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. I know I am … so let’s get this show on the road.
Delay is the deadliest form of denial.
— C. Northcote Parkinson
They battened down the hatches
But the hatches wouldn’t hold …
— Bob Dylan, “Tempest”
Credits and Debits
Debit: Did you see this? A new report by Credit Suisse says the number of well-off in China has, for the first time, surpassed the number of wealthy Americans. In fact, the report found that 100 million Chinese are officially members of the global “top 10% club” versus 99 million Americans. The world, it is a-changin’.
Debit: Once upon a time Caterpillar was considered the bellwether stock for the industrial sector. If that’s still true, then the world economy is teetering on the brink of its first recession in almost 10 years, as CAT reported dismal quarterly earnings this week while slashing its profit outlook in 2020. In case you’re wondering just how far Cat execs tempered next year’s profit expectations, here’s a visual aid that should help:
Credit: Speaking of dismal earnings, Bill Blaine recently noted, “If you wake up on a Casper mattress, work out with a Peloton before breakfast, Uber to your desk at a WeWork, order DoorDash for lunch, take a Lyft home, and get dinner through Postmates, you’ve interacted with seven companies that will collectively lose $14 billion this year.” Surprised? Don’t be; these zombies are an unfortunate side effect of a world awash with worthless currency.
Credit: On a related note, a few days ago Michael Lebowitz offered up this extremely pithy observation about Texas Instruments (symbol: TXN) that is also directly attributable to worthless currency, via artificially-low interest rates:
Since 2006 TXN revenue is up 2.6% and TXN stock is up nearly 300%. Lucky for management they can mask no growth by buying back about a third of the shares and fooling investors.
Michael Lebowitz, CFA (@michaellebowitz) October 23, 2019
Debit: Meanwhile, the worldwide dollar shortage is getting worse, as the Fed increased its daily overnight liquidity injections by 60% this week with $200 billion released in the last month alone. Clearly, something, somewhere, has broken behind the scenes. The $64 trillion question is what, exactly, is causing this liquidity-demand spike within a system that is — ironically — already drowning in $1.5 trillion of excess reserves?
Debit: While something has clearly broken behind the scenes, the international monetary system died in the Great Financial Crisis of 2008 and has officially been on life support — better known as quantitative easing (QE) — ever since. As a result, the central banks’ have now printed $16 trillion in a desperate effort to keep the Weekend at Bernie’s economy going. And that’s expected to hit $18 trillion by 2021 — assuming they get that far.
Credit: Market analyst Dave Kranzler says he has yet to encounter a reasonable explanation for this latest batch of Fed “money printing which is accelerating in size and frequency almost weekly.” He also says that “the Fed is going out of its way to obscure the truth. But it’s pretty obvious to me that big bank balance sheets are starting to melt down again.” Wait … but we were told in 2008 that QE and near-zero rates were supposed to fix everything!
Debit: The trouble is, if you believe the latest report from consulting firm McKinsey, the central bankers have no choice regarding the reintroduction of QE (um … that isn’t really QE .. wink, wink). In other words: print even more funny money … or the system dies. That’s because, according to the report, nearly 60% of global banks are no longer generating enough returns to weather a future economic storm. Yikes.
Credit: For those who want a peek into just how bad the next financial storm will be, Peter Schiff offers this: “The Fed has been successful in fooling the markets regarding the temporary and reversible nature of 0% rates, QE, and its (growing) balance sheet. The realization that they’re neither could cause a flight from the dollar and Treasuries that could usher in a crisis far worse than 2008.” And that’s probably an understatement.
Debit: The mainstream media is finally waking up and shining a light on the central banks’ mounting woes. This week, Iceland’s central bank governor, Asgeir Jonsson, told Reuters that negative interest rates “may be hiding deep underlying problems” and are “a sign of sickness for developed economies.” No, Mr. Jonsson; they’re actually a sign of the current debt-based monetary system in its death throes.
Credit: Of course, you don’t have to tell asset manager Egon von Greyerz that fiat money is on its death bed. He warns that, “In a world that can’t survive without incessant deficits, money printing and negative interest rates, something is clearly rotten; it stinks of lies, deceit and decadance because those who control the financial system have everything to gain from false markets, false money and false rates. I’ll say. Somebody pass the soap …
Debit: Fiat money’s downward trajectory steepened after President Nixon “temporarily” broke the dollar’s anchor with gold in 1971. Since then, more than $2 quadrillion of debt, derivatives and unfunded liabilities have been created and now the world finds itself drowning in a sea of red ink, which is why almost all world currencies are struggling to maintain the last remnants of their original purchasing power … although it will be to no avail.
Credit: As Von Greyerz reminds us, “For 5000 years, the only real money has been gold and silver. And whenever the financial system has deviated from that principle, it’s ended in disaster for the world.” This time is no different, folks. The S.S. Fiat Money hit an iceberg in 2008 and it’s now destined for Davy Jones’ locker. The good news is it’s still not too late to grab a gold or silver lifeboat. But time is clearly running out.
By the Numbers
Just for fun, here are a few highlights from the latest Gallup poll on honesty and ethics in professions:
1 Nurses’ rank among 43 professions whose ethics are seen as being high or very high. (84%)
19 Percentage of poll respondents who rated lawyers’ ethical standards as high or very high.
8 Percentage of poll respondents who rated the ethical standards of car salesmen as high or very high.
5 Percentage of poll respondents who rated the ethical standards of both pharmacists and engineers as low or very low.
28 Percentage of respondents who rated lawyers’ ethical standards as low or very low.
34 Percentage of respondents who rated journalists’ ethical standards as low or very low.
4 Number of professions that respondents rated as having lower ethical standards than journalists. [Advertisers (37%); car salesmen (44%); telemarketers (56%); congressmen (58%)]
Source: Gallup
The Question of the Week
[poll id="291"]
Last Week’s Poll Results
How much will you spend on Halloween candy, costumes and decorations this year?
- Less than $25 (71%)
- More than $50 (17%)
- $25 – $50 (12%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that almost 3 in 10 of them will be spending at least $25 on Halloween in 2019. That’s about $15 more than I dished out this year — all of it on candy, by the way. For the sake of my waistline, I hope there’s very little left after the trick-or-treaters get their fair share.
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: Wake-up Call
A married couple were sound asleep when the phone rang at two in the morning. So the wife (undoubtedly blonde), picked up the phone, listened for a moment and said, “How should I know? That’s 200 miles from here!”
And with that, she hung up.
“Who was that?” the husband asked.
“I don’t know,” the wife replied. “Some woman wanting to know if the coast is clear.”
(h/t: Sam I Am)
Other Useless News
Here are the top five articles viewed by my 27,991 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 10 Unique Halloween Treats That Kids Love — But Rarely Get!
- Outrageous Pizza Delivery Fees Are Here to Stay (and It’s Your Fault)
- 16 Extreme Ways to Increase Your Monthly Savings
- How to Find a Low-Cost Plumber Who Won’t Rip You Off
- 10 Ways to Get Fit for Little or No Money
Hey, while you’re here, 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 out to me at: Len@LenPenzo.com
After reading a recent Len Penzo dot Com article offering tips to help you improve your credit score, James Rosa left this comment:
I know how it feels to be frustrated by credit report issues. I paid a credit hacker but it didn’t work out for me. Then I decided to fix my own credit the old fashioned way — mainly by paying my bills on time.
Good for you, James! Unlike that so-called “credit hacker,” you can be sure that self-reliance and personal responsibility will never let you down.
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
Hi Len,
Thanks for another great cup of Black Coffee. Better than Starbucks and a lot cheaper too!
In the meantime, I’m going to keep with my weekly silver stacking program until the system finally kicks the bucket!
Sara
Thank you, Sara!
Something is broken in the U.S. alright. Manufacturing is on the ropes and it has been replaced with toxic easy money financialization. The rust belts of formerly prosperous manufacturing areas in this country are all but dead. Think of places like Detroit and Chicago.
But if you look elsewhere in the world, manufacturing centers are thriving. Think of places like Catalan in Spain, or much of Germany. They have high living standards because of it. It’s not a coincidence that the richest areas of China and Mexico, aside from a few financial districts, are their manufacturing hubs.
The U.S.A. used to manufacture very high quality goods in large quantities. They sold them domestically and also exported them all over the world. Everything in my parents’ house had the Made In America tag. Does anybody still remember that?
Manufacturing will make its big US comeback only after the reset because once the reset occurs, the cost of imports will rise sharply, making domestic production more cost competitive. That, in turn, will provide well-payikng jobs to those who want them and the rebirth of the days when a single blue collar income could provide enough income to support a family.
Yes, folks, that is the rainbow that is waiting for everyone at other side — but first there is going to be a painful reckoning. The piper must be paid.
Hmm, the moral hazard of easy money at zero percent. Who’d’a thunk?
Certainly not the world’s central bankers, Blue!
Really good job this week, Len. The banks may be in trouble but they just ignore the losses to keep their margins. How long can the game keep on going?
Nobody knows for certain, Oscar; but I’ll be shocked if the current system is still functioning five years from now.
The game of Monopoly ends when a single player owns everything. We’re almost there now. One person doesn’t own everything yet of course, but we are not far off. Relatively speaking. Less than 1% will soon own 95% and that is close enough in my book. Effectively, right now a tiny group has an insane amount of money and power over everyone else and it’s getting worse.
Great observation. About a dozen uber-rich companies have so much wealth and so many politicians, members of the media, and lawyers on their payroll that nobody else can compete with them.
The Fed doesn’t care about the long term health of the dollar or the USA for that matter as long as the bankers keep getting their bonuses.
Sure seems that way, Buzz.
Most of our citizens have no understanding of the money, credit and banking system and they never will. When their “money” doesn’t work or they can”t get access it (nothing they need for sale or bank runs) they will only understand their victimhood and try to hoard real goods.
Which is why everyone should have at least three to six months of everything they need now, before the system gets to that point!
I’m speculating, but it’s worth knowing that Len lives in terrain near LA and his electric power may be out.
Actually, Dave, I was away on some personal business. Back now though! Thankfully, the city where I live has almost all of its power cables running underground — so I think we are at a fairly low risk of power outages. (I know … famous last words. I probably just jinxed myself!)
That’s the trouble with us speculators – we eventually get it wrong.
Welcome back!
Thanks, Dave!