{"id":45161,"date":"2017-09-23T04:15:19","date_gmt":"2017-09-23T11:15:19","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=45161"},"modified":"2025-02-28T09:34:05","modified_gmt":"2025-02-28T17:34:05","slug":"black-coffee-23-september-2017","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id45161-black-coffee-23-september-2017.html","title":{"rendered":"Black Coffee: Sir Isaac Newton and the Three Bears"},"content":{"rendered":"

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

Another glorious week comes to an end. Off we go …<\/p>\n

“I can calculate the movement of stars, but not the madness of men.”<\/em><\/p><\/blockquote>\n

— Isaac Newton<\/strong><\/p>\n

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

Credit:<\/strong><\/span> I see that the de-dollarization of the world continues to pick up speed. This week, Russian President Vladimir Putin directed his government to approve legislation making the ruble the main currency<\/a> of exchange at all Russian seaports by next year. And so the expiration date on the dollar’s role as the world reserve currency draws nearer — as does most Americans’ very comfortable standard of living. Tick tock.<\/p>\n

Credit:<\/strong><\/span> In other news, all three key indices — Dow, S&P 500, and Nasdaq — closed at record highs on Tuesday. Then the Dow did it again on Wednesday. In fact, the Dow has been climbing for so long that it’s up approximately 22%<\/a> and 4000 points since the election. Is this a great country, or what?<\/p>\n

Credit:<\/strong><\/span> Things are going so well that a record 65% of respondents in the latest University of Michigan Consumer Survey expect that stocks will rise<\/a> during the next 12 months. That has Mish Shedlock wondering if all of that optimism is a signal that the eight-year bull market is finally nearing its end. I agree. Now you know why guys like Mish and I don’t get invited to a lot of parties.<\/p>\n

Credit:<\/strong><\/span> And Simon Black points out that it’s not just stocks: “Stocks are at all-time highs. Bonds are at all-time highs. Property prices are at all-time highs. Many alternative assets like private equity and collectibles are at all-time highs. Yet asset prices keep climbing<\/a>.” Uh huh. Simon usually has nowhere to go on the weekends either.<\/p>\n

Credit:<\/strong><\/span> By the way, the Dow isn’t the only stock index that’s en fuego<\/em>: The S&P 500 hasn’t had a 3% decline in ten months. That’s the second longest streak<\/a> since 1928; beaten only by an 11-month streak that started in 1994. It’s also the fourth longest period without the S&P experiencing a 5% decline. Thanks, Fed. (And the ECB, BoJ, and BoE).<\/p>\n

Credit:<\/strong><\/span> In fact, according to the National Bureau of Economic Research, American stocks have risen more during the past eight years<\/a> than in almost any other post-World War II period of economic growth. And in case you’re wondering, if you invested $100 in the S&P 500 at the start of this bull market on July 1, 2009, you’d now have $272. Nice.<\/p>\n

Debit:<\/strong><\/span> The stock market has delivered terrific returns for investors since the end of the last recession. But, as Zero Hedge points out, there’s a problem with the current market euphoria: when measured against hard economic data, today’s stock valuations simply don’t align with reality. Take a look:<\/p>\n

\"\"<\/a><\/p>\n

Debit:<\/strong><\/span> Speaking of not aligning with reality … Since 2006, corporate giants such as Exxon, IBM, Johnson & Johnson and McDonald’s have shown little to no improvement in performance — or, in some cases, worse<\/em> performance — despite the addition of significant debt<\/a>. Yet, thanks to the Fed’s relentless multi-trillion dollar printing campaign, their stock prices are much higher. Something will have to give. Eventually.<\/p>\n

Credit:<\/strong><\/span> Meanwhile, investment advisor John Mauldin is warning that a pension storm is coming<\/a> that, he says, will become “one of the most heated battles of my lifetime.” That wouldn’t be so alarming if John was only 18 years old — but he’s actually closer to 81.<\/p>\n

Debit:<\/strong><\/span> To prove John’s point, this week, financial stresses forced CalPERS to slash its pension payments to retirees in the towns of Redding and Niland, California, by up to 90%<\/a>. They join Golden State pension funds from Loyalton and the East San Gabriel Valley whose benefits were similarly reduced last year. If you’re wondering how that’s possible, with equities eight years into a bull market, you’re not alone.<\/p>\n

Credit:<\/strong><\/span> Then again, it’s really no mystery at all. As Zero Hedge correctly observes, an ever-increasing number of municipalities are finally beginning to admit what most astute observers have known for years: “Namely, that they’re running Ponzi schemes<\/a> which simply don’t have the funding required to pay the benefits they’ve promised.” In other words: What cannot<\/em> be sustained, won’t<\/em> be sustained.<\/p>\n

Credit:<\/strong><\/span> Finally … Did you see this? Swiss prosecutors are trying to figure out why someone dumped upwards of a hundred-thousand euros into a Geneva bank crapper<\/a>. No, really. As crazy as it sounds, perhaps they were trying to make a statement about the future of fiat currency. Okay … maybe not. Regardless, it definitely gives new meaning to the term “flushing money down the toilet.”<\/p>\n

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

This week, retail giant Toys R Us filed for bankruptcy protection, echoing a larger trend for struggling brick-and-mortar retailers in 2017:<\/p>\n

1000<\/strong><\/span><\/span> Number of Toys R Us stores in the US.<\/p>\n

1600<\/strong><\/span><\/span> The number of Toys R Us stores worldwide.<\/p>\n

1948<\/strong><\/span><\/span> The year that Toys R Us was founded.<\/p>\n

1957<\/strong><\/span><\/span> The year that Toys R Us’ mascot, Geoffrey the Giraffe, made his print-advertisement debut.<\/p>\n

1984<\/strong><\/span><\/span> The year that Toys R Us opened its first international store. (Canada)<\/p>\n

$5,000,000,000<\/strong><\/span><\/span> Total debt that the toy store currently owes its creditors.<\/p>\n

$6,000,000,000<\/strong><\/span><\/span> Price that the private equity firms of Kohlberg Kravis Roberts and Bain Capital paid for Toys R Us in 2005.<\/p>\n

Source: Heavy<\/a><\/em><\/p>\n

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

[poll id=\"182\"]<\/code><\/p>\n

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

Should the US repeal its debt ceiling law?<\/p>\n