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 enjoying their weekend. We’ve got a lot to cover this week, so let’s get right to it, shall we?
Our knowledge is a receding mirage in an expanding desert of ignorance.
— Will Durant
Only those with truth in them will recognize truth. And you must learn to recognize all that is untrue to get the truth.
— Suzy Kassem
Credits and Debits
Debit: Did you see this? Through last Monday, just four companies accounted for 67% of the S&P 500’s returns in 2020: Microsoft (28%), Apple (15%), Amazon (13%), and Google (11%). According to Franklin Sanders, “That means the market is advancing on speculation, not economic grounds. Also think about what gains that size in six weeks means: some buyers are nuts.” You’re far too kind, Mr. Sanders — they’re all nuts.
Credit: Speaking of Microsoft, asset manager Sven Henrich points out that the stock “has nearly doubled since 2019 with a market cap expansion of more than $700 billion, for a total market cap of $1.4 trillion. Historic. And add the top four and their market caps you get this same vertical picture:”
#MAGA ate the stock market… not that one… $MSFT, $AAPL, $GOOGL & $AMZN = nearly $5 trillion in market cap or ~17% of the $SPX. Different this time? pic.twitter.com/vXdEZo3Vs6
Dan Nathan (@RiskReversal) February 7, 2020
Debit: Apparently, stock market investors are unaware that global air freight markets declined 3.3% last year — the worst performance since 2009, during the depths of the Great Financial Crisis — suggesting the global economy is continuing to decelerate. The last time the world saw contracting freight volumes across an entire year was way back in 2012.
Debit: Meanwhile, here on Main Street, the Fed’s latest quarterly consumer credit report found that aggregate household debt increased 1.4% last quarter; that puts consumers $193 billion deeper into the red, and $14 trillion overall. Even more disturbing, consumer debt has now increased for 22 consecutive months — and last month saw the single biggest monthly jump in household debt since before the financial crisis. Uh oh.
Debit: So how did we get here? Well … after the Fed gradually reduced its balance sheet between January 2018 and September 2019, the market became unwilling to absorb additional Fed selling; thereby threatening higher interest rates, followed by a sharp stock market decline — and the obligatory ensuing recession.
Powell: “There is nothing about this economy that is out of kilter or imbalanced”.
Hey Jay, stop bullshitting us. pic.twitter.com/ZUSlpRZc8Y
Sven Henrich (@NorthmanTrader) February 13, 2020
Debit: In other words, the primary dealers and big banks no longer have the liquidity to absorb new debt at current rates — and this is while foreigners are reducing their US debt holdings. The problem is exacerbated because this is occurring just as government debt is peaking, with the annual deficit for fiscal 2020 on pace to hit $1.1 trillion — the most since it hit $1.3 trillion in 2011. Don’t worry; the Fed has everything under control …
Debit: This is forcing the Fed to be the buyer of last resort. Typically, they have the primary dealers buy US Treasuries — but since the dealers have too many already, they are now selling them back to the Fed a few days later. And that, folks, is outright debt monetization. The same strategy used by central banks in Weimar Germany back in the 1920s and — more recently — Zimbabwe and other banana republics. Imagine that.
Debit: Of course, with the National Debt at $23 trillion, and at least $41 trillion more in unfunded liabilities — but probably much more — America is now in a place where the Fed is being forced to pick up the slack. Eventually the market will pull its head out of the sand and recognize that our debt-based monetary system — and the dollar-denominated paper wealth propping it up — is a cruel mirage …
Credit: So, when will the mirage disappear? Answer: when confidence finally breaks. And history tells us that confidence eventually breaks with every fiat-based system. It also tells us that when the current monetary subterfuge is finally revealed, as MN Gordon notes: “Debts will be paid in full. The dollar will go up in smoke. And madness of the kind only abstract thinking can forecast will triumph.” So true … somebody hold me.
Debit: Although few people see it, we have a dead monetary system incapable of determining legitimate prices. But eventually that rotting corpse will capture enough attention that the fragile veneer of confidence holding everything together will finally give way. Then reality will return with a vengeance. Assets will readjust to a fraction of their current value. Most people will lose their life savings. And the politicians and bankers will say they never saw it coming.
By the Numbers
When it comes to the best investments over the past decade, here are the top five performing large-company stocks for the period between January 1, 2010 and December 31, 2019. How many of these were in your portfolio?
3018% MarketAxess (MKTX); an electronic bond trading platform that aims to make the process easier and more equitable for buyers and traders.
3207% LendingTree (TREE) is a loan marketplace for everything from mortgages to student loans and small business loans.
3208% Neurocrine Biosciences (NBIX) has two approved products: Ingrezza, for tremors in patients with long-term use of anti-psychotics; and Orlissa, designed to treat pain associated with endometriosis.
3909% Netflix (NFLX) is the king of streaming television and movies.
3961% Domino’s Pizza (DPZ) was foundering at the end of 2009, both in sales and customer satisfaction. In fact, a national consumer-taste survey put its pie in a tie for dead last with Chuck E. Cheese. So Domino’s revamped their recipe, which set the stage for a decade of out-performance unmatched by the rest of the Russell 1000.
Source: Kiplinger
The Question of the Week
[poll id="308"]
Last Week’s Poll Result
Will you do your own taxes this year or hire a professional?
- I’ll do my own. (62%)
- I’ll let a pro handle them. (35%)
- I’m not filing a return. (3%)
More than 1800 Len Penzo dot Com readers answered last week’s poll question and it turns out that slightly more than one in three will let a professional do their taxes for them this year. That is close to the national average of roughly 37%. As for me, I’ve been filing them online from the comfort of my home for many years now. If your taxes are relatively simple, I think it’s the only way to fly!
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.
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Useless News: Pet Shop Parrot
A lady was walking past a pet store when a parrot said, “Hey, lady! You’re really ugly!”
The lady was furious, but continued on her way. On her way home, she passed by the pet store again and the parrot again said, “Hey, lady! You’re really ugly!”
This made her especially mad, so she went into the store and told the owner that she was going to sue the store and kill the bird. But the owner apologized profusely and promised he would make sure the parrot never insulted her again.
The next day, the woman decided to see if the pet shop owner would be true to his word, so she deliberately passed by the store to test the parrot. Sure enough, the bird called out, “Hey, lady!”
“Yes?” she answered.
The parrot replied, “Yoooou know.”
(h/t: Sam I Am)
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. Alberta (1.90 pages/visit)
2. Manitoba (1.81)
3. Northwest Territories (1.75)
4. British Columbia (1.72)
5. Nova Scotia (1.67)
9. Yukon Territory (1.33)
10. Newfoundland & Labrador (1.31)
11. New Brunswick (1.29)
12. Nunavut (1.25)
13. Saskatchewan (1.00)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Alberta, eh …) — or not (ahem, all you hosers living on the frozen Saskatchewan 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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Thank you!!!! 😊
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
P. Ouellette left this comment on my article explaining why waterbeds are for suckers:
Not to jinx us but we’ve had no leaks in 20 years. Although he did jump on it one time too many and the bed let go, but the bladder stayed strong. We got a couple of screws in to hold the bed together. We still laugh at that one.
Heh. Nope … I’m not going to go there.
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
Len
You stated: “Then reality will return with a vengeance. Assets will readjust to a fraction of their current value. Most people will lose their life savings. And the politicians and bankers will say they never saw it coming.”
Sad to say but I think this is why the Coronavirus was unleashed. It will give the criminal bankers reason to deflect the blame away from themselves. It’s almost a fore gone collusion that the Coronavirus came from a genetically engineered lab in Wuhan. I’m not so sure we make it out of 2020 without the Mother of all collapses because China is being decimated and the World economy hinges on them.
However the people are so dumbed down I could never have dreamed this charade could last this long! SMH
Jared
Yup there is plenty of reality to go around in this world. Just read that Lysoal kills the coronivirus…says it right on the can,
I’ve heard that theory espoused elsewhere, Jared. It’s plausible I guess. Regardless, it does offer up a convenient excuse.
Household debt is defined as the combined debt of all people in a household. It includes consumer debt and mortgage loans. A significant rise in the level of this debt coincides historically with many severe economic crises and was a cause of the U.S. and subsequent European economic crises of 2007-2012. Wikpedia.
My thoughts on shipping. Alot was going to war zones.
What we never see coming. Put up a bird feeder in the back yard. Cooper hawk flies in scares the hell out of the doves. One flies into my sliding glass door knocks itself out and the neighbors cat gets it. As far as the hawk, all I saw was feathers falling from the sky.
Question for poll. Have you ever gone home with a pitchman product from a home or boat show?
😀
I don’t think shipping numbers include traffic shipped by military.
I’ve had more than a few birds fly into windows at my place. Most end up with broken necks, but a few manage to regain consciousness and go on their way.
Yes, there is a correlation between increasing debt and financial crises — but does it imply causation? (I think it does, but not exclusively; there are other factors.)
I enjoy sitting in my backyard and watching the lizards and hawks. I’ve seen the lizards do some amazing things. Their eyesight is incredible; I watched one spy a bug from about 35 feet away and ambush it.
I also watched a hawk take a pigeon in midair.
A kindred spirit! Here on my ridge in the mountains, I see such blessed wonders, too.
P.S. Just got orders from the missus to go get some more oil seeds to feed the wild birds. Man, talk about your free loaders! I think every little bird from miles away camps in our trees until spring.
I have a bird feeder in my backyard that I fill with seeds too. You are right … the birds are big freeloaders! They can eat a pound of seed in short order.
I also should mention I am fortunate enough to occasionally have roadrunners grace my property. They are my favorite bird of them all — they are so funny! They go after the lizards.
Hi Len,
The stock market is insane! Good news, it goes up. No news, it goes up. Bad news, it goes up. It seems like this can go on for ever.
Sara
The pigs at the Fed have jacked the prices of so many stocks so high, that if they lost half their value tomorrow, they’d still be over valued.
Well … my 401(k) isn’t complaining. 😀
Wall Street’s goal is to bid up stocks and sell them to Main Street. Then, when everybody is fully invested, they trigger some sort of financial panic and pick up the stocks for pennies on the dollar. Rinse. Repeat.
I think Mom and Pop investors who buy individual stocks are pretty much out of the market. Remember the “investment clubs” back in the late 1990s? I could be wrong, but I think the vast majority of Main Street is only exposed to the stock and bond markets through their workplace retirement plans and personal retirement accounts via index funds.
You’ve got to be kidding. If I had invested all my money in Dominos back in 2010 I would have got almost a 40 bagger???
I could be retired right now. Thanks for sharing that, Len.
Investing is soooooo easy when we’re looking backwards!
Your sarcasm is noted, Jim.
Re last week’s question of the week: Saving doesn’t have to be fiat money – in fact, it’s the riskiest kind of saving, right now.
PMs, timberland, a supply of non perishable food, etc. are all better, IMO.
Yep, Dave. Many times you have demonstrated here that it is possible to build your net worth by only investing in that which can be enjoyed during acquisition and throughout life, as opposed to papers in a drawer, like stocks and bonds.
Folks, for more info on how Dave does it, check out his long-running series here: Grandfather Says.
Thanks, Len. I wish I could go on writing for your blog forever, but I’m 88 now and feeling “old”, so It’s not likely I will write any more.
Well … I hope you change your mind! It has been a wonderful series.
If not, we still have about a half dozen in the queue that will be running through April.
Grandfather, say it ain’t so! I truly enjoy your writings and will miss them. I wish you all the best and please do stop by from time to time. You are an inspiration sir.
Thank you David! Your sentiment proves you have good parents, good genes and have been raised wisely …
David, I will try and comment here as long as I’m above the ground.
My grandpa always said “a day above ground is a good day”.
Beckybeq,
By the time we’re Grandpas, we’ve got life sorted out correctly. I agree with yours.