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.
Well… another busy week is behind us. So with that in mind, let’s get this party started!
With bombs and fires, you only get one mistake.
– Red Adair
Credits and Debits
Credit: Did you see this? Multi-millionaire investor Kevin O’Leary shared the advice he gives his children to keep them on track toward a healthy retirement nest egg. The rule: Take 15% of every dollar you receive, whether it’s from your paychecks, side hustles, or birthday money from grandma, and put it directly into the market. He says, “If you make the average salary of $68,000 a year, and you do this your entire life, you’ll end up a millionaire in retirement at 65.” He’s right, you know. For example, an annual contribution of 15% ($10,200) that generates an average return of 7%, would leave $2.2 million in your portfolio by the time you retire. It all sounds so easy, doesn’t it? Especially if your household has two earners… or not.
Credit: As Yahoo!Finance points out, the 15% rule may not work for everyone – especially for people earning $68,000 or less per year. Applying the 15% rule on annual income of $68,000 requires investing roughly $850 per month. The fact is, for many people, expecting them to have $850 available after paying their living expenses, debt payments, a little mad money, and any other financial obligations is an unrealistic expectation. That being said, if you think they have problems, well…
Scott Adams – Dilbert
Debit: In other news, after Nike’s stock traded this summer around levels investors had not seen in more than a decade, the company is now about to suffer another symbolic blow: Nike is going to be removed from the S&P 100 due to years of chronic underperformance. In fact, the company has lost $200 billion in market value since 2015. As for the cause of Nike’s woes, well… there are more than a few, including numerous marketing blunders; the first of which happened just prior to Nike’s current 11-year business decline. We’ll leave the specifics of that one, along with Nike’s many other self-inflicted advertising bungles over the years, as an exercise for the student.
Debit: Last month there was another milestone that hadn’t been breached in more than a decade; this one, relating to the housing market. It turns out that, the supply of existing homes for sale in the US is at its highest point in 10 years. Despite this fact, the median sales price rose 1.6% from a year ago to $429,100, extending a streak of annual price increases that began more than three years ago. The big question is: What does the market seem to know that others don’t? Remember… markets aren’t infallible. But that’s okay; because these guys aren’t either…
Debit: Speaking of rising prices, my grocery bill has more than doubled since 2020. The good news is that, according to federal government bureaucrats, inflation is running at 3.4% year-over-year. So there’s that. As for shopping situation over in Europe, well… it seems to have better perks.
Debit: Then there’s this: For the first time in history, the US national average diesel price has surpassed $6.00 per gallon – and in some parts of California it has reached $9.99. You know what that means: It’s almost time to change the pump prices to quarter-gallons. And here’s something else that needs changing…
Credit: Since the US dollar’s (USD) anchor to gold was broken in 1971, Fed policy has slowly driven homebuyers from housing market by escalating real estate speculation with loose monetary policy. The proof is in the pudding, such that the median home price to median personal income ratio is currently 9.5 – compared to 5.1 in 1970. As macro analyst David Jensen notes, since 1971, incomes have failed to “keep up with escalating cost of living prices – especially given the continually redefined lower CPI (Consumer Price Index) measures issued by” the government. Ya think?
h/t: rd.com
Debit: The incessant expansion of the US currency supply has resulted in a staggering 95% loss of the dollar’s purchasing power since 1913, with nearly half of its purchasing power wiped out in the last 25 years. And if you think that is alarming, even more mind-boggling is the fact that the USD has lost 22% of its purchasing power in just the last six years alone. No, really. If this were 1926, he said, we would be having this conversation about the pound sterling as the world’s reserve currency, the obvious place of safety. Britain was bankrupt fifty years later. In other words: We’re dealing with a ticking time bomb. Let’s hope somebody out there knows how to defuse it …
Debit: The fact is, whether its the Spanish silver dollar (piece of eight), the Dutch guilder, the French franc, or the British pound sterling, history shows that global reserve currency status has never been permanent, and that any unwinding is painful for everybody – not just the country with that exorbitant privilege – because when any reserve currency runs into trouble, everyone around the world who is holding it inherits the problem.
(h/t: @thebubblebubble)
Gary Larson – The Far Side
Credit: Thankfully, there is still some good news for those of us whose retirement savings are denominated in USD: Our wealth can be insured from the collapsing purchasing power of the USD by holding physical precious metals. Got gold?
By the Numbers
With nine million Americans having at least one credit account that is either delinquent or in forbearance, the personal-finance company WalletHub today released its latest report on the states with the most – and least – people in financial distress.
50 Kansas (least distressed)
49 Louisiana
48 Florida
47 Texas
46 South Carolina
5 Michigan
4 Vermont
3 Hawaii
2 Rhode Island
1 Maine
Source: Wallet Hub
Last Week’s Poll Results
Which of these celebrations do you enjoy the most?
- Christmas 61%
- Thanksgiving 35 %
- Halloween 4%
More than 2700 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 25 of you prefer Halloween to both Thanksgiving and Christmas. I actually thought that figure would be a bit higher, but what do I know? As for me, there’s something about Thanksgiving that makes it the top holiday for me. Maybe it’s because of the cherry pie.
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.
The Question of the Week
Useless News: Good Collateral
An old Native American man had a need to borrow $500, so he went to his local bank and asked to speak with the loan officer.
The banker welcomed the old man and then told him that a loan application form would need to be completed first. The banker then took a form from his desk drawer and began questioning the old man.
“You said you need $500. What exactly are you going to do with the money?”
“Buy silver, make jewelry, then sell it,” the Native American responded.
“Okay. And what have you got for collateral?” asked the banker.
“Don’t know collateral,” replied the old man.
“Well… collateral is something of value that you provide us with to cover the cost of the loan if you fail to repay,” said the banker. “For instance, have you got any vehicles?”
“Yes; a ’79 Chevy pickup,” replied the old man.
The banker shook his head, “I’m very sorry but, unfortunately, that simply won’t do. How about livestock?”
“I have a horse back on the reservation,” replied the old man.
“How old is it?” the banker enquired.
“Don’t know; has no teeth,” replied the old man.
The conversation went on like this for a while, but eventually the banker decided to grant the $500 loan to the old man.
Several weeks later the old man returned to the bank.
He pulled out a very large roll of $100 bills from his pocket. “Here to pay,” he said.
He then handed the banker five $100 bills to repay his loan.
“Business has been good I can see!” said the banker. “So … what are you going to do with the rest of that money?”
“Keep it close to me,” the old man responded.
“But that’s a lot of cash. Why don’t you just deposit it in my bank?” the banker enquired.
“Don’t know deposit,” replied the old man.
“Well,” the banker responded, “you just put the money in our bank and we will take good care of it for you. Whenever you want to use some of it, you can withdraw it.”
The old man then leaned across the desk, looked the banker in the eye, and asked, “What you got for collateral?”
(h/t: Cowpoke)
Squirrel Cam
That’s definitely not a squirrel… .
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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
This week Jill dropped me a nice note that started off with this comment:
Hi, Len! I want you to know that I found your wonderful blog by mistake.
Welcome to Misfit Island. That’s how most of us got here — including me!
If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀
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Photo Credit: public domain