{"id":37934,"date":"2016-06-25T05:15:25","date_gmt":"2016-06-25T12:15:25","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=37934"},"modified":"2022-05-27T13:25:18","modified_gmt":"2022-05-27T20:25:18","slug":"black-coffee-can-you-hear-me-now","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id37934-black-coffee-can-you-hear-me-now.html","title":{"rendered":"Black Coffee: Can You Hear Me Now?"},"content":{"rendered":"

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

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.<\/p>\n

Off we go …<\/p>\n

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

Credit:<\/strong><\/span> On Thursday, more than 17.4 million people in Britain bucked expectations — and the prevailing conventional “wisdom” — by voting to leave the European Union<\/a>. They did it in convincing fashion too; the margin was 52% to 48%.<\/p>\n

Credit:<\/strong><\/span> The final “Brexit” results saw the pound sterling plummet to a 31-year low against the US dollar and the gold price skyrocket<\/a> — at one point, the yellow metal was up $100 — almost 8% — before gradually falling back a bit.<\/p>\n

Debit:<\/strong><\/span> The market turmoil hit financial sector stocks<\/a> particularly hard. Deutsche Bank, whose beleaguered stock was already reeling before the Brexit vote, saw its share price plunge 17.5% on Friday. (Yes, the decimal is in the right spot.) Keep a close eye on Deutsche Bank because if it goes belly-up there will be lots<\/em> of collateral damage.<\/p>\n

Debit:<\/strong><\/span> Deutsche Bank wasn’t alone — stock indices around the world took a beating<\/a> on Friday: the Nikkei plunged 7.92%, the German DAX slumped 6.82%, the French CAC plummeted 8.04%, the London FTSE declined 3.15% and Shanghai dipped 1.3%. I’d give you more results, but I ran out of synonyms for “fell.”<\/p>\n

Debit:<\/strong><\/span> On this side of the pond, the Dow opened the day deep in red territory<\/a> — and by the closing bell it was even deeper, down 611 points; a 3.4% decline. I strongly suspect the fireworks are just getting started. We’ll see on Monday.<\/p>\n

Credit:<\/strong><\/span> Frankly speaking, the drop in the extremely over-valued US market<\/a> is a nice start, but it’s got a long<\/em> way to go before it begins to reflect the economic reality that currently plagues America — and the entire world, for that matter.<\/p>\n

Debit:<\/strong><\/span> And just how bad is the American economy? Well, the Financial Times reported this week that the US labor participation rate for prime-age workers is near the bottom<\/a> of the world’s 34 biggest market economies — despite an “official” unemployment rate of 4.7%. I know. Such blatant disconnects between government statistics and reality are usually reserved for banana republics. Daiquiri, anyone?<\/p>\n

Debit:<\/strong><\/span> Meanwhile, the Commerce Department is busy revising GDP downward by 2%<\/a> during President Obama’s entire term<\/em> in office. Why are they doing that now? Well … because this long-running economic illusion is getting harder for the puppet masters to maintain. After all, you can’t fool all of the people all of the time.<\/p>\n

Credit:<\/strong><\/span> By the way, after learning GDP has been overstated by 2% for years, the stock market didn’t blink — which led financial analyst Bill Holter to ask: “You’re talking about a $300+ billion error; doesn’t this deserve some attention? Doesn’t this bring into question all sorts of other assumptions?” Of course. But most people are too busy watching Dancing with the Stars<\/em> and debating about Deflategate<\/a> to care.<\/p>\n

Credit:<\/strong><\/span> Hey … Bill and I aren’t the only Debbie Downers around here; this week, retired Fed Chairman Alan Greenspan said, “This is the worst period since I’ve been in public service<\/a>, including October 19th, 1987, when the Dow (dropped) 23%. This has a corrosive effect that will not go away. I’d love to find something positive to say.”<\/em> Me too, Alan. Me too. Welcome to my world.<\/p>\n

Credit:<\/strong><\/span> As Zero Hedge notes: “Greenspan was referring to the unprecedented combination of economic stagnation, deteriorating demographics, insolvent entitlement programs, social inequity, wealth division and a historic debt overhang which should have been cleared in the Crash of 2008, but instead was preserved<\/a> to avoid wiping out the ‘equity’ (of) the Fed’s stakeholders.”<\/em> Lest there be any doubt.<\/p>\n

Credit:<\/strong><\/span> As for the Fed’s role in all of this, Holter summed it up with this: “Central banks and sovereign treasuries have destroyed their balance sheets to supposedly create ‘growth.’ And now it turns out that all we got was <\/em>more debt<\/a> and no growth<\/em>.” He’s right … I didn’t even get a lousy “End the Fed” tee-shirt. Did you?<\/p>\n

Debit:<\/strong><\/span> Oh … and I know what you’re thinking — but any “growth” in your portfolio over the past seven years that’s attributable to central bank printing and stock market manipulation<\/a> doesn’t count. (Psst. I’m talkin’ about all<\/em> of it.)<\/p>\n

Debit:<\/strong><\/span> You know … Upon further reflection, I guess I shouldn’t be surprised so many people are disconnected from the real world — especially since a recent study found that Millennials engage with their Smartphones<\/a> more than they do actual humans. Uh huh. Then again, the dying Roman Empire had its bread and circuses too.<\/p>\n

Credit:<\/strong><\/span> Here’s the good news: Although most Americans aren’t ready for the lower standard of living<\/a> that’s waiting for them just around the corner, they’ll probably be too preoccupied to notice when the reckoning arrives. Well … that is, at least until they can no longer afford their Smartphones.<\/p>\n

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

In honor of the United Kingdom’s very pragmatic decision to leave the European Union, I thought I’d share a few facts on the EU’s currency, the euro:<\/p>\n

17 <\/strong><\/span><\/span>Eurozone countries that use the euro as its sole currency. In all, those countries represent 326 million people.<\/p>\n

1999<\/strong><\/span><\/span> Year the euro was introduced as an official accounting currency.<\/p>\n

23 <\/strong><\/span><\/span>Countries that peg their national currencies to the euro. (Sixteen of them are in Africa.)<\/p>\n

$1.11<\/strong><\/span><\/span> Euro exchange rate at Friday’s close of trading.<\/p>\n

$1.60 <\/strong><\/span><\/span>Euro’s all-time exchange rate high point. (July 2008)<\/p>\n

$0.86 <\/strong><\/span><\/span>Euro’s all-time exchange rate low point. (February 2002)<\/p>\n

2<\/strong><\/span><\/span> Rank among the world’s reserve currencies. (The US dollar is first.)<\/p>\n

Source: Wikipedia<\/em><\/p>\n

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

What is your biggest financial worry?<\/p>\n