{"id":42544,"date":"2017-04-29T05:15:47","date_gmt":"2017-04-29T12:15:47","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=42544"},"modified":"2017-05-01T18:32:26","modified_gmt":"2017-05-02T01:32:26","slug":"black-coffee-29-april-2017","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id42544-black-coffee-29-april-2017.html","title":{"rendered":"Black Coffee: The Double Bubble Edition"},"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

So with that, let’s get right to it …<\/p>\n

Bubbles have quite a few things in common, but housing bubbles have a spectacular thing in common: every one of them is considered unique and different.<\/em><\/p><\/blockquote>\n

— Jeremy Grantham<\/strong><\/p>\n

It isn’t the economy that bursts a bubble, but investor psychology.<\/em><\/p><\/blockquote>\n

— Jay Samit<\/strong><\/p>\n

One day, market forces will crush the Federal Reserve.<\/em><\/p><\/blockquote>\n

— Mark Faber<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Is a cashless society<\/a> getting closer? Perhaps. One in three people in the US and Europe say they’d be happy to rely solely on electronic payment forms if they could, and 20% already pretty much do so. Hmm. I guess they don’t mind the loss of freedom and anonymity that cash provides. Sad.<\/p>\n

Debit:<\/strong><\/span> In other news, the stock price of Canada’s biggest non-bank mortgage lender, Home Capital Group, fell 61% on Thursday. Apparently, stockholders got skittish<\/a> after finding out that Home Capital secured an emergency liquidity arrangement for a $1.5 billion credit line to counter evaporating deposits at terms that may soon leave them insolvent. Imagine that.<\/p>\n

Credit:<\/strong><\/span> Compared to bank lenders, Home Capital Group is relatively small potatoes — but the fact that any mortgage provider would require an emergency $1.5 billion loan while home prices continue to hit all time highs is a flashing-red idiot light<\/a> on the dashboard of the Canadian housing market. Let’s see if anybody is paying attention.<\/p>\n

Debit:<\/strong><\/span> In case you’re wondering, Canadians avoided the steep price declines American homeowners endured after the US housing bubble popped in 2007. Unfortunately, as a result, housing prices north of the 49th parallel are arguably now more over-valued than in the US<\/a>.<\/p>\n

Credit:<\/strong><\/span> As for America’s<\/em> housing market, the US is currently experiencing its strongest housing sellers’ market<\/a> ever. Yes, even stronger than the one that occurred right before the peak of the last housing bubble. Meh. I’m sure it’s different this time.<\/p>\n

Credit:<\/strong><\/span> Not coincidentally, the US stock market is in bubble territory too — and still rising at a torrid pace<\/a>. No, it’s not solely because heavy-machinery manufacturer Caterpillar just showed its first year-over-year retail sales increase in 51 months<\/a>. Although I’m sure that didn’t hurt. (Psst. Thanks, Fed.)<\/p>\n

Credit:<\/strong><\/span> Amazon exemplifies just how hot the stock market is at the moment; their shares are quickly closing in on the $1000 benchmark<\/a>. Please … quit sniveling. After all, one share of AMZN is a bargain compared to the $247,000 you need — give or take a grand — to purchase a single certificate of Berkshire Hathaway (BRK.A<\/a>).<\/p>\n

Debit:<\/strong><\/span> Speaking of Amazon, although the giant online merchant isn’t solely responsible for the 8640 brick-and-mortar retail stores closing<\/a> this year, it’s pretty clear that the Internet is a big reason for the decline — not to mention the collateral economic damage that’s going to result, in the form of lost jobs.<\/p>\n

Debit:<\/strong><\/span> The soaring US stock and housing markets inexplicably continue to fly in the face of ugly GDP data. Looking at the stocks, you’d never guess that, with GDP at 0.7%<\/a>, the national economy barely registered a pulse<\/a> last quarter. Oh … And by the way, that GDP figure is annualized — so the actual quarterly number was less than 0.2%.<\/p>\n

Credit:<\/strong><\/span> Financial analyst Michael Pento is certainly scratching his head. According to him, “The mystery here<\/a> is why the Fed is raising rates when Q1 GDP growth is (minuscule), net Non-Farm Payroll job growth is (anemic), and core consumer price inflation is negative.” Good question, Michael.<\/p>\n

Debit:<\/strong><\/span> The Fed’s sudden urge to raise rates — after years of declining to do so when the economy was growing at a much faster, if still paltry, rate — is even more confusing when you consider that their own analysts are now forecasting GDP to flatline<\/a> this<\/em> quarter at 0.2% too.<\/p>\n

Debit:<\/strong><\/span> On second thought, it’s really no mystery at all; the markets are broken<\/a>. The Fed’s misguided policies are now driven entirely by the stock market. Unfortunately, with roughly 85% of all trading volume now controlled by computers, there are few living, breathing traders left who are able to take a step back and see the absurdity of the trading that’s now taking place.<\/p>\n

Debit:<\/strong><\/span> If you feel like you’re on a runaway train, well … you are. So strap yourself in and hold on tight, because there’s a bridge out at the end of the line.<\/p>\n

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

Stocks have started the second quarter of 2017 on a tear — but they’re not as hot as last quarter. Here’s how various investment alternatives performed during the first three months of 2017:<\/p>\n

16.9%<\/strong><\/span><\/span> Palladium<\/p>\n

14.4%<\/strong><\/span><\/span> Silver<\/p>\n

9.8%<\/strong><\/span><\/span> NASDAQ<\/p>\n

8.5%<\/strong><\/span><\/span> Gold<\/p>\n

5.5%<\/strong><\/span><\/span> S&P 500<\/p>\n

5.2%<\/strong><\/span><\/span> Platinum<\/p>\n

4.6%<\/strong><\/span><\/span> Dow Industrials<\/p>\n

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

The Question of the Week<\/strong><\/p>\n

[poll id=\"161\"]<\/code><\/p>\n

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

Heads or tails?<\/p>\n