Black Coffee: A Lack of Financial Horse Sense

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 had a terrific week. With the hardest part of it over, let’s get right to this week’s commentary …

Mules have more horse sense than horses. They know when to stop eating — and they know when to stop working.

— Harry Truman

The castle gates will always open for gold-laden donkeys.

— Russian proverb

Credits and Debits

Credit: Did you see this? The S&P 500 has set new highs on 41% of all trading days in the third quarter — that’s the highest rate since the first quarter of 1998. It’s also been exactly 218 trading days since the S&P 500 experienced a daily decline of at least 5%. Hey … does anybody remember when markets weren’t juiced by central bank liquidity, and stocks used to move up and down? Pepperidge Farms remembers.

Credit: Maybe the soaring stock market is why, amidst a historic labor shortage, workers heading into their 60s have had enough. Indeed, the percentage of survey respondents who say they don’t want to work past the age of 62 rose from 50% last year to 52% today; at the same time, the percentage of workers expecting to be employed when they’re 67 fell, from 34.1% to 32.4%. Until then, they’ll just keep buying the dip.

Credit: Frankly, it shouldn’t surprise anyone that the same survey does indeed note that some workers are rethinking their future because they have ‘bigger nest eggs’ thanks to ‘exuberant financial markets.’ Apparently, they aren’t concerned with the declining purchasing power of their currency, or see the connection between higher stock prices and the debauched dollars that make up their nest eggs — but maybe they should.

Debit: Speaking of debauched dollars, the latest inflation report showed that on a year-over-year (YoY) basis headline CPI rose 5.3% last month. That’s the 15th straight monthly rise in consumer prices and the fourth straight month above 5% on a YoY basis. Apparently, “transitory” has a different meaning these days. Then again, that’s par for the course now.

Debit: While most existing home owners are probably feeling wealthier as home prices continue their rocket trip to the moon, the trouble is US home prices relative to household incomes are higher than they’ve ever been — yes, even higher than the insane heights of the last housing bubble in 2008 — which begs the question: How much higher can prices realistically rise?

Debit: Then again, homes prices aren’t rising in a vacuum. After surging 7.8% in July, US producer prices increased sharply again in August, leading to the biggest annual gain in nearly 11 years. In the last 12 months, the PPI has accelerated 8.3% — that’s the biggest year-on-year increase since November 2010 when the series was modified. Why was it modified, you ask? Well … to hide actual inflation, of course.

Debit: Meanwhile, Congressional Democrats are still arguing over how high taxes are going to be raised to “pay” for their proposed $3.5 trillion infrastructure bill pork-laden boondoggle — which is quite comical when you consider that the Fed has had no qualms printing as much currency as the government needs to keep the massive federal bureaucracy running for more than a decade now.

Credit: Of course, as Famous Dave at JSMineset observed earlier this week, “If the world could become prosperous simply by allowing governments to deliver freshly-printed currency to the public, then nobody would have ever had to toil in the factories or fields during the last 5000 years.” Uh huh. Even so, millions of statists out there still believe that wealth generation and social prosperity comes from the government rather than the private sector; a notion that’s as crazy as believing a horse can play baseball. Oh, wait …

Debit: In other news, the fit may finally be hitting the proverbial shan, as China’s second largest property developer, Evergrande, technically defaulted on its bond obligations this week. The default is so massive, it’s being called China’s “Lehman Brothers Moment.” We’ll see. For now, the only question worried creditors want to know is how much of their hard-earned cash will they get back after the dust finally settles. Here’s a hint, folks: not much.

Debit: Keep in mind, folks, that Evergrande has more than $300 billion in debt obligations — that’s more debt than many first-world nations owe — which is why some experts are saying this could be the quake that topples the entire global financial system because the vast majority of that debt is not only dollar-denominated, but also held by creditors outside of China. Then again, $300 billion is a pu pu platter compared to the main dish that we’re all going to be served. Well … some day.

Credit: In 1978 financial historian, Charles Kindleberger, pointed out in his book Manias, Panics and Crashes, that centuries of history revealed that there was a major financial crisis roughly every decade. Today his observation still holds, as such crises have continued to erupt like clockwork every decade; at least five so far. In the meantime …

Credit: It’s no coincidence that ever since the dollar’s anchor to the yellow metal was broken in 1971, each subsequent crisis has been been bigger than the previous one. As macroeconomist and legendary financial guru Jim Sinclair reminded us again this week, unfortunately, “fiat currency, like critter scat, will always be with us — which is why it’s important to look at it only as a method for exchanging goods and services, rather than a long term storehouse of purchasing power.” Indeed. Got gold?

By the Numbers

Last week we featured the the US states with the ten highest credit card delinquency rates (Nevada was the worst, at almost 14%); so it’s only fair that this week we highlight the states with the ten lowest delinquency rates:

10 Idaho (delinquency rate: 7.39%)

9 South Dakota (7.23%)

8 Kansas (6.92%)

7 Maine (6.85%)

6 Minnesota (6.65%)

5 Washington (6.57)

4 Vermont (6.55%)

3 Utah (6.49%)

2 North Dakota (6.40%)

1 Wisconsin (6.29%)

Source: Self

The Question of the Week

[poll id="390"]

Last Week’s Poll Result

How often are you stocking up on products when they go on sale to reduce inflation impacts?

• Frequently (42%)
• Occasionally (30%)
• Rarely (18%)
• Never (10%)

More than 2300 Len Penzo dot Com readers answered last week’s poll question and it turns out that almost 3 in 4 of you are taking advantage of sales at least occasionally to reduce wallet impacts of future inflation. As for me, I’m doing it as often as I can; for example, buying canned vegetables by the case and stocking up on coffee when it is offered at a discount.

Thanks to Leasi, who submitted this week’s question! 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.

Useless News: Daylight Robbery

Two lawyers were in a crowded bank when a gang of three armed robbers burst into the lobby …

While one of the robbers began taking the money from the tellers, the other two proceeded to take the wallets, cell phones, watches, and other valuables from the customers.

In the midst of all the chaos, the first lawyer jammed something into his friend’s pocket.

Without looking down, the second lawyer whispered to his friend, “What in the world did you just put into my pocket?”

The first lawyer replied, “It’s the $100 I owe you.”

(h/t: Don R.)

Yet More 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 (2.05 pages/visit)
2. Manitoba (1.97)
3. Saskatchewan (1.88)
4. Newfoundland & Labrador (1.83)
5. Northwest Territories (1.67)

9. Quebec (1.52)
10. Prince Edward Island (1.49)
11. Ontario (1.33)
12. British Columbia (1.27)
13. Yukon (1.25)

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 Yukon tundra) — please don’t forget to:

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(The Best of) 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

After reading my article on 18 tips to consider before buying home, auto and life insurance, Sariah shared this story:

“My brother bought an expensive new car and my parents reminded him to also purchase auto insurance. But he didn’t get it and two days later he crashed his car into a tree!”

Was the car a Mercedes? If so, now your brother knows exactly how a Mercedes bends.

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