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.
Well … another glorious weekend is upon us. I hope everybody is enjoying these early days of the holiday season. I know I am! In the meantime, let’s get this party started, shall we?
It is what it is, but it’s not what it seems.
— Paul Hewson
Confidence is contagious; but so is lack of confidence.
— Vince Lombardi
Credits and Debits
Debit: Did you see this? A recent study has found that the median age of first-time home buyers in the US has increased to 33 — it was 32 in 2018; it’s also the oldest age since the statistic started being tracked in 1981. And as homebuyers’ ages have increased, so have their incomes; the average income of purchasers is now $93,200, as fewer affordable options squeeze lower-income potential buyers out of the market. Imagine that.
Debit: Meanwhile, there is a growing number of low-paying jobs relative to employment with above-average pay. In 1990, the jobs were evenly divided; but since then, 63% of all jobs that were created have been low-wage, low-hour jobs. As a result, there are now only four high-paying jobs for every five low-paying jobs. The increased disparity may seem insignifcant, but it’s not. And if you don’t believe me, just ask a prospective first-time homebuyer.
Credit: Of course, empires always rot from within, and Tom Luongo observed that America’s chronically-declining job quality is just one symptom of that. Luongo also sees the US finally buckling under the enormous amount of unpayable debt it has been allowed to amass ever since the dollar was decoupled from gold. He’s not the only one.
Debit: Then again, there’s always hope. For example, a pair of Federal Reserve researchers released some good news in a report that says the National Debt only becomes dangerous when it outpaces GDP; in other words, if the National Debt grows at a faster rate than the nation’s income, eventually the debt becomes unsustainable. The bad news is, the National Debt is accruing faster than national income.
Debit: But hold on … the same Fed report notes that one particular “solution” that countries with high levels of unsustainable debt can try to cover their obligations is to “borrow money by issuing bonds and then order the central bank to buy those same bonds by printing money.” Hmmm. Frankly, that sounds too good to be true. A central banker sleight of hand trick, if you will. You know … kind of like this:
Credit: As Peter Schiff notes, “The process that (the Fed report) describes is called ‘debt monetization.’ And it’s exactly what the Fed is doing today.” The report also admits that, “History shows that this leads to extremely high inflation, and often ends in economic ruin.” Actually, it always ends in economic ruin. Hopefully, I’m not the only one who sees that the Eccles Building oracles are suffering from an acute case of cognitive dissonance.
Debit: Perhaps that’s why the Fed is now considering a new rule that would let inflation run above its 2% target to make up for “lost” inflation. No, really. Never mind that the Fed refuses to admit that inflation is currently running close to 10% because they purposely measure it incorrectly to hide the dollar’s declining purchasing power. A ruse which is more important than ever after a decade of rampant money printing — er, I mean, “quantitative easing” (QE).
Debit: So how confident is the Fed in the financial system? Well … last month, chairman Jerome Powell tried to reassure those who are worried about ever-increasing levels of corporate and government debt by stating that he doesn’t see any immediate dangers being posed by America’s trillion-dollar deficits, saying (emphasis mine), “I think possibly the day of reckoning could be quite far off.” Color me unconvinced. And apparently, Mr. Powell too.
Credit: By the way, Powell isn’t the only one worried about what’s waiting around the corner. Kuppy, the proprietor of the ‘Adventures In Capitalism’ blog believes, “The road ahead is a market crash, followed by obscene fiscal stimulus. If you thought QE was nutty, wait until you see what drunken sailor mode looks like.” Uh huh. And for those of you who can’t wait, well … here’s a quick preview:
Credit: Oh, sure …I hear ya; at least QE continues goosing the stock and bond markets — not to mention workers’ quarterly 401(k) statements. But before anyone gets too complacent, it’s important to remember that, as MN Gordon notes, “Every bubble eventually finds its pin. When this bubble pops, like all bubbles pop, the remaining wealth of workers and savers will die a painful death.”
Credit: But all is not lost; at least for those who choose to purchase a little wealth protection in the form of precious metals. And, as Simon Black reminds us, “The decision to own gold should never be about the investment gain. Gold is a private, fully-redeemable insurance policy with steady cash value and zero counterparty risk; a hedge against uncertainty and risks. And there are lots of those in the world.” Amen to that.
The Question of the Week
Last Week’s Poll Results
How much is your Christmas gift budget this year?
- More than $500 (49%)
- $101 to $500 (33%)
- $100 or less (18%)
More than 1900 Len Penzo dot Com readers responded this week’s question and it turns out that 51% plan to spend $500 or less on Christmas this year. In case you’re wondering, that result is unchanged from last year, when I asked the same question.
Hey … If you have a question you’d like to ask your fellow readers here, send it to me at Len@LenPenzo.com — and be sure to put “Question of the Week” in the subject line.
By the Numbers
Speaking of Christmas gift budgets, this week’s version of Cyber Monday raked in a new all-time for sales, including the first day in history when consumers spent more than $3 billion using their smartphones:
$9,400,000,000 Total Cyber Monday sales in 2019. That’s bigger than both Black Friday ($7.4B) and last year’s Amazon Prime Day ($4.2B).
19 Percentage increase in Cyber Monday sales over last year.
33 Percentage of all Cyber Monday sales made with a smartphone.
$11,000,000 Amount consumers spent per minute during Cyber Monday’s peak sales hour, which was between 11 p.m. Eastern time and midnight.
41 This year’s percentage increase in BOPIS (buy online, pick-up in store) sales.
$143,800,000,000 Expected total Christmas holiday spending in 2019; that’s up from $126 billion last year.
Useless News: The Office New Hire
A man joined a Fortune 500 company as a trainee. On his first day he dialed the company cafeteria and shouted into the phone, “Get me some hot coffee and a jelly donut — and make it quick!”
The voice from the other side responded, “You fool! You’ve dialed the wrong extension!! Do you know who you’re talking to?”
“No,” replied the trainee.
“I’m the company CEO, you fool!!!” screamed the voice from the other side.
The trainee shouted back, “Congratulations! By the way … do you know who YOU are talking to? You fool!!!!”
“No,” replied the CEO.
“Good!!” said the trainee. And with that, he hung up.
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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
This week, Your [sic] An Idiot left this note in the Len Penzo dot Com complaint box:
Every overly opinionated idiot with enough sense to turn on a computer has the right to publish any amount of worthless, meaningless, biased, thoughtless and useless words that they have time to salvage from the biological landfill they call their brain.
I see what you mean.
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Photo Credit: brendan-c