the pastor walked up, stood beside the boy, and then said quietly, “Good morning, son.”
“Good morning pastor” replied the young man, still focused on the plaque. “Sir, what is this?” the boy asked.
‘Well, son,” replied the pastor, “these are all the people who have died in the service.”
Soberly, they stood together, continuing to stare at the large plaque.
After a few more seconds, the boy’s voice barely broke the silence when he asked quietly, “Which one, sir? The 8:30 service, or the one at 10:30?”
(h/t: Sharon)
Other Useless News
Here are the top five articles viewed by my 26,143 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 50 Good Personal Finance Habits Everyone Should Follow
- Is It Okay to Eat Foods Past Their Expiration Dates?
- Is Coinstar’s 11.9% Conversion Fee Worth the Price?
- 12 Travel Savings Hacks That May Actually End Up Costing You More
- 5 Ways to Make Extra Money While Staying at Home
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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
I found this note from Allison in the Len Penzo dot Com complaint box:
I sent you an email message over a week ago and I’m wondering why you haven’t replied yet.
I’m really sorry about that, Allison, but it never got to my inbox. Next time add an extra postage stamp — just to be sure.
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
“… cost cutting at Tesla is now so severe that teams at several Tesla facilities have stopped purchasing office supplies including toilet paper. (Insert your own scatological joke here. No, go ahead; Ill wait.)” – Len
Well, when we bought an obsolete schoolhouse and made it into a piano teaching studio, it came complete with an outhouse. Wife Elaine (a real packrat, if there ever was one) actually got rather attached to it (???) so, when we eventually installed a restroom inside, I hauled the outhouse on a hay wagon up the mountain and set it behind the barn, just so she would know it hadn’t met its demise.
Did you hear about the constipated accountant? He couldn’t budget.
… or the constipated engineer? Worked it out with a slide rule …
Touche!
“Black Coffee: The Global Economy on the Rocks”
Following up on last week’s “black coffee” commentary, it was mentioned that Wolf Richter (Wolf Street dot com) noted that the service sector of the GNP hadn’t declined. This week, new data has changed the tune:
https://wolfstreet.com/2019/05/23/suddenly-us-service-sector-too-lets-go-manufacturing-gets-even-weaker/
Yeah, Dave … most of the data being reported suggests we’re close to being in a recession, if we’re not already there. Remember, recessionary periods are not officially defined until long after the fact by a committee of an entity known as the National Bureau of Economic Research. (Just don’t ask me how they acquired that responsibility!)
1. “… taxpayers in Americas ten biggest cities face an average burden of $50,000 in debt incurred by county, state and city government entities.”
2. “The ever-increasing tax burden for big-city denizens is especially bad news for the 59% of millennials who are living paycheck to paycheck.”
Just a chance that our kids are not accumulating much net worth because they have figured out that neither they nor anyone other than the holders of the debt will ever need to be really responsible for it? It will be abrogated, one way or another (most pundits say by inflation) – it’s just too great already (and growing exponentially) to ever be liquidated by conventional repayment.
Unlike previous generations, I think the millennials, generally speaking, are more interested in acquiring experiences rather than assets. But I do agree the current debt outstanding will never be repaid; it’s just too large relative to global GDP.
Credit: It may seem improbable at the moment, but one day the markets will overwhelm the central banks’ ability to keep the illusion that all is well. Thankfully, precious metals will be a guaranteed safe haven when that day finally comes — if they’re still available. One more bit of good news: 50 years ago, the inflation-adjusted price of silver was roughly $683 per ounce. It’s less than $15 today. Who says insurance isn’t cheap?
So if I read between the lines, you’re saying that it’s a good idea to purchase silver? Would that be physical silver or options? Not real clear on the proper way to get some insurance for the future. Asking for a friend…
Mark, first, the obligatory disclaimer: I do not give actionable financial advice — I can only spout my opinion and tell you what I am doing. Everybody’s situation is different.
That being said, I buy physical precious metals as a form of wealth insurance. Buying paper-based alternatives is pointless from an insurance perspective as the whole point of owning wealth insurance is to eliminate counterparty risk. I discuss this in more detail here: https://lenpenzo.com/blog/id22332-economic-collapse-101-the-most-important-insurance-we-never-buy-2.html
I buy silver and gold for the long term. It is safely stored. It helps that it is so easy to conceal. I’m lucky in that I’m one of those who can afford to buy it. It’s just like all of my other hard assets. Real estate, guns, vehicles, tools. Anybody who thinks silver won’t go back to $50 per ounce or higher are kidding themselves. What I don’t need I’ll leave to my heirs.
Hi Len,
I really enjoyed this week’s videos. That bartender knows how to make a drink!
Hope you have a relaxing weekend.
Sara
The bartender had me mesmerized. Forget the drink. I needed a smoke after that performance.
LOL! He’s quite a showman. I’m not a big whiskey fan, but that drink looks delicious.
Thank you, Sara. I hope you have a great weekend too!
Tesla is only still around because central banks have destroyed the capital markets with their cheap credit. The company is a Ponzi scheme. It’s totally insolvent. Somehow they managed to raise a couple billion with a bond last month. The people who bought those bonds are already underwater!
I would love to meet some of the fools willing to put down good money for a Tesla.
There are LOTS of fools out there. They don’t call him Enron Musk for nothing!
I agree, Cowpoke. If Tesla goes out of business, it’s going to be tough getting spare parts for repairs.
Check this out, from Dave Kranzler: http://investmentresearchdynamics.com/every-bounce-in-tesla-stock-can-be-fearlessly-shorted/
You nailed it, Steve. For the last two years I’ve been telling anyone who has been listening that Tesla’s business model was fatally flawed. I’ll be surprised if Tesla doesn’t declare bankruptcy within the next 12 months. When the $2 billion in cash they took in from from their recent bond offering is gone, I think the game will be over. Frankly, I the game is over now … as usual, it just takes awhile for most people to catch on.
Len,
Do you know why Washington never paid income and property tax? Its unconstitutional, just as our Federal Reserve Notes are! 1913 was a sad year, basically the Death of our Constitution. 😢 The only thing left of the Constitution is our right to bare arms and that is in detriment if a far left wing president ever wins office again. Basically freedom of speech is dead due to our corrupt media centers. The country is basically in shambles, but the zombies don’t realize it.
Hopefully a reset of this corruption will soon take place, until then hold tight to the memory our Founders once had for this nation.
Jared
Jared, I believe it is no coincidence that the decline of our Republic and the move away from self-reliance and personal responsibility has corresponded with the decline in our currency. Although that started in 1913 with the creation of the Fed, it really ramped up after the Nixon closed the gold window in 1971, decoupling greenback’s anchor to the yellow metal. When the system resets, I expect personal responsibility and self-reliance will eventually come back into vogue out of necessity; an honest monetary system demands it.
An $11 million dollar commission for selling that rabbit? I would have been happy to hold the auction for $100,000! Think of all the money the buyer would have saved.
You can say that again! And I thought real estate agent commissions were hefty.
Folks with that kind of money and quality of mind to match are happy to spend whatever it takes display their bods and duds at Sotheby’s.