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 nice relaxing Father’s Day weekend — especially all you dad’s out there. I know I am! Okay, away we go …
The best way to destroy the capitalist system is to debauch the currency.
— Vladimir Lenin
Those people who think they know everything are a great annoyance to those of us who do.
— Isaac Asimov
Credits and Debits
Credit: What do you say we start off with some really good news? This week, the People’s Socialist Paradise of Venezuela announced that its inflation rate slipped below 1 million percent. Hooray! Unfortunately, with their printing presses in overdrive, the pullback is almost assuredly only temporary — and with inflation still running at an astounding 815,945%, prices are still doubling almost daily. Forward, amigos!
Debit: Did you see this? We all know that numbers are a big part of economics and personal finance. With that in mind, a researcher recently asked 3200 Americans if their kids should be taught Arabic numerals in school; 56% said no. Another 15% had no opinion. I know. Not surprisingly, the New York Times chalked up those head-scratching results to racism. Rather, I think it primarily reflects the quality of our education system.
Debit: Here’s another head scratcher: Despite his claims that the US is supposedly enjoying “the greatest economy ever,” the President continues to badger the Fed for lower interest rates. Hmm. At some point, you would think a booming economy would require higher interest rates to keep inflation in check. But what do I know? (Don’t answer that.)
Credit: Maybe the President is worried about the bond inversions in both Europe and the US. Dave Kranzler says that’s a signal that the elites know something has already busted that could lead to another major financial crisis; with its stock now under $7, he suspects it’s Deutsche Bank. Kranzler also speculates that Deutsche Bank would already be sleeping with the fishes if not for direct monetization by the ECB. Yikes.
Debit: Deutsche Bank’s dwindling stock price notwithstanding, Tavi Costa pointed out this week that the Commodities-to-S&P-500 ratio just hit its lowest point since 1969. That should be no surprise considering that the nominal price of silver is still roughly 67% lower today than it was in 1980. How many other products can say that? Say … do ya think there’s a potential opportunity there? Yeah. Me too:
Commodities-to-S&P 500 ratio just reached a fresh 50-year low!
Amazes me how many ways stocks look absurdly overvalued at the likely top of the business cycle. pic.twitter.com/HSuMBEYMZ8
Otavio (Tavi) Costa (@TaviCosta) June 11, 2019
Debit: As Zero Hedge notes, “The tremendous disconnect between equities and virtually every other asset class is the result of one thing: the market’s growing conviction that the US economy is sliding into a recession, and the Fed doing everything in its power — cutting rates, more (money printing), perhaps negative interest rate policy — to prevent that.” And why not? That strategy has been working well for Japan since 1992. Oh, wait …
Credit: Of course, as Lance Roberts notes, the Fed is a one trick pony; they believe that increasing the “wealth effect” will ultimately restore consumer confidence and foster economic growth. “The problem,” Roberts says, “is there’s scant evidence that (money printing and lower interest rates) are doing anything other than fueling asset bubbles in corporate debt and financial markets.” Imagine that.
Credit: For his part, market strategist and macroeconomist Sven Henrich reminds us that, the “central bank’s plan to once again lower interest rates is not capitalism, nor does this ongoing farce constitute free market price discovery. It’s politburo-based central planning, desperately trying to keep the balls in the air.” Uh huh. Speaking of politburo planning …
Credit: Bill Holter agrees that the Fed and other central banks, “have been buying ‘crap’ and putting it on their balance sheets for 10 years, which means stocks and junk bonds now ‘back’ their currencies. This carries with it a very big problem: Just as the majority has figured out the news is fake, investors are figuring out that central banks and their issued currencies are too.” That’s not good news when the only thing backing those currencies is faith.
Credit: Meanwhile, financial analyst Jeffrey Snider wants to know why, “No one ever addresses the elephant in the room: the potential that 2008 wasn’t a recession — but a permanent break.” Oh, that’s an easy one. Let’s go to the tape:
Credit: For those who still don’t get it, I’ll let Peter Schiff explain: “Everything the Fed has been saying for the past 10 years about normalizing interest rates was a lie. The fact that they’re about to cut interest rates proves that any economic strength is artificial; a result of cheap money. So the Fed is going to give the addicts on Wall St. more heroin — except this time inflation and a dollar collapse is going to crash the party.” Yep. The good news is: silver is cheap! For now.
By the Numbers
Last month, China and the EU signed landmark agreements, recognizing aircraft certifications from both sides that could lead to business for China’s newest commercial airliner, known as the COMAC C919. This is a big deal for China, and a signal that Boeing and Airbus will soon have a key competitor in an aviation market that they currently dominate:
487,000,000 The number of domestic and international journeys made last year in China.
168 Seats on the the C919. The plane will compete with Boeing’s 737 and Airbus’ A320.
5100 New airplanes similar in size to the C919 that China will need over the next two decades.
$1,000,000,000,000 Estimated cost for China to buy those 5100 planes from a foreign supplier.
55 Number of Chinese airlines in operation.
8 Nations that have developed large airliners. (US, Russia, Brazil, Canada, UK, France, Germany and China)
Source: CNN
Last Week’s Poll Result
Have you ever been given a counterfeit bill during a cash transaction?
- No (85%)
- Yes (15%)
More than 1600 Len Penzo dot Com readers answered last week’s survey question and it turns out that, slightly more 1 in 6 of them have received some funny money at least once in their lives. By the way, more than a few people have asked me how they can be absolutely positive they’ve received counterfeit cash. I tell them if it’s a $3 bill, then they can be sure.
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
[poll id="272"]
Useless News: Lucky Number
One day, a 55-year old man who was born on May 5th, made $55,555.55 a year, was 5 years into his marriage with 5 children, and whose lucky number was 5, received a phone call from a very good friend.
After exchanging a few pleasantries, the friend informed the man that a horse named “Lucky 5” was scheduled to run as the number 5 entry in the fifth race at the local track that evening.
Well … the man was absolutely convinced that this was a sign of unbelievable good fortune, so he went to his bank and emptied his savings account of nearly every last penny.
The man then went to the races and bet $5555.55 on “Lucky 5” to win.
Sure enough, the horse came in fifth place.
(h/t: Tim)
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. Yukon Territory (2.50 pages/visit)
2. Saskatchewan (1.58)
3. Newfoundland & Labrador (1.56)
4. Alberta (1.49)
5. Quebec (1.48)
9. Nova Scotia (1.50)
10. New Brunswick (1.39)
11. Prince Edward Island (1.33)
12. Northwest Territories (1.25)
13. Nunavut (1.00)
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(The Best of) 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
Stefano wasn’t buying any of my reasons explaining why a 30-year loan is better than a 15-year mortgage. At least I think he wasn’t when he left this comment:
I must say, I can’t concur with you 100%. But that’s merely my opinion, which could be wrong. I don’t know.
Maybe it’s just me, Stefano, but I’m betting you hate it when people ask you to recommend a good restaurant.
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
Hi Len,
Happy Father’s Day and thanks for another great cuppa joe! I love my black coffee on Saturday mornings.
Sara
Thank you, Sara!
Nice round up. The walls seem to be closing in on the banksters. It is pretty obvious that they really don’t have a lot of options left .
One illegal option tried by the notorious Deutsche Bank (“dwindling stock price notwithstanding” – above) was to rig the price of gold and silver:
https://www.reuters.com/article/us-deutsche-bank-settlement-gold-idUSKBN13R2N1
Dave, the DB settlement for manipulating precious metals prices is so low compared to the profits raked in from their scheme that it only encourages more corruption.
That’s okay … eventually, the markets will overwhelm the ability of these shysters to fix the price.
Short of a full monetary reset (good, but painful for everyone) or elimination of our current debt-based monetary system in favor of one based on precious metals (better, but painful for proponents of Big Government), you are right, Drew.
Venezuela is just another example of fiat money at its worst, contrary to what Nobel Prize economists like Krugman say. People love to say Peter Schiff is a broken clock, but when he’s proven right, he’ll be proven right in the blink of an eye.
As Hemingway wrote in The Sun Also Rises:
“How did you go bankrupt?” Bill asked.
” Two ways,” Mike said. “Gradually, and then suddenly.”
A full Fed audit would show everyone that they’ve been buying stocks under the table since 2009 to keep the stock market artificially propped up. It’s pretty obvious that Tesla has been one of the biggest beneficiaries of that policy.
I saw an article somewhere that showed many higher level execs have left the company in the past year. Not a good sign. And another article that showed a couple of key execs have been cashing out their stock at an alarming pace … makes you wonder why if they believed the company business case was sustainable (it’s not, IMO), and has its best days ahead of it (it doesn’t; things will only get tougher for them from here).
Thanks for the great read. If Congress ever wakes up it would get rid of the Fed. Do that and things will have a chance to right themselves. But as long as the Fed exist and prints unlimited money that is used to buy and corrupt, there will never be any changes.
Our reps in Congress are elected by the people. I can assure you that most voters have no clue what the Federal Reserve is or what it does. If most of them don’t understand what an Arabic number is, then I think it is safe to assume they are incapable of grasping all of the problems caused by the Fed.
Well said, D. That’s a quality comment.
… and, Steve: Your comment is spot on too. (Sadly.)
Why are their unlimited funds for illegal aliens’ health care, education, food stamps, housing, etc., but social security is going broke???
Because the inmates are running the asylum right now. Nothing is going to change until the fraudulent debt-based monetary system that not only allow, but encourage, these idiotic “progressive” policies, implodes.
By the way, one of my many pet peeve with the politicians here in California is that they are working hard to outlaw plastic straws (it is now a crime for a waiter to hand them out unless requested). Meanwhile, they are fine handing out free medical syringes to the homeless, who discard them with reckless abandon on the streets and in our parks. Total insanity.
Len, I have a stupid question. Are gold and silver considered commodities?
It’s not a dumb question, Jennifer! Both are considered commodities, but gold’s primary role is money. Silver has many uses in industry; but it also has the added benefit of being money.