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 …
Once you believe things are permanent, you’re trapped in a world without doors.
— Neil Andrew Megson
Curiouser and curiouser!
— Lewis Carroll, Alice Through the Looking Glass
Credits and Debits
Debit: Did you see this? The median-wage American worker in eight of America’s largest ten occupations can’t afford a one-bedroom apartment. Employees earning the federal minimum wage have to work 127 hours per week to afford a two-bedroom apartment. And the ten jobs expected to see the largest demand through 2030 pay less than the wage needed to afford housing. Other than that, the US economy has never been better!
Debit: In other news, this week, Rabobank’s chief researcher, Michael Every said, “For a perfect example of the mess we’re in, look at the market reaction to the (positive) June payroll data. US Treasury yields naturally went up; and yet US equities went down. So it seems the stock market would rather have juicy rate cuts than a healthy US economy.” Why? Because cheap money is the only way to keep the illusion going.
Credit: Of course, with the global monetary system not only hopelessly broken, but also in its death throes, it’s getting tougher with each passing day to keep that illusion going, as evidenced by a growing number of extremely risky “junk” bonds with negative yields being offered to the public by dubious entities …
Negative-Yielding Junk Bonds Have Arrived in Europe: What causes junk bonds to have a negative yield is not some kind of magic but benighted investors whose brain is malfunctioning after years of NIRPhttps://t.co/1FPe81aiqO
Wolf Richter (@wolfofwolfst) July 9, 2019
Debit: In fact, there are now 14 euro-denominated junk bonds trading with a negative yield; six months ago there were … zero. Then again, thanks to the European Central Bank’s (ECB) negative interest rate policy, the absurdity of a high-risk negative-yield junk bond — where an investor who holds it to maturity is guaranteed to lose money — is par for the course these days. Welcome to Wonderland:
Credit: Speaking of Wonderland, Bill Holter points out that no pension plan, bank, or insurance company can survive to pay out benefits with negative-yielding bonds because any capital invested will lose interest over the life of investment. “We’re told that 2+2 can — and does — equal more than 4,” says Holter, “when, in fact, current monetary policy mathematically guarantees systemic insolvency.” Imagine that.
Debit: By pricing in so much easing, the stock market has trapped the Fed. According to Goldman Sachs, if the Fed doesn’t lower interest rates by 0.50% soon, the market will fall sharply, and force the Fed to cut rates anyway to avoid a crash. And if the Fed doesn’t cut rates? Well … the current stock market bubble will grow even larger until it finally bursts, taking the entire financial system with it. So there’s that.
Debit: Frankly, the Fed is trapped in other ways: It’s also firmly stuck in the same liquidity trap that Japan has endured for 30 years: not even free credit is enough anymore to stimulate the economy. As a result, additional monetary interventions will, at best, do nothing more than continue financial asset boom/bust cycles and increase the wealth gap between rich and poor. As for the worst case: it increases the odds of a revolution.
Credit: Meanwhile, Poland has shocked the gold market — not to mention the European Union — by announcing that it bought 100 metric tons of the yellow metal earlier this year; Poland also announced plans to repatriate almost half of its strategic gold reserves from the Bank of England to the National Bank of Poland in Warsaw. Meh. I’m sure there’s nothing to worry about — especially when you know why central banks hold gold:
Debit: Whether you believe the banksters or not, something bad in the financial world seems to be happening behind the scenes, as Deutsche Bank announced a major restructuring of its floundering business including the creation of a so-called “bad bank” to offload their upside-down investments. Heh. Do you think we could get away with dumping our unmanageable debts into a “bad account” using an alias? Yeah. Neither do I.
Credit: For his part, Holter believes Deutsche Bank is signaling something far more ominous than a failing bank: “Confidence in all things financial has been paramount, just as it is for Ponzi schemes. Laugh all you want, but confidence in everything will be broken: The world will find the entire system is, and has been, a ‘bad bank’ for most of our lifetimes.” Yep. It’s all fun and games until someone loses an eye, Bill. Or their life savings.
Credit: Thankfully, Peter Schiff reminds us that there is a silver lining to the upheaval that will result from the demise of our dying fraudulent debt-based monetary system: Nations left the gold standard for the dollar standard because US dollars were convertible into gold. And just as “the US led the world off the gold standard, the collapse of the dollar will lead it back” — thereby allowing us to escape from this dreaded financial rabbit hole in the process.
By the Numbers
Here is a summary of price inflation/deflation rates between 1996 and 2016 for ten select goods and services:
-96% Televisions
-66% Computer software
-45% Wireless telephone service
-5% Clothing
-2% Furniture
2% New automobiles
61% Housing
64% Food and beverages
105% Healthcare
197% Tuition
Source: King World News
Last Week’s Poll Result
When is the last time you withdrew cash from an actual ATM?
- Within the last week (30%)
- More than a year ago (23%)
- Within the last month (20%)
- Within the last year (15%)
- Never (12%)
More than 1600 Len Penzo dot Com readers responded to last week’s question and it turns out that half of you have used an ATM in the past 30 days. On the other hand, slightly more than 1 in 3 readers haven’t withdrawn cash from an ATM in more than a year — it ever. Interesting.
The Question of the Week
[poll id=”276″]
Useless News: Six Figure Salary
My wife clipped a job listing out of the paper for me. She said it wasn’t much to start … but came with a huge pay raise later. It read … “Salary: 23k to start. 401k after first year.”
(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. Vermont (2.33 pages/visit) !
2. North Dakota (2.03)
3. Arkansas (1.94)
4. Hawaii (1.90)
5. Montana (1.70)
46. Wyoming (1.26)
47. Illinois (1.21)
48. Nebraska (1.18)
49. Rhode Island (1.15)
50. Alaska (1.13)
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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 how to find a reputable low cost pest control company, Gerri in Bangladesh — no, really — shared this:
Me and my boyfriend moved into our new apartment and we wanted to make sure that there were no pests in it. Unfortunately, we found out it has fleas infested with bubonic plague.
Call me a cynic, but something tells me you don’t really live in Bangladesh. Los Angeles, maybe; but Bangladesh … nope.
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
“So it seems the stock market would rather have juicy rate cuts than a healthy US economy. Why? Because cheap money is the only way to keep the illusion going.”
There’s another explanation, Len: Greed.
Those that have want more. More. More.
Those that have not are of no concern of the “investors”.
While capitalism is a very effective way (perhaps the only way) to effectively motivate productive economic behavior, its Achilles heel is greed. There is nothing contained within it to limit competitive behavior and the losers are ever-increasingly without sustenance.
Good comment, as usual, Dave. I see greed as a double-edged sword. The profit motive drives innovation, but it can get out of hand, as it is today’s in the financial industry.
Something isn’t right. The Fed is acting like it wants to lower rates soon, but the stock market is higher than ever and unemployment is still low. Shouldn’t they be raising rates?
Not if the Fed knows something bad is happening behind the scenes, Steve!
Len,
Another great summary this week. I love my weekend Black Coffee!
In the meantime, I’m going to keep stacking my silver. Did you notice its price isn’t moving up with the price of gold? Good for me because that means its on sale!
Sara
Thank you, Sara! Yes, silver is a real bargain, considering it is still cheaper in nominal terms than it was in 1980. That and the gold-silver ratio is now 93!!! (Silver comes out of the ground at a 10:1 ratio to gold.) That being said, don’t be surprised if the ratio climbs to 100 or more before it drops precipitously — silver is the financial system’s Achilles Heel and the powers-that-be are going to keep its price bottled up as long as they can.
Interesting bit of analysis pointing to a “Whale” in the silver futures market, indicating expected higher silver prices:
https://www.zerohedge.com/news/2019-07-11/whale-accumulating-silver-futures
Saw it … we’ll see, Dave. Alasdair Macleod says the “whale” is China. He could be right. Then again, who knows, since the precious metals’ market is purposely made so opaque by the people running it.
I’m not so sure that Silver will explode. Its not like there is a world shortage :
https://www.indexmundi.com/minerals/?product=silver&graph=production
In the end if there is a meltdown and Gold and silver are required it could be balanced by simply mining more of it. From the attached link Mexico could become a pretty rich country if Silver skyrocketed. They may have to build a wall to keep us out!
“additional monetary interventions will, at best, do nothing more than continue financial asset boom/bust cycles and increase the wealth gap between rich and poor. As for the worst case: it increases the odds of a revolution.”
Hyperbole much?
Really, Oscar? What do you think was the primary cause of the French Revolution (and many others for that matter)? Who do you think finally put an end to the chaos there? Napoleon did … and he didn’t use his military to fix the problem; he employed … wait for it … a monetary system based on gold.
Most Americans have no idea what the Fed even is or its purpose. Nor do they care! They know not the difference between fiscal and monetary policy. When a guy like Ron Paul or Ross Perot warns about the economic issues facing us most people don’t believe them. Your blog does a great job explaining things Len, but I’m afraid nothing will change until the dollar breaks for good.
I’m afraid you may be right, Cowpoke. But I hope you are wrong.
Governments are like people. They tend to spend more than they make. Why do you think so many people are unhappy and many governments are in a constant state of unease? Both people and governments need to learn how to either 1) spend less or 2) make more. Both require resolve and sacrifice. But most people these days seem to have no resolve and are unwilling to sacrifice even a little bit. Gimme gimme gimme! As you say, they won’t change until it’s forced on them.
Can’t argue with that, DK. Good post.
Why are democrats promising free taxpayer funded healthcare, education and food stamps for illegal aliens when even our veterans who pay taxes cant receive the same ?? Is this the definition of insanity and/or a failed political ideology ??
Yes
This is so reminiscent of the 2008 market crash. I remember coworkers saying, “how could the government let the stock market fall like this” and “isn’t the fed going to do something about this?”.
Most average investors are way too reliant on the general stock market and are under the assumption they’ll make 10-20% gains every year. It’s sad but I feel that this time the fall will be way worse and effect a lot of baby boomer retirees that really depend on this money now.
Agree, Don.