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.
Let’s get right to this week’s financial commentary …
Corrupt money leads to a corrupt society.
A republic, if you can keep it.
— Ben Franklin
Credits and Debits
Debit: Did you see this? After a decade of relentless central bank money printing, global debt-to-GDP is projected to swell to a record 265% this year. And if you think that’s bad, one ratings agency is saying it expects insolvencies and defaults to rise to levels not seen since the 2009 crisis. But I’m sure the major central banks will have something to say about that in the form of low interest rates and more QE. With their currencies now tied to asset performance, they really don’t have a choice.
Credit: Jim Rogers is worried about the global sea of red ink too; the legendary 78-year-old investor says the world is buried under such an unprecedented mountain of debt that history is clear on what’s coming next: “the worst economic crisis of my lifetime.” How? Either via a massive default, or destruction of the currencies the debt is denominated in. (Psst. Since our debt-based monetary system can’t withstand the deflation that would be unleashed with the former, it’ll be the latter.)
Credit: Hey … if Rogers is correct about what’s waiting around the corner, then what’s an average Joe supposed to do? As many might expect, Rogers recommends protecting your wealth with physical precious metals and select commodity investments. In fact, as measured by the S&P commodities index, commodities are the cheapest they’ve ever been versus the general stock market in more than 50 years. It’s true … see for yourself:
Credit: Meanwhile, despite the current US election uncertainty, the stock market continues to hover near all-time highs. Imagine that.
With stocks up big on presumed Biden win; then up big on presumed Trump win; then up big again on presumed Biden win, thought itd be a good time to revisit this.
Luke Gromen (@LukeGromen) November 4, 2020
Debit: So … how crazy is the current stock market? It’s this crazy: Excluding the US and China, four companies — Apple, Amazon, Microsoft, and Google — have a combined market cap that’s more than the GDP of every country in the world. Here’s more inanity: Despite having just 5% of the revenue, Tesla recently surpassed Walmart to become the ninth-largest stock in America. No, really. And if you think that’s absurd, look at this …
Credit: Unfortunately, Stephen Lendman points out that current “stock market valuations are at levels that suggest double-digit earnings growth ahead — despite evidence indicating protracted economic depression, mass unemployment, and reduced business- and consumer-spending.” Okay. Just don’t tell that to all of the Wall Street consultants and television talking heads on CNBC who continue to advise everyone that they should keep buying the dips.
Credit: Frankly, there’s a grain of truth in the “buy the dip” mentality. As economist Lance Roberts notes, “In an economy supported by debt, rates must remain low. Therefore, the Fed has no choice but to monetize as much debt issuance as is needed to keep rates from rising.” Of course, all that freshly-printed Fed funny money has to go somewhere — and a lot of it has been going into the stock market.
Fed: We decided to leave interest rates at zero because if interest rates ever rose substantially the global financial system would collapse
StockCats (@StockCats) November 5, 2020
Credit: Speaking of the economy, Treasury and Risk recently opined that, “It’s hard to overstate the degree to which psychology drives an economy’s shift to deflation. When the prevailing economic mood changes from optimism to pessimism, creditors, debtors, investors, producers, and consumers change their orientation from expansion to conservation, resulting in slower money velocity.” Oh … and for the shy kids in the back, “money velocity” is a measure of how quickly money changes hands.
Debit: Believe it or not, money velocity has never been as low as it is today — which is one reason why inflation, while high, has been kept under relative control to this point even though the central banks’ printing presses are stuck in overdrive. In fact, many economists believe hyperinflation is impossible while the current velocity of money continues to be restrained. Unlike this guy:
Debit: The trouble with that line of thought is that hyperinflation isn’t a monetary phenomenon — it’s a psychological one. So while the Fed will continue to print as much currency as required to monetize the debt and stave off deflation, there is a limit to how many debauched dollars can be conjured out of thin air before the world starts rejecting them as payment for their exports. In other words: We’re sitting on a ticking time bomb. The big question is: How much time do we have left?
Ronnie Stoeferle (@RonStoeferle) November 6, 2020
The Question of the Week
Last Week’s Poll Results
What is your credit score?
- 800+ (58%)
- 740 – 799 (23%)
- 670 – 739 (8%)
- I’m not sure (7%)
- Less than 670 (3%)
More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that — not surprisingly — almost 3 in 5 of them have exceptional credit in the eyes of the major credit rating agencies. Remember, there is no excuse for not knowing your credit score — best of all, you can get it free of charge from any number of places. If you are unsure where to go, simply search for the term “free credit score” using your favorite Internet search engine for options.
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
If you’re thinking about quitting cable, you’re not alone — six million Americans will cut the cord this year. With that in mind, here are the current monthly costs for some of the more popular streaming service options:
$5.99 Hulu (basic service without live TV)
$8.99 Netflix (basic service)
$11.99 Hulu (premium service without live TV)
$17.99 Netflix (premium service)
$54.99 Hulu (basic service with live TV)
$60.99 Hulu (premium service with live TV)
Useless News: Tailgate Tale
The light turned yellow, just in front of him. He did the right thing and stopped at the crosswalk, even though he could have beaten the red light by accelerating through the intersection.
Meanwhile, the tailgating-woman behind him was furious and honked her horn, screaming in frustration, as she missed her chance to get through the intersection. As she was still in mid-rant, she heard a tap on her window and looked up into the face of a very serious police officer.
The officer ordered her to exit her car with her hands up. He took her to the police station where she was searched, fingerprinted, photographed and placed in a holding cell.
After a couple of hours, a policeman approached the cell and opened the door. She was escorted back to the booking desk where the arresting officer was waiting with her personal effects.
He said, “I’m very sorry for this mistake, ma’am. You see, I pulled up behind your car while you were blowing your horn, giving the guy in front of you the finger and cursing at him. I noticed the ‘What Would Jesus Do’ bumper sticker, the ‘Choose Life’ license plate holder, the ‘Follow Me to Sunday-School’ bumper sticker, and the chrome-plated Christian fish emblem on the trunk, so naturally I assumed you had stolen the car.”
(h/t: RD Blakeslee)
More 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
After reading my article explaining why expensive luxury cars don’t impress smart people, pete d, who drives a brand new Mercedes, had this to say:
I don’t understand why people crow about driving a 30-year-old Golf.
Why? Because they aren’t driving a brand new Mercedes.
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