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.
For most people on Main Street, the financial crisis rages on — just don’t tell that to the suits on Wall Street, where everything continues to be lollipops and rainbows. So let’s get right to this week’s commentary …
The greatest shortcoming of the human race is our inability to understand the exponential function.
— Albert A. Bartlett
Because gold is honest money, it is disliked by dishonest men.
Credits and Debits
Credit: Did you see this? The theme for the 2021 Davos conference is “The Great Reset.” No, really. At least I can say I’ve been proudly wearing my tin foil hat for the past decade. Now almost everybody seems to be wearing one — including the smart money guys.
Credit: You shouldn’t be surprised. As asset manager Keith Dicker notes, the effectiveness of Keynesian economic theory is over now that the world’s central banks have collectively cut interest rates to zero. But because the world’s policy makers continue to embrace Keynesian economic theory, Dicker says, “we should expect to see even more deficit spending and bailouts, even lower negative rates, and even more money printing to support credit markets.” Ya think?
Debit: People who say the Fed has everything under control need to explain how that can be when it took the Fed seven years to add $3.7 trillion to its balance sheet during and after the Great Financial Crisis of 2008 but only 10 months to add nearly another $3.7 trillion since the repo market broke last September. Does anybody else see a problem here? Anyone? Anyone?
Debit: Considering the Fed has shown that they will never be able to shrink its balance sheet again, it’s now painfully obvious to anyone who is paying attention that the law of exponents is beginning to catch up with all central banks. If you don’t believe me, the following graph should convince anybody — even those who aren’t very good with numbers:
Debit: It’s not just the Fed that’s plagued with that dreaded math problem. The US government has math troubles too, with debt-to-GDP at 130% — and that’s before the 55% decline in GDP expected this quarter. In fact, as Peter Schiff notes, US expenditures-to-revenue is so out of whack now that the Treasury just added $2 trillion to the National Debt in a period of 2 months and 2 days. Unfortunately, America’s debt engine is just getting warmed up.
Debit: By the way, the National Bureau of Economic Research finally declared on Monday that the US is officially in a recession. Heh. Better late than never I guess.
Debit: Of course, the soaring stock market belies the dismal economic data showing that year-over-year, US factory orders are down 22%, heavy truck sales are down 37%, and corporate bankruptcies are up 48%. Yes, investors are clearly displaying a total lack of situational awareness, but one could argue that they’ve still got nothing on this guy:
Credit: Despite all of the terrible economic news, the Nasdaq hit an all-time high this week. I know. By the way, the Dow and S&P have recovered a big chunk of what they lost after their earlier plunge too. But as financial analyst Fred Hickey warns, “the Fed’s (printing press) is causing these unimaginable market distortions.” As a result, he says that “markets are no longer recognizable.” Well … that’s one way to put it.
Debit: The stock market is so manic that, at one point, Hertz’ stock was up almost 10-fold after hitting a record low of 56 cents on May 26. Yes, that’s the same Hertz that declared bankruptcy on May 23rd. I guess these investors fail to understand that the owners of common stock shares are last in line for a share of the firm’s liquidated assets. Then again, the Fed has screwed up markets so badly, maybe that no longer matters.
Credit: For his part, asset manager Sven Henrich says, “The Fed is setting markets up for another crash. Why? Because they’ve set in motion a stock market mania we have not seen since the 2000 tech bubble — but this time while we’re still in a recession.”
BR478 (@Reutabega) June 5, 2020
Debit: You can bet the absurdity in the financial markets and endless central bank currency printing is why the former chairman of Morgan Stanley Asia — and Yale faculty member — Stephen Roach, believes that a crash in the dollar is coming and, as a result, “living standards are about to be squeezed as never before.” Too bad most Americans remain completely unaware of what’s coming.
Credit: I’ll let market analyst J. Johnson sum things up for this week: “Nothing can be done for a monetary system created to fail. Those who have prepared by buying physical precious metals are still way ahead of the game. What other asset can be held in hand and outside the currency makers’ game, that doesn’t have any counterparty risk?” Indeed, Mr. Johnson. Indeed. And if you don’t believe us, just ask a central banker … or not:
The Question of the Week
Last Week’s Poll Result
Have you ever filed for a personal or business bankruptcy?
- No (92%)
- Yes (8%)
More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that, roughly 1 in 12 of them have filed for bankruptcy at least once in their lives. I have never filed for bankruptcy — but I am married to a former bankruptcy paralegal!
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.
By the Numbers
Bankruptcy is typically a financial remedy of last-resort — and it affects all walks of life and all income levels. Here are some statistics for the year 2016 that shed a little more light on the topic:
24,114 Total number of business filings.
770,946 Total number of non-business filings.
46 Percentage of bankruptcies related to medical debt.
$30,000 Annual income of the average filer.
45 The median age of all people who file for bankruptcy.
19 Percentage of filers under age 34.
8 Percentage of filers over age 65.
14 Percentage of filers who earn more than $50,000 per year.
5 Percentage of filers with a graduate degree.
Source: The Balance
Useless News: The Daily Special
A Texan, a Russian, and a New Yorker go into a restaurant in London. The waiter walks up to their table and says, ”Excuse me, gentleman. The chef says if you wanted the steak it’s not available because there’s a shortage due to Mad Cow Disease.”
The Texan says, ”What’s a shortage?”
The Russian says, ”What’s a steak?”
The New Yorker says, ”What’s excuse me?”
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Other Useless News
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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
Tara had something she wanted to get off her chest this week, so she dropped this note into the Len Penzo dot Com Complaint Box:
Yeah, you’re full of hot air. Another blogger who thinks he’s a big shot and is going to tell the world how it is.
Let me assure you, Tara; the only big shot around here is the Honeybee, and she reminds me of how full of it I am every day.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: public domain