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 weekend. I know I am! Okay, away we go …
It’s all bullshit. Ninety percent of the American people have little or no net worth. I create nothing I own. We make the rules, Buddy; the news, war, peace, famine, upheaval, the cost of a paper clip. We pull the rabbit out of the hat while everybody else sits around their whole life wondering how we did it.
— Gordon Gecko, Wall St. (1987)
Credits and Debits
Debit: Bankruptcy petitions for US consumers and businesses are climbing sharply; they’re up 5% from the previous month alone. In case you’re wondering, Alabama had the highest rate per capita with 5.6 filings per 1000 people, followed by Tennessee (5.4), Georgia (4.3), Mississippi (4.2) and Nevada (3.8). Then again, I’m sure that’s just a statistical blip. After all …
The Economy is the BEST IT HAS EVER BEEN! Even much of the Fake News is giving me credit for that!
Donald J. Trump (@realDonaldTrump) July 2, 2019
Debit: Stop me if you’ve heard this before: US mortgage debt hit an all-time high this week, eclipsing the previous peak reached during the Great Financial Crisis of 2008. One reason for the surge in mortgage debt is an increase in homeowner refinancings being used to tap significant home equity that has accrued during the current housing market bubble. I guess people have short memories.
Debit: I’ll bet excessive mortgage debt is why Rabobank’s recession probability model now says there’s an 81% chance of a US recession next year. That figure is higher than the recession odds the model spit out prior to the bursting of the dot-com bubble in 2000, and during the 2007 housing bubble. Oh, yes … the model also suggests that the next US downturn will be worse than the Global Financial Crisis. Uh oh.
Credit: Speaking of mortgage debt, I see a large bank in Denmark is now offering a 10-year negative 0.5% interest rate mortgage. In essence, they’re effectively paying their customers to borrow cash. Best of all, no mortgage payment is due until the payoff date; so the borrower only has to repay principal, with a small discount. In other words: the bank loses money on the loan. Abracadabra! It’s magic!
Debit: Hey … Denmark isn’t the only place with insane bankers; Chase Bank is forgiving all outstanding credit card debt from its Canadian customers. No, really. One 24 year-old
deadbeat university student who hadn’t made a credit card payment in five years told YahooFinance that, “It’s kind of like I’m being rewarded for my irresponsibility.” Good God! Kind of? Kind of? No … it’s precisely like that!
Debit: In other news, Argentina’s stock market plunged 48% on Monday, after a socialist politician received a strong showing in the country’s presidential primary election the day before. Not surprisingly, that’s the second-biggest single-day stock exchange decline ever; surpassed only by a 60% tumble in the Sri Lankan bourse in 1989. Ouch. Of course, I don’t worry about devastating market losses because all of my investments are professionally managed:
Debit: As if Argentina didn’t have enough troubles, its currency fell 30% this week too — and Morgan Stanley expects the peso to fall another 20%. Can you imagine the US dollar losing half its purchasing power in short order? That had Franklin Sanders observing that, “The US, with its central bank, fiat currency, and debt, is no different than Argentina.” True … but that won’t become apparent until the buck loses its reserve currency status.
Credit: On a related note, this week another $1 trillion of negative-yielding global debt was issued worldwide — making it a cool $2 trillion in less than two weeks. That prompted financial analyst Luke Gromen to ask this intriguing question:
Have you ever seen people running into a burning building for safety?
You have now. pic.twitter.com/3W13b6u7O6
Luke Gromen (@LukeGromen) August 15, 2019
Credit: Bill Holter certainly sees the financial lunacy before him: “If $16 trillion in negative yielding bonds isn’t insane enough, hundreds of billions in (corporate) junk debt are also trading with negative yields. Think this through; if you’re offered a negative rate bond from a (dubious) issuer, and your other option is gold or silver, which do you choose?” Pro Tip: It’s probably best if you don’t ask a college student:
Debit: Oops. This just in …
SWEDEN’S 20-YEAR BOND YIELD FALLS BELOW 0% FOR FIRST TIME, ENTIRE SWEDISH YIELD CURVE NOW NEGATIVE
There was a record $16.7 trillion in negative debt. Make it $17+ trillion pic.twitter.com/CkM12EKNHs
zerohedge (@zerohedge) August 16, 2019
Credit: Sven Henrich is still marveling at the central banks’ recent spate of interest rate cuts: “Cuts this late in the cycle aren’t a sign of effective stimulus — they’re a sign of fear. The fact that the ECB, ten years after the financial crisis, can’t even raise rates to zero without risking a system collapse is beyond embarrassing and reflects how weak the financial system actually is. They’re barely keeping it together.” I’ll say!
Credit: By the way, with all the financial turmoil going on, Mr. Henrich had a question of his own this week:
Unemployment looks to be the last shoe to drop.
Once that changes direction everything else will fall apart.
The bond market is screaming.
Is anybody listening? pic.twitter.com/q8ojOc55oR
Sven Henrich (@NorthmanTrader) August 10, 2019
Debit: Meanwhile, the combined debt of the US, China, Japan and Germany increased ten times faster than their economies grew last year — and yet this excludes off-balance sheet entitlement programs such as Social Security. Unfortunately, our debt-based international monetary system will implode unless the debt increases exponentially — so the amount of red ink is only going to grow faster with each passing day.
Credit: As financial analyst David Robertson notes, “Much of what’s happened with monetary and fiscal policy the last 50 years has ultimately been an effort to cope with unaffordable entitlements. The rapid increase in debt are desperate attempts to forestall the inevitable reckoning.” A reckoning that the crazy negative-yielding bond markets seem to be suggesting may not be too far away.
By the Numbers
On August 14th, Social Security celebrated its 84th birthday. Here’s some additional data on the program:
1937 Year that the first Social Security taxes were collected.
4 Number of years that Social Security gave out one-time lump-sum payments to some beneficiaries. (1937 – 1940)
$58.06 The average Social Security lump sum payment made between 1937 and 1940.
$22.54 Amount of the first monthly payment ever made; it belonged to Ida May Fuller who retired in 1939 and lived to be 100.
25% Reduction in monthly benefits for those who begin collecting Social Security at age 62.
32% Additional monthly benefit increase for those who wait to collect until age 70.
$1461 The average monthly Social Security benefit in 2019 for all retired workers.
$2861 The maximum monthly Social Security benefit in 2019.
The Question of the Week
Last Week’s Poll Result
How much is your average monthly electricity bill during the summer?
- $100 – $199 (39%)
- Less than $100 (31%)
- $200 – $299 (22%)
- $300 or more (8%)
More than 1600 Len Penzo dot Com readers answered last week’s survey question and it turns out that 70% of them spend less than $200 a month for electricity during the summertime. On the other hand, 8% typically see bills of $300 or more. For them, it may be time for them to consider buying or leasing solar panels.
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.
Useless News: Fine Dining
The customer in the Italian restaurant was so pleased with his meal that he asked to speak to the chef. So the owner proudly led the happy diner into the kitchen and introduced him to the chef.
“Your veal parmigiana was superb,” the customer said. “I just spent a month in Italy, and yours is better than any I ever had over there.”
“Naturally,” the chef said. “Over there, they use domestic cheese. Ours is imported.”
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. New Brunswick (2.50 pages/visit) !
2. Newfoundland & Labrador (2.00)
3. Quebec (1.77)
4. Alberta (1.64)
5. Saskatchewan (1.59)
9. British Columbia (1.41)
10. Manitoba (1.35)
11. Northwest Territories (1.33)
12. Nova Scotia (1.10)
13. Prince Edward Island (1.08)
Whether you happen to enjoy what you’re reading (like those crazy canucks in New Brunswick, eh …) — or not (ahem, you hosers living on the frozen Prince Edward Island 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 reading my article discussing the ethics of found money, Cpc left the following comment on Wednesday:
The cops tell me my husband found $170,000. He says it wasn’t that much, but that after he realized what it was he was terrified that it was drug money and that the cartel would be looking for him.
Well … if the cartel isn’t looking for him, you can bet the IRS will be.
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