{"id":31571,"date":"2015-06-06T09:44:37","date_gmt":"2015-06-06T16:44:37","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=31571"},"modified":"2020-02-22T17:33:57","modified_gmt":"2020-02-23T01:33:57","slug":"black-coffee-this-edition-brought-to-you-by-the-letters-m-and-b","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id31571-black-coffee-this-edition-brought-to-you-by-the-letters-m-and-b.html","title":{"rendered":"Black Coffee: This Edition Brought to You by the Letters M and B"},"content":{"rendered":"

\"\"<\/a>It’s time to sit back, relax and enjoy a little joe<\/em> …<\/p>\n

I hope everybody had a great week!<\/p>\n

Okay, off we go …<\/p>\n

Credits and Debits<\/strong><\/p>\n

Debit:<\/strong><\/span> Let’s face it, folks: Greece is broke<\/a>. In fact, Greece is so broke they couldn’t scrape up enough spare euros on Friday to make a scheduled 300 million (with an “M”) euro payment to the IMF. That’s especially troubling considering Greece owes more than 320 billion (with a “B”) euros overall.<\/p>\n

Credit:<\/strong><\/span> As the old saying goes: If you owe the bank 1 million euros (with an “M”), then YOU<\/em> have a problem — however, if you owe the bank<\/a> 1 billion euros (with a “B”), then the BANK<\/em> has a problem.<\/p>\n

Debit:<\/strong><\/span> So it should come as no surprise that the bankers are now bending rules<\/a> to pretend Greece isn’t<\/em> insolvent. After all, the fallout from an official default would instantly destroy the European Central Bank’s financial charade — and perhaps, eventually, the ECB itself.<\/p>\n

Debit:<\/strong><\/span> Even so, you can bet the bankers won’t continue bending the rules forever. Especially since EU regulators gave 11 countries just two months to adopt bank “bail-in” rules<\/a> designed to hose depositors. Hey, somebody<\/em> has to pay for this — it just won’t be the banks.<\/p>\n

Credit:<\/strong><\/span> In the good old days, banks that made poor lending decisions paid the price<\/a> for those poor choices by eating the losses and — if the losses were big enough — going out of business. No, really.<\/p>\n

Credit:<\/strong><\/span> The Lone Star State has clearly lost confidence in the banking system. They’re now considering an official Texas Bullion Depository<\/a> to store its gold, including $1 billion (with a “B”) in gold bars housed at a New York bank owned by the University of Texas Investment Management Co.<\/p>\n

Credit:<\/strong><\/span> Of course, more people lose faith in our economic system every day — which is understandable since today’s central bank stewards naively believe wealth is generated by a printing press<\/a>, rather than productive labor.<\/p>\n

Debit:<\/strong><\/span> Anyone wanting proof that money printing doesn’t create wealth need look no farther than last quarter’s US GDP figure<\/a>, which was recently revised downward to a negative<\/em> 0.7% — or this Zimbabwe food market back in 2008:<\/p>\n

\"\"<\/a>

Yes, the “M” on those price tags stands for “million.”<\/p><\/div>\n

Credit:<\/strong><\/span> Then again, it ain’t all bad in the US. According to the Bureau of Labor Statistics, last month the nation experienced its biggest hiring wave since December; in fact, more than 280,000<\/a> new jobs were created. Woo hoo!<\/p>\n

Debit:<\/strong><\/span> Unfortunately, two out of every three new positions were the low-paying<\/a> variety: jobs such as waiters, retail clerks, hospital orderlies, and temporary help. I’m sure if they just increase the minimum wage to $15 per hour everything will be fine.<\/p>\n

Debit:<\/strong><\/span> But wait — if you look closer at the data, there’s more bad news: the numbers don’t add up<\/a> in the face of declining productivity figures. Well, unless, as Zero Hedge noted, “companies have, incredibly, forgotten how to profitably project and conduct business.” Right.<\/p>\n

Debit:<\/strong><\/span> Did you see this? In a bit of poorly-executed satire<\/a>, this week the Wall Street Journal wrote an open letter to “stingy American consumers” asking why they’re not spending more. I know.<\/p>\n

Debit:<\/strong><\/span> I guess the Journal didn’t read the latest Fed report that found more American families than ever are facing financial catastrophe<\/a>. How bad is it? Well, 47% don’t have enough spare cash on hand to cover an emergency expense of just $400. Yikes.<\/p>\n

Debit:<\/strong><\/span> Just wait until those folks find out that dozens of health insurers selling Obamacare plans in 2016 are asking for huge premium increases<\/a> — some as large as 30%. I guess that means we’ll all finally get that annual $2500 decrease<\/a> we were promised in 2017. Or not.<\/p>\n

Debit:<\/strong><\/span> In other news, it was announced this week that the widely-anticipated Ferrari IPO<\/a> was delayed until later this year. At least Ferrari is profitable — unlike 78% of all companies<\/a> that have<\/em> put out IPOs this year. That’s worse than during the height of the Dot Com bubble.<\/p>\n

Credit:<\/strong><\/span> And finally … Remember last week when I mentioned China’s Shenzhen Composite stock index was up 100% since January 1st<\/em>? Well, it climbed another 14% this week — so it’s now up more than 114%<\/a> year-to-date. That kind of gives a new meaning to the term “bull market,” don’t you think?<\/p>\n

By the Numbers<\/strong><\/p>\n

Bubbles? What bubbles? Here are more stunning figures for China’s hyperbolic stock markets:<\/p>\n

1<\/strong><\/span><\/span> Current rank of the Shenzhen Composite among the world’s top performing stock indices.<\/p>\n

191%<\/strong><\/span><\/span> Annual return of the Shenzhen Composite index at the closing bell on June 5.<\/p>\n

54%<\/strong><\/span><\/span> Best all-time annual return for the S&P 500. (1933)<\/p>\n

$29,000,000,000<\/strong><\/span><\/span> IPO money raised by companies in Chinese stock markets this year.<\/p>\n

$15,000,000,000<\/strong><\/span><\/span> IPO money raised by US companies in 2015.<\/p>\n

2011<\/strong><\/span><\/span> Last year that China led the US in IPO value through early June.<\/p>\n

15.4<\/strong><\/span><\/span> Historic long-term price-to-earnings (P\/E) ratio of the S&P 500.<\/p>\n

21.5<\/strong><\/span><\/span> Current P\/E of the S&P 500. (That’s 40% above the historic average.)<\/p>\n

63<\/strong><\/span><\/span> Current P\/E of the Shenzhen Composite Index.<\/p>\n

Source: Wall Street Journal<\/a><\/em><\/p>\n

Last Week’s Poll Results<\/strong><\/p>\n

Do you think the housing market where you live is in a bubble?<\/p>\n