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, shall we?
The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets.
— Robert Kiyosaki
Meet the new boss. Same as the old boss.
— Pete Townshend
Credits and Debits
Credit: Did you see this? After falling 1.1% on Friday, the S&P 500 ended the week down 1.3%. It was the same story for both the Nasdaq 100, which lost 1.9% Friday and 1.8% for the week, and the Dow, which lost 0.8% on Friday and 1.4% for the week. Huh. Apparently, the stock market really does move in reverse.
Debit: The high-flying stock market hasn’t been enough to keep seniors out of the labor force. In 2016, almost 27% of Americans between 65 and 74 were still working; a number that’s projected to exceed 30% by 2026. And the number of people 75 and older who continue to work has gone from one in 17 in 2006 to more than one in 12 now. And by 2026, that figure will climb to one in nine. Sad.
Debit: Of course, some seniors only work to stave off boredom; and others continue for the health insurance — but the majority of them still work because they have to. In fact, the GAO reports that 29% of senior households age 55 and older have no pension and nothing saved for retirement. Zero. Zip. Nada. That means, for at least 40 million US households now in — or approaching — their golden years …
Debit: On the other hand, it’s hard to save for retirement when more than 50% of your income is spent on housing; and one in four renters — 11 million renters in all — are doing exactly that. That figure has nearly doubled since 2001. Somewhat ironically, this is happening even though households with incomes of at least $75,000 accounted for more than three-quarters of the growth in renters from 2010 to 2018. Yikes.
Debit: Meanwhile, another new study of 2700 working adults at companies with over 500 employees has found that at least 32% of people making over $100,000 run out of money between paychecks and can’t make ends meet. Although, to be fair, that is clearly more of an indictment of those workers’ budgeting skills than a poor economy.
Credit: Then again, it ain’t all bad news: Fidelity just announced that they have 233,000 clients with at least $1 million in their 401(k) accounts — that’s 1.3% of all its participants. Hooray! However, the midpoint balance across all of their 401(k) accounts is much lower — just $27,000.
Debit: At best, this economic data is just more proof that exploding wealth inequality — caused by the central bankers’ poisonous near-zero interest rate policy — has seen the middle class tread water; and at worst, they’ve become modern-day serfs. All this while the top 5% grow richer by the day.
Credit: It’s no surprise that the central banks’ cheap credit policy has created an enormous bubble in everything from stocks and bonds to houses and fine art — not to mention US dollars. But, as Charles Hugh Smith notes, that bubble comes with consequences that has led to an even bigger problem: “The Fed birthed a monster mania of moral hazard beyond its control in which all risk has vanished.” You know … kind of like this:
Debit: That cheap credit is a big reason why last month’s CPI rose 0.1% on a seasonally adjusted basis; and climbed 2.5% over the past 12 months, not seasonally adjusted. As a result, the 30-year yield is now less than the “official” inflation rate for the first time since 1972, shortly after the dollar’s anchor to gold was broken. And, yes; I realize real-world inflation has been higher than the 30-year yield for many many years — but just play along.
Debit: Unfortunately, central-bank money printing is in permanent overdrive because taking the foot off the pedal now would cause markets to implode — worldwide — which will cause the dollar to go up in smoke shortly thereafter. The good news is the rich possess hard assets and wealth insurance to cushion the blow, while the poor won’t miss what they never had. As for the middle class, they’ve got the most to lose. And lose they will. As they always do.
By the Numbers
If you’ve watched any television at all in the past few weeks, you’ve probably seen at least one political ad from billionaire presidential candidate Michael Bloomberg. Here are some numbers on Bloomberg’s campaign expenditures so far — as well as statistics for a couple of other billionaires in the race too:
3 Months Bloomberg has been an official presidential candidate.
$463,800,000 Amount that Bloomberg has spent on his campaign during the past three months; all of it from his own pocket.
$263,700,000 Amount that Bloomberg spent in January alone.
$55,100,000 The Bloomberg campaign’s current cash-on-hand; that’s more than Democratic candidates Amy Klobuchar and Andrew Yang had raised in all of 2019.
$200,000,000 Amount fellow Democratic candidate Tom Steyer put into his own campaign last year.
$66,000,000 Amount that incumbent Donald Trump put into his 2016 campaign.
0 Amount of personal cash to-date that Trump has contributed to his own 2020 reelection campaign.
Source: Forbes
The Question of the Week
[poll id="309"]
Last Week’s Poll Results
Are you a saver by nature, or do you have to force yourself?
- I’m a saver by nature. (85%)
- I have to force myself. (15%)
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that 6 in 7 Len Penzo dot Com are savers by nature. I guess that should be no surprise, considering this is a personal finance blog.
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: The Long Weekend
A man called home to his wife and said, “Honey, I’ve been asked to fly to Canada with my boss and several of his friends for fishing. We’ll be gone for a long weekend — and it’s a good opportunity for me to get that promotion I’ve been wanting — so please pack enough clothes for a three-day weekend. Also, please get my rod and tackle box from the attic. We’re leaving from the office at 4:30 p.m. and I’ll swing by the house to pick my things up. Oh, yes! And please pack my new navy blue silk pajamas!”
The wife thought this sounded a bit odd but, being the good wife, she did what her husband asked.
At the conclusion of the long weekend, the man came home; he was a little tired but, otherwise, looked great.
The wife welcomed him home and asked, “So, did you catch many fish?”
“Yes!” answered her husband. “Lots of walleyes, several bass, and a few pike.”
After a brief pause, the husband asked his wife, “By the way, why didn’t you pack my new blue silk pajamas like I asked you to do?”
The wife replied, “I did — they’re in your tackle box.”
(h/t: RD Blakeslee)
Other Useless News
Here are the top five articles viewed by my 29,762 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- The 50 Biggest Money Mistakes Household CEOs Make
- Sneaky Price Tricks Your Grocer Doesn’t Want You to Know
- Six US Presidents Who Suffered With Personal Debt Problems
- How to Stop FOMO From Creating a Gaping Hole in Your Budget
- Five Lessons From My Italian Father on Marriage and Money
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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 my article explaining that pizza fees are never going away, Jenny left this suggestion to a fellow commenter who she obviously didn’t agree with:
You can buy a franchise for $50k idiot! Lern [sic] to spell, and know what your [sic] talking about. You obviously slept in school. If you went.
Glass houses … and all that.
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 coffee! Nothing is more scary to me than getting to old age and not having enough money to support myself if I can’t work. We can’t rely on Social Security!
Sara
I agree, Sara. Social Security was never meant to be a substitute for our own retirement savings; it was supposed to be a safety net.
“Apparently, the stock market really does move in reverse.”
In small increments only.
Seems that way. I’ll tell you what, the market has been so insane, it’s been hard watching it go up in despite the disconnect to fundamentals. My 401k could have had bigger returns over the past year if I had increased my stock allocations, but I refuse to do it.
” … to be fair, (people running out of money between paychecks) is clearly more of an indictment of those workers budgeting skills than a poor economy.
IMO, It goes deeper than that, Len. This blog and life itself clearly show the problems faced by the shrinking middle class. When faced with problems of this magnitude, the wise look for solutions equally large: They orient their whole lives against the storm.
The solutions often abandon the rat-race. The best solutions (again, IMO) are personally responsible and yield increasing independence and autonomy.
When the credit bubble finally collapses — and it will — I think those solutions will be forced upon almost everyone, Dave.
No worries Len. America will be fine. The Fed is printing its way to prosperity!
Yes, if the key to prosperity was printing currency, then the government has no excuses for citizen poverty. Just print $100,000 checks for every man, woman and child and let the economy reap the “rewards”! Even so, a modest segment of the population today clearly believes that Utopian world is actually possible. It’s scary.
The Fed is full of smart people; they know how this game will eventually end. The policy makers are just hoping it doesn’t happen on their watch. Until then, they will keep things going as long as they can because its very profitable for them (at our expense, of course).
Forget the CPI. If you want to calculate what inflation truly is, use the gold price. Just make sure to discount those period where price rapidly adjusted due to buying panics. So if we went from Jan 2016 to today, the gold price went from about $1,100 to $1,650. That’s about 12% inflation a year which is close to what the Chapwood index you promote here is, Len. Not perfect, but it does seem to line up with my experience.
I agree. Over a long enough time period, the number of dollars it takes to purchase an ounce of gold is an extremely good gauge of currency price inflation.
Len, how much should somebody have saved by age 65? Asking for a friend.
Paul, there are so many personal variables that your question is impossible to answer. The first step is to determine how much money you need on a monthly basis to pay the bills; then add any extras for entertainment, home and car maintenance, taxes, gifts for the grandkids, etc., with maybe a buffer for unforeseen expenses that will probably pop up from time to time.
Then you need to estimate how long you plan to live, and don’t forget to account for the effects of inflation. (If you’re young and just starting your career, if you expect to spend the annual equivalent of $100,000 in today’s dollars over a 25 year period, you’ll need to save close to $5 million over the next 30 years or so, assuming an interest rate of roughly 2% to 3%.)
That will give you an idea of how much you’ll need.
If you’re feeling lucky, you can estimate your social security benefit to offset a bit of those expenses.
Well my thoughts this week. Just hook up the fed to a tesla and we wont have to worry about a crash.
My math may be wrong maybe have to hook it up to a cyber truck?
This ought to get em goin in the basement. Have a great week Len.
: )
Ha ha ha! Tesla. If you want to see how much of a joke the markets have become, look no further than them. $900 a share for a company that has never made a yearly profit.
It’s a good thought, Duke — but since Tesla is already hooked up to the Fed, we’re going to need you to come up with a Plan B!
When the credit bubble pops, Tesla is going down too.
How does someone who earns 100k a year run out of cash between paychecks? How? HOW??????
Some people just have no concept of saving money and living within their means. For many, I’m convinced that the desire to spend cash as it comes in is hard-wired into their brain; they just can’t help it — it’s like hoarding in reverse (although instead of “stuff,” it’s cash).
I would think cost of living in the area they live would play into it. For instance: People living in NY and LA wouldn’t be buying much on 100K in those areas.
Could be, Mark; but if that is the case, then the smart thing to do would be to move to a place with a cheaper cost of living.
Regarding bumper stickers – they declined along with metal bumpers. Old timers may remember a few classics, Such as the Run Jessie Run bumper sticker that was placed on the FRONT bumper🤪
Well … they seem to increase temporarily during election years. I haven’t noticed any increase so far this year though.