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.
Wow! Another week has come and gone — so without further ado, let’s get this show on the road.
The first duty of a man is to think for himself.
— Jose Marti
The last duty of a central banker is to tell the public the truth.
— Alan Blinder, former Vice Chairman of the Fed
Credits and Debits
Debit: It’s worth noting that for the past two weeks, the yield spread between 10- and 2-year US Treasuries has gone from inverting to steepening. This is especially significant because the damage from an inverted yield curve doesn’t actually begin with the inversion, but after it. In other words, the curve inverts first, acting as a warning — and then steepens into the recession. So buckle up.
Debit: Did you see this? For the first time ever, Greece has issued negative-yielding debt. Yes, that Greece — the same nation that, just seven short years ago, had the largest debt restructuring in history where bondholders saw their capital essentially evaporate into nothing. The world truly has gone mad.
Credit: On a related note, MN Gordon notes that, “In a world with $17 trillion in negative yielding debt, and asset prices including US Treasuries bubbled up beyond comprehension, the Fed has fabricated a financial system that’s reliant on extreme central bank intervention to remain solvent.” Then again, with worldwide debt at $244 trillion — that’s 318% of global GDP– I suppose solvency is in the eye of the beholder.
Credit: For his part, after the Fed announced last week that it’s starting yet another round of quantitative easing (QE), Graham Summers asked this : “If everything is so great, why is the Fed printing ($60) billion per month?” Put your pencils down, kids; that was a rhetorical question. Besides … we always save the more difficult queries for this guy:
Credit: Of course, the Fed insists it’s not implementing more QE. But, as Sven Henrich points out, at $60 billion per month you have to “ignore the fact that they’re running a program equal in size to the US military budget. Fed Chair Jay Powell (says), ‘The economy is in a good place. Now here’s a $60 billion monthly Treasury-buying program, multiple rate cuts and daily repo operations.’ How stupid do they think we are?” Yes, yes … that’s rhetorical too.
Credit: As for those who are still wondering just what the hell is going on with the central bankers in the Eccles building, MN Gordon perfectly summed up the true reasoning behind the Fed’s latest round of QE that, um … isn’t really QE (wink, wink): “Powell must damage tomorrow’s credit markets so they can function today; he must destroy credit markets to save them.” Frightening? Yes. But that kind of honesty is why Mr. Gordon can never be a central banker.
Credit: Bill Holter believes the bond market — not to mention the financial system that drives it — has gone “absolutely nuts.” In fact, Holter warns that, “The entire episode will end as the biggest credit collapse in history.” Even worse, Holter reminds us that when the credit market finally does goes belly-up, so will fiat currencies, because their value is derived from a credit-based foundation. Think: the Weimar Republic circa 1920 – 1923.
Debit: If a credit crisis does appear, “money” printing will go into overdrive. Then, when the public eventually figures out that their currency is worthless, they’ll begin dumping their cash for tangible goods — which, in turn will rapidly lead to the currency’s demise. How fast? Well … back in 1923, after years of relentless money printing by the Reichsbank, the German mark’s death throes took place over a short nine-month span.
Credit: This week the Dutch Central Bank (DCB) actually announced that: “If the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence and creates a sense of security. If things go wrong, prices may fall. But a gold bar always holds value. This (is) the opposite of shares, bonds and other securities — all of which have inherent risk.” Wait … what?? Yes, folks … hell has officially frozen over.
Credit: As Zero Hedge noted about the DCB’s stunning public admission this week, “While predictions of a monetary reset are hardly new, they’ve been relegated to the fringe of mainstream financial thought. And it’s stunning to see a mainstream financial institution open up about the superior value of limited-supply, non-fiat, sound-money assets.” On the other hand, there are those who have an unusually strong affinity for fiat cash:
Credit: So when is the big reset? Asset manager Daniel Oliver believes ‘QE for the people’ — Milton Friedman’s famous helicopter drop of cash — is coming: “The Fed wants inflation and it’s going to get it — good and hard. Then they’ll face the same choice that confronted the Reichsbank in the ’20s: continue (QE) and drive consumer inflation; or don’t and let rates rise, which will crush the economy. ‘QE for the people’ is the end game. Gold will anticipate it first.”
Last Week’s Poll Result
Are you eligible to receive a pension from a current or past employer?
- No (57%)
- Yes (43%)
More than 1700 Len Penzo dot Com readers answered last week’s survey question and it turns out that slightly more than 2 in 5 of them have the good fortune of being eligible to reveive a pension from a current of past employer. Believe it or not, yours truly is eligible to receive not one but — count ’em — two pensions, thanks to more than 30 years of employment with two major aerospace companies. Although one of those only pays enough for little more than a nice restaurant meal once a month. The big question I’m grappling with is: How long will both pension funds remain solvent?
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="290"]
By the Numbers
With Halloween less than two weeks away, here are some numbers on the popular unofficial holiday:
$8,800,000,000 Amount US shoppers will spend on the holiday this year; that’s down from $9 billion last year.
172,000,000 The number of Americans who plan to celebrate Halloween or participate in the holiday activities this year.
$3,200,000,000 The projected amount Americans will spend on costumes in 2019.
$2,700,000,000 The projected amount spent on Halloween decorations in the US this year.
$2,600,000,000 The amount Americans will spend on Halloween candy in 2019.
69 The percentage of households that plan to hand out candy this year.
44 The percentage of Americans who say they’ll carve a pumpkin this year.
17 The number of Americans who plan to put a costume on their pet in 2019.
Source: 24/7 Wall St.
Useless News: Anniversary Night
For their anniversary, a couple went out for a romantic dinner. Their teenage daughters said they would fix a dessert and leave it waiting. When the couple got home, they saw that the dining room table was beautifully set with china, crystal and candles, and there was a note on the table that read:
Dear Mom and Dad, your dessert is in the refrigerator. We’re staying with friends tonight — so go ahead and do something we wouldn’t do!
“Well … ,” the husband responded dryly, “I suppose we could clean the house.”
(h/t: Sharon)
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. Saskatchewan (1.91 pages/visit)
2. Manitoba (1.87)
3. Quebec (1.80)
4. Alberta (1.78)
5. British Columbia (1.70)
9. Prince Edward Island (1.40)
10. Newfoundland & Labrador (1.35)
11. New Brunswick (1.29)
12. Nova Scotia (1.20)
13. Northwest Territories (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Saskatchewan, eh …) — or not (ahem, all you hosers living on the frozen Northwest Territories tundra) — please don’t forget to:
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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 sneaky pizza delivery fees, long-time Len Penzo dot Com reader and top-commenter Karen Kinnane shared this:
I always pick up our pizza! I order online, use a coupon, pay with my United credit card to get miles, and drive home with a couple of clean bath towels wrapping the box to retain the heat. If you’re not severely handicapped and want to save money, get up and get your own pizza.
Karen, when it comes your excellent pizza advice, I’d say there’s not mushroom for improvement!
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,
I love The Price Is Right! I remember watching that episode you showed. It’s true. Some people would just rather have cash than a car!
Sara
Kevin had two rolls left. If I were him, and I really wanted the cash (and assuming you couldn’t receive cash in lieu of car), I would have asked for the four dice with the cars on it, and rerolled them to get even more cash! He had two more chances to earn up to $7500 with five $1500 dice.
That cash vs. car thing: Remember, he had to RISK THE CASH to get the car! In my situation (retired old fogey), I would take the cash and, since it was a windfall I don’t need to live on, I would buy precious metal with it.
Me too, Dave! On a side note, I have a good friend who is very outgoing and good with prices. I keep trying to get him to come with me to a taping of TPIR, but we haven’t got our schedules/circumstances to line up yet. I live about a half hour from the studio, so getting there is no problem. If I ever do get to a taping, I’ll let everyone know!
Excellent wrap up this week, Len. I think all it will take is a few defaults on the current bunch of junk bonds out there to set off the panic.
My guess is that a downgrade on a major corporation’s bonds will do the trick. Specifically, I’m thinking of a supposed “blue chip”company that appears to be on the ropes right now, like GE.
“Powell must damage tomorrow’s credit markets so they can function today; he must destroy credit markets to save them.”
I feel like I’m trapped on a plane with a suicide pilot. Can anybody stop this?
Yes. Will they? That is the trillion-dollar question, Sharon!
Q.E., Negative Interest Rates, Q.E. for the People, etc, etc, etc. These are desperate games of the system’s end stage. Easy credit gets offered to teh masses to keep the game going. At some point, everyone reaches their debt limit – so then comes the “free” money. That people can’t see this is hard to believe but it has been this way for a long time.
I agree, John. The writing is clearly on the wall for anyone who is looking for it.
“Karen, when it comes your excellent pizza advice, I’d say there’s not mushroom for improvement!”
Actually there’s a little Len, I forgot to mention that my reason for ordering online is that the independent pizza company we use gives a 5% discount for ordering online.
I liked “there’s not mushroom for improvement.” because I’m not quick enough to think up good puns!
Wow. 5%?? That’s quite a deal!
The dilemma facing the fiat financial system is increasingly recognized by those in the system:
It is not really clear how we are going to get out of this, Stanford University economics professor John Taylor said at a meeting of the Institute of International Finance. ”
https://www.reuters.com/article/us-imf-worldbank-economy-analysis/negative-rates-forever-central-bankers-look-for-an-exit-idUSKBN1WY0R8
A reset is the only way, Dave.