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.
And so it goes … we’re almost two full months into the ongoing financial crisis. Unfortunately, despite the relative calm on Wall Street over the past several weeks, the worst is yet to come.
Okay, let’s get started …
All the perplexities, confusions, and distress in America arise, not from defects in their constitution or confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit, and circulation.
— John Adams
Sooner or later everyone sits down to a banquet of consequences.
— Robert Louis Stevenson
Credits and Debits
Debit: Did you see this? The departing 59-year old CEO of AT&T is retiring with an absurdly excessive pension that will provide him with a lifetime guaranteed income of $274,000 — per month. Unbelievable. Considering that AT&T’s stock price is 25% lower than the $39 it was when this guy became CEO in 2007, can you imagine what kind of pension he’d be collecting if the stock price had, say, doubled or tripled?
Debit: To be fair, if you include reinvested dividends — although how many people actually do that? — total shareholder returns have added up to 55% over the AT&T CEO’s 13-year career. For those of you counting at home, that works out to an average of 3.5% a year. I’m sure that makes the 250,000 AT&T employees potentially facing layoffs feel a lot better.
Debit: Speaking of laid off employees, if history is any guide, the following graph strongly suggests that anyone who is expecting a rapid recovery in the US job market after the coronavirus hysteria finally subsides, should probably definitely think again.
There can be no talk of American jobs returning to pre-crisis levels until the losses find a bottom — unfortunately, the slope of that red line doesn’t suggest that will be happening anytime soon.
Debit: Meanwhile, in an attempt to keep the corporate bond market from imploding, this week the Fed officially opened up yet another of its many so-called “special purpose vehicles” (SPV) — this one to the tune of $750 billion for buying corporate bonds and ETFs. Uh huh. Please … no questions. Besides, I think we’ve all seen this movie before …
Credit: Of course, as Wall Street on Parade observes, those “SPV garbage cans keep the bad debt off the Fed’s books. But miss not this epochal watershed: The Fed has nationalized credit and bond markets, eliminating the pricing of credit risk in a pure central-planning socialist economy, all to bail out the 1% elite.” Imagine that.
Debit: Here’s more good news: In just three short months, as a percentage of GDP, the central banks for the 20 largest world economies have already exceeded the quantitative easing (QE) total issued over the three full years between 2009 and 2011. Oh, relax, you big worrywart … that exponential currency growth isn’t a bug — it’s a feature of our banker friends’ debt-based monetary system.
Debit: By the way, as this Deutsche Bank chart illustrates, now that the Fed has graced us with QE-infinity — and upwards of $3 trillion created out of thin air, distributed to both Wall and Main Streets in the past month — the conversation is now transitioning from liquidity to solvency. (h/t: JSMineset)
Patience, grasshopper. The full magnitude of this crisis is yet to come.
Credit: There are many folks who believe the National Debt can be reduced if we only elect “the right” politicians — but that’s impossible as long as our current debt-based monetary system remains in place. Charles Hugh Smith gets it; he says, “The dirty little secret is that America’s economy implodes once debt stops expanding.” True.
Credit: The trouble is, as Amanda Howard points out, “Rather than spurring real economic gains, the Fed’s QE program is supporting and further extending the bloated and fragile debt grid, as well as generating exuberance in the stock market and real estate, (thereby) fueling the largest wealth gap since the 1920s.” Which is why nothing will change until the politicians wake up and agree to a monetary reset, unless …
Debit: … the system forces the pols’ hands first. After all, central bank currency printing and yield repression only works as long as the economy has the capacity to absorb more debt. However, the still-unfolding financial crisis suggests that America’s economic sponge is quickly approaching its debt limit, as most entities who are still willing to take on more debt can’t afford it, while those who can afford it, don’t want it.
Credit: Unfortunately for all of us, if a monetary reset isn’t implemented, we’ll remain stuck with what Ms. Howard calls “a slow stagnation death as the Fed eats the economy” characterized by: continued malinvestment and bailout-generated moral hazard. Sadly, it also means even more government growth that only benefits useless bureaucrats while stifling private sector business opportunities — oh, yeah … and your liberty too. Just in case you hadn’t already noticed.
This is not the Onion or Babylon Bee. Its from San Diego County COVID alert system pic.twitter.com/CigWVFjxnF
Susan Crabtree (@susancrabtree) May 14, 2020
By the Numbers
Ten years ago, the largest US stock in terms of market capitalization was Exxon Mobil, with General Electric, Bank of America, and Wells Fargo ranked fourth, eighth and tenth, respectively — today, none of those companies are among the top 10. (Although Bank of America promotions are still going strong!) Here are the 10 largest American stocks today:
10. Proctor & Gamble (market cap: $292 billion)
9. Walmart ($344 billion)
8. Visa ($393 billion)
7. Johnson & Johnson ($396 billion)
6. Berkshire Hathaway ($456 billion)
5. Facebook ($583 billion)
4. Alphabet ($920 billion)
3. Amazon ($1234 billion)
2. Apple ($1273 billion)
1. Microsoft ($1359 billion)
Source: Morningstar
The Question of the Week
[poll id="321"]
Last Week’s Poll Result
How long until your mortgage is paid off?
- What mortgage? (60%)
- Less than 10 years (17%)
- 10 – 20 years (12%)
- More than 20 years (11%)
More than 2000 Len Penzo dot Com readers answered last week’s poll question and it turns out that 3 in 5 of them don’t have a mortgage to worry about. Unfortunately, even people who think they own their own home free and clear are still paying rent — to their government landlord in the form of property taxes.
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: The Recipe of the Week
Chicken stuffed with smoked fish. Follow me for more recipes!
(h/t: The Honeybee)
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. British Columbia (1.78 pages/visit)
2. Alberta (1.74)
3. Saskatchewan (1.63)
4. Manitoba (1.59)
5. Nunavut (1.50)
9. New Brunswick (1.31)
10. Nova Scotia (1.29)
11. Quebec (1.26)
12. Prince Edward Island (1.25)
13. Yukon (1.20)
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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
For some reason, Louie felt an overwhelming need to deposit this question in the Len Penzo dot Com mailbox:
Hey, Len! Do you know how many calories there are in a booger?
Heh. You don’t really expect me to bite on that one, do you?
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: stock photo
On AT&T returns over 13 years @3.5%. I’d point out that had one merely retained their currency as REAL money (gold) held in a cookie jar, they would have averaged around 9-10% in terms of currency units of today. (Goldprice.org).
I’m constantly amazed at the articles I read all suggesting stocks/bonds/TIPS combinations for retired, or near retirement, folks……and almost NONE of them mentions “What if I had simply saved my ‘money’ in the form of real money ?”
The same plan people worked for hundreds and thousands of years before banks came along with their interest schemes, followed by their fractional lending, followed by their printing press. Despite the heavy repression of the price of gold in currency units managed by the currency printers, the true nature of real money compared to the fake stuff manages to shine over time, and reveals how fake the ‘returns’ are in most ‘investments’ over time….and why gold should make up a significant portion of your savings going forward…..because we’re now approaching the end stage of how math works against the printing press.
Amen to this tnandy! I’ve been steadily buying silver and gold for 20 years. My stack gives me more financial security than anything else I have in my portfolio – and that includes real estate. The truth Wall St. doesn’t want you to know is that anybody who is not doing the same thing is a fool.
There is no doubt that finding and investing in the right stocks offers the potential for out-sized real returns you can’t get with gold and silver.
That being said, the mainstream media will never admit that, over time, a diligent saver of precious metals can build a solid nest egg without the risks that come with holding stocks. People who put their long-term savings into physical precious metals don’t have to worry about generating out-sized returns to overcome the effects of inflation — because gold and silver can’t be printed on a whim. And the fact that they have no counterparty risk is icing on the cake.
Hi Len,
I don’t care who you are. Nobody can justify a pension that pays $274,000 a month! And people wonder why so many Millennials think socialism is better than capitalism (not that I do, but it does make capitalism look really bad).
Have a great weekend!
Sara
The optics are terrible, Sara.
Andy points out that savings in PMs would have defeated banker’s stealth confiscation of fiat money savings. Same with PMs treated as investments.
I don’t buy traditional fiat money-denominated investments, so today’s “Question of the Week” gives me a bit of a problem: The word “yet” at the end of the last option, implying that the responder will do so in the future.
Hey, never say never, Dave!
Never!
Richard Nixon on TV back in the 70’s regarding inflation:
“Gas will NEVER be a dollar a gallon” (and visualize him shaking his head ‘no’, jowls flapping)
“Bread will NEVER be a dollar a loaf”.
I’d like to dig ole Tricky Dick up and take him shopping……….
Then what do you trade with for fiat money products? I finally get it RD! I use paper and plastic to trade for paper and plastic. Use my commodities to trade for commodities. Then I all I have to do is manage how much BS and Truth takes up my precious time. Oh I just heard the FED is going to buy foreign junk bonds. The idea is to hit the delete button and no one will notice. Its a giant orchard and the FED is pruning the economy. On that $274,000. Goes into a trust and feeds on itself. Trickles down to other investments and creates jobs. Did everyone that worked in Oz lose their jobs after he left? The wizard left his fortune? or his balloon would have never got off the ground. Enough for now think there is plenty of imagination to go around. Thanks for this site Len. Dont change a thing. Heard they were going to have blogs on the antique road show!
“On that $274,000. Goes into a trust and feeds on itself. Trickles down to other investments and creates jobs.”
LOL! Yes, one job for the lawyer who drew up the trust and one job for the money manager who skims his 2% off the top every year.
‘Merica!
“if a monetary reset isn’t implemented, we’ll remain stuck with what Ms. Howard calls “a slow stagnation death as the Fed eats the economy” characterized by: continued malinvestment and bailout-generated moral hazard.”
I think 0% interest rates also create moral hazard. All of these zombie companies can borrow as much as they want with no regard for whether they are using the money wisely or not.
That’s fair, Sam — it is certainly very close, although I don’t think it is quite the same as the “too big to fail” banks and other entities knowing that they can take incredibly reckless risks because they will always be bailed out if those bets fail.
I’ve asked this before and I’ll ask it again. Why does anyone slave away all day at a job to earn money when the Fed is handing out trillions to their crony friends and fellow bankers like its candy? How can this continue with hardly anyone protesting?
We live in interesting times, don’t we? The level of corruption we are witnessing at all levels of society now is gobsmacking — and it is all because our “money” is as corrupt as the day is long.
For my kids’ sake and sake of our nation, I pray every day that we can soon return to an honest monetary system that is based on real money, rather than debt.
The gov’t does not, cannot, and will not secure freedom and prosperity for anybody other than those who govern and their cronies.
I’m with you — but there are plenty of people out there who vehemently disagree with you, Cowpoke.
Yes CEOs of insurance companies too. Anyway, this whole thing has made me appreciate the frugality and health benefits and durability of good old beans. Pinto beans, red beans – who needs pork? Better for gut health too.
“who needs pork ?”
Exactly what my two little, but growing, feeder pigs say……when they aren’t saying “Eat mo chicken”……ahahahaaa
I have a healthy store of pintos, Dr. P. Love ’em!
By the way, speaking of pork … does anybody know when the McRib is coming back? 😉
(At least I think that’s pork.)
Think there is a you tube video on how to make your own McRib. You put hot dog and egg in a blender and cook in waffle iron. Then you can put them on the grill. Least thats what the lunch lady told me at work. Trade secrets are not safe in Penzonia! Think that sandwich costs 74 cents to make. If you get the right hotdogs they dont stick to the grill or the iron. Heard Mcdonald is getting into the investment buisness. You set up an account and your change goes to you buying their stock. Everytime you earn a share you get a free shake.
OMG, Duke … I was going to “admonish” you by saying “I do all the jokes around here” — but I can’t compete. You are too freaking funny (… and Tennessee Andy too)! 🤣
(That being said … I wouldn’t be surprised at all if that really is how Mickey D’s makes their McRibs. If true, I’m still going to eat them.)