Black Coffee: Iron Fist, Glass Jaw

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 …

It ain’t about how hard you can hit. It’s about how hard you can get hit and keep moving forward.

— Anonymous

Credits and Debits

Debit: Did you see this? Rising crude oil prices are bad enough, but now the cost of cooking oil is beginning to soar too, with canola prices are at record highs with global stockpiles at a four-year low. Last week Paris canola oil futures surged nearly 6% – that was the largest intraday gain since 2009. The price increase was a bit more subdued on this side of the pond, as canola futures climbed a relatively paltry 1.5%. If only the price increases for other prices were so tame, relatively speaking.

Debit: Of course, nobody who has been paying attention is surprised at rising prices anymore. In fact, the Bureau of Labor Statistics’ (BLS) December Consumer Price Index (CPI) showed prices rose at 7.0% year-over-year (YoY) — that marks the fastest YoY increase since 1982. Although when one considers how manipulated the CPI figures are, you can bet the actual inflation rate is probably double that number. If not more …

Credit: In other news, this week macroeconomist Jim Rickards complained that, “It’s difficult to tell if the supply chain is being intentionally sabotaged or whether it’s just collapsing under its own weight; possibly both. For 30 years, the goal of supply chain management has been efficiency, inventory and latency. That’s fine in the short run, but it results in a system that’s brittle and has no tolerance for even small disruptions.” Translation: Just-in-time delivery is a wonderful innovation that keeps prices low as long as there are absolutely zero hiccups. Otherwise, it’s a disaster. That being said …

Credit: Meanwhile, investment advisor Lance Roberts points out that “share buybacks hit a record last year as companies rushed to improve bottom-line EPS reports. More than 40% of the S&P 500’s total return since 2011 came from share buybacks.” But wait … it gets better. Roberts goes on to say that, “Over the last few years they’ve accounted for nearly 100% of the net buying in the market. So, if buybacks accounted for a large portion of the net purchases in the equity market, what happens if those buybacks reverse?” Hey … it’s a good question. Let’s go to the tape:

Credit: Needless to say, stocks seem to only go in one direction now. With the NASDAQ up 1500%, S&P 500 up 600% and the Dow up 500% since 2008, macro analyst Egon VonGreyerz says that, “Investors believe they’re in Shangri-La where markets only go up and they can live in eternal bliss. But few understand that the $180 trillion increase in global debt since 2006 is what has fueled investment markets.” I’m sure that will come as quite a shock to a lot of people who mistakenly believe their bulging retirement account balances are due to their investing prowess.

Credit: The sad truth is, these gargantuan asset bubbles in the stock, bond and housing markets are solely due to the Fed who, as the inimitable MN Gordon reminded us this week, can usually be found “cleaning up messes of their own making.” He also points out that when quantitative easing (QE) began 13 years ago, the Fed’s balance sheet was $800 billion, while today it’s more than ten times higher at $8.7 trillion. Curiously, the only people who seem to think that isn’t a problem are the central bankers who are responsible for running up that tab. Imagine that.

Debit: By the way, Mr. Gordon also points out that, if there is any lesson that future economists must take away from the Fed’s financial follies, it’s this: “Once the QE genie is out of the bottle it’s impossible to put back without triggering disaster. The economy and financial markets have adjusted to the abundance of cheap credit; businesses, government, and individuals depend on it. Take it away and the whole debt edifice implodes.” Ah, yes. But these were always the eventual consequences of this Fed-induced moral hazard.

Credit: Obviously, as Alasdair Macleod observed this week, “the Fed is reluctant to acknowledge the argument for significantly higher interest rates, and risk losing control over them. And it is in this context that reverse repos have come to the Fed’s partial rescue by suppressing statistically the true rate of growth in currency and credit.” Remember, this is the same Fed that has managed to convince a lot of otherwise-smart people that 2% inflation is healthy for an economy – even though it results in the dollar losing half its purchasing power in 35 years.

Credit: The other day, entrepreneur Frank Giustra asked a great question: “So why does the Fed lie and why does the market believe them?” He then provided the answer: “Quite simply, the truth would create a panic that nobody wants; they’re in an inescapable trap and they know it. As for Wall Street, they’re happy encouraging easy money policy to keep the party going. So the Fed pretends. As a result, we’re living in a collective delusion of money and markets, aided and abetted by a loosely-aligned club of players.” Well … “players” is one word to describe them; I prefer “criminals.” But, hey … that’s just me.

Debit: Unfortunately for all of us, the Fed’s iron-fisted insistence on keeping that “collective delusion” intact with their refusal to raise rates will be at the expense of the US dollar and – more critically – those who hold dollar-denominated paper assets. In other words: most Americans. As a result, the Fed is, to quote an anonymous commenter, “nothing but a worthless body overseeing a slow moving collapse, hoping to extend life support as long as possible.” Indeed. Oh … and speaking of extending life support:

Debit: The coming demise of the “Almighty Dollar” is the inevitable end to a long journey that began in 1910, when a powerful cabal of bankers and politicians plotted on Jekyll Island to capture the US monetary system – a plan that ultimately came to fruition when the Fed was founded in 1913. VonGreyerz reminds us that since then, “the bankers have helped themselves from the self-filling honeypot, driving US Federal debt from $1 billion to $30 trillion.” Yes, they have. But now the Fed is in a terrible bind; one that will eventually reveal to an insouciant public just how corrupt our monetary system really is.

By the Numbers

With millions of Americans facing financial insecurity during their golden years, is the nation on the brink of a retirement crisis? Here are some numbers related to Americans’ retirement situation:

$191,659 Total retirement funds of the average American retiree.

30% Percentage of retirees who say they have zero savings.

65% Percentage of retirees who say they are not financially secure.

45% Percentage of retirees who say they waited too long to begin saving for retirement.

10% Percentage of retirees who have taken a part-time job.

73% Among retirees who have a part-time job, the percentage who say they did so to cover basic expenses.

43% Percentage of retirees who say they struggle to pay their bills.

27% Percentage of retirees who say they regret retiring when they did.

Source: Clever.com

The Question of the Week

[poll id="407"]

Last Week’s Poll Result

What is the most money you’ve ever spent for your primary vehicle?

• Less than $30,000 (34%)
• Less than $20,000 (29%)
• Less than $40,000 (18%)
• $40,000 or more (16%)
• Less than $10,000 (4%)

More than 2100 Len Penzo dot Com readers answered last week’s poll question and it turns out that 1 in 3 say they’ve spent at least $30,000 on their primary vehicle. With the average used car price today approaching that same figure (!), I guess that shouldn’t be too surprising.

This week’s question was submitted by reader Frank.

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: True Story

Prologue: The other day I stumbled upon this little story about my daughter, Nina, that I shared in the April 27, 2013 edition of Black Coffee. Keep in mind while reading this old story that, although Nina is 22-years-old today, at the time Daddy’s Little Girl was just beginning that awkward transition into her teen years. Here’s what I wrote:

***

Last night at the dinner table, Nina was lamenting why I wouldn’t drop her and her girlfriend off at Disneyland this weekend for a day of unsupervised fun.

“Because you’re just 13, that’s why!” I said.

“Well, when will I be able to go to Disneyland with my friends?”

“I think 16 is a reasonable age.”

Of course, Nina wasn’t impressed with that answer. At all.

“What?” she complained. “But nothing bad is going to happen to us, Dad — Disneyland is the happiest place on Earth!”

Uh huh. Don’t you just love that counter-argument?

Anyway, our back-and-forth continued for another few minutes. Oh, it was an amusing exchange for a while — but the dialog eventually became repetitive, so I decided to end the conversation.

“That’s enough, Nina! If you don’t drop this right now, I’m not going to let you roam the park with your friends until you’re 17. What do you think of that!”

“That’s ridiculous!” she protested.

Okay … make it 18!”

“Eighteen!!!”

And with that, the war was on! In one final — but futile — blaze of glory, my daughter battled, begged, pleaded, whined, and cajoled for another couple of minutes.

Unfortunately for Nina, this time her incessant tirade really cost her: Now she can’t visit Disneyland with her girlfriend until she’s 45.

That’ll teach her to argue with me.

***

Epilogue: By the way, earlier this week I shared this via email with Nina’s grandpa. A couple minutes later he sent back this reply: “I wonder if she’s still mad that she can’t go to Disneyland for another 23 years?”

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 (1.89 pages/visit)
2. Saskatchewan (1.80)
3. Ontario (1.73)
4. Manitoba (1.69)
5. Yukon (1.67)

9. Quebec (1.51)
10. British Columbia (1.43)
11. Prince Edward Island (1.40)
12. Newfoundland & Labrador (1.32)
13. Nova Scotia (1.21)

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 Nova Scotia tundra) — please don’t forget to:

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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

After reading my article highlighting 14 reasons why third-party monitored home alarm systems are for suckers, reader Paul shared his preferred alternative:

I use (very loud) $10 door alarms, a dog, and a .357.

Me too. In that order — assuming I’m in a good mood.

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