{"id":38825,"date":"2016-08-27T05:15:30","date_gmt":"2016-08-27T12:15:30","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=38825"},"modified":"2025-04-18T13:46:18","modified_gmt":"2025-04-18T20:46:18","slug":"black-coffee-in-the-land-of-negative-numbers-zero-is-your-hero","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id38825-black-coffee-in-the-land-of-negative-numbers-zero-is-your-hero.html","title":{"rendered":"Black Coffee: In the Land of Negative Numbers, Zero Is Your Hero"},"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

Let’s get right to it this week …<\/p>\n

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

Credit:<\/strong><\/span> The latest government statistics indicate that US new-home sales in July surged<\/a> to their highest level in nearly eight years. Wow. The economy is obviously doing much better than I thought.<\/p>\n

Credit:<\/strong><\/span> Then again, as financial analyst Dave Kranzler points out, “Like everything else going on in the financial markets, the new home sales report is thoroughly inconsistent with all of the supporting data and bears absolutely no semblance to reality<\/a>.” Imagine that.<\/p>\n

Debit:<\/strong><\/span> According to Kranzler, “The Government’s numbers were ‘driven’ by an unexplainable 18% surge in new home sales in the South. Yet, according to Redfin’s data<\/a>, homes sales in the South’s biggest population areas cratered: Atlanta -12.9%, Dallas\/Ft Worth -13.3%, Miami -24.2%, and Orlando -16.1%.” True — but that’s close enough for government work.<\/p>\n

Debit:<\/strong><\/span> It gets worse for the US housing market: Demographic data suggests a so-called “Home-ageddon” may be on the horizon, thanks to an impending nosedive<\/a> in the growth of potential buyers and a surge in an elderly population that, naturally, is more likely to downsize or sell than buy. The good news is: this too shall pass … in 2035.<\/p>\n

Debit:<\/strong><\/span> The terrible population statistics has Econimica’s Chris Hamilton asking this simple question: “With so few new buyers, a growing quantity of new homes, and so many likely sellers … who will buy all those houses?” Call me crazy, but I’m guessing it will be the Fed<\/a> — after all, they already own about 12% of US home mortgages. No, no; it’s okay … they’ve got a printing press.<\/p>\n

Debit:<\/strong><\/span> If you’re among that rising demographic wave of elderly Americans over the coming two decades, you shouldn’t count on Social Security<\/a> as your sole source of income in retirement — at least if you believe David Stockman, who served as the Director of the Office of Management & Budget under President Reagan.<\/p>\n

Debit:<\/strong><\/span> As Stockman warns: “Measured by the only thing that matters — hard cash income and outgo<\/a> — Social Security has already gone bust. What’s more, even under the White House’s rosy forecasts, outlays will exceed revenues (excluding payroll taxes) by $8 trillion over the next 12 years — meaning there will be no general fund surplus to pay the shortfall.” But other than that, it’s all good.<\/p>\n

Credit:<\/strong><\/span> Despite the shortfall, as long as the number of young workers paying into the system can grow faster than the number of elderly Americans who are cashing Social Security checks, the system should survive. So relax — the US demographic picture<\/a> over the next 20 years will certainly help in that regard. Oh, wait …<\/p>\n

Debit:<\/strong><\/span> In other news, John Cryan, CEO of the teetering Deutsche Bank, is warning of ‘fatal consequences<\/a>‘ for pension plans and savers if the current artificially-imposed negative interest rate environment continues. Psst. That’s code-speak for: “If Deutsche Bank goes down, the whole system is coming with us.”<\/p>\n

Credit:<\/strong><\/span> Of course, what did you expect the guy to say? He’s a CEO — they always sugarcoat bad news. Okay, almost<\/em> always.<\/p>\n

Debit:<\/strong><\/span> On the bright side, considering that 62% of all Americans<\/a> don’t even have $1000 in savings, Cryan’s warning is pretty much irrelevant.<\/p>\n

Debit:<\/strong><\/span> But seriously, I see that two more banks have begun charging select clients<\/a> for their savings deposits. Madness. Frankly, after accounting for inflation, most Americans have been paying real<\/em> negative interest on their savings for years. Yes, yes, I know — but I’m talking about the 38% of Americans who actually have<\/em> appreciable savings.<\/p>\n

Credit:<\/strong><\/span> Needless to say, today’s negative interest rate environment is one of the biggest reasons why everyone needs to own gold and silver. True, their yield is zero — but zero is more than any number with a minus sign in front of it.<\/p>\n

Credit:<\/strong><\/span> Speaking of precious metals, people are reporting that one ounce of silver will now buy six months of food<\/a> in the People’s Socialist ParadiseTM<\/sup> of Venezuela. Well … assuming Venezuelans can find<\/em> six months of food. Think about that.<\/p>\n

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

Here is a quick update on the current international financial situation from Bank of America’s Michael Hartnett:<\/p>\n

667<\/strong><\/span><\/span> Number of interest rate cuts by global central banks since 2008.<\/p>\n

17<\/strong><\/span><\/span> Collective years G7 central bank governors Yellen, Kuroda, Draghi, Carney and Poloz have been in their posts.<\/p>\n

1<\/strong><\/span><\/span> Number of current G7 central bank governors that have raised interest rates during their tenure. (Yellen)<\/p>\n

1<\/strong><\/span><\/span> Number of times Yellen has raised rates. (December 2015)<\/p>\n

$25,000,000,000,000<\/strong><\/span><\/span> Assets currently owned by the world’s central banks. (Bought with currency created out of thin air.)<\/p>\n

$12,000,000,000,000<\/strong><\/span><\/span> Assets bought by the world’s central banks since 2008 (with currency created out of thin air).<\/p>\n

28<\/strong><\/span><\/span> Percentage of global bonds currently offering a negative yield.<\/p>\n

0<\/strong><\/span><\/span> Chance that any of the world’s currencies will come out of this alive. (That’s my conclusion; not Hartnett’s.)<\/p>\n

Source: Zero Hedge<\/a><\/em><\/p>\n

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

Who handled the family’s personal finances when you were growing up?<\/p>\n