{"id":61064,"date":"2020-05-16T02:15:14","date_gmt":"2020-05-16T09:15:14","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=61064"},"modified":"2020-06-25T10:43:55","modified_gmt":"2020-06-25T17:43:55","slug":"black-coffee-16-may-2020","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id61064-black-coffee-16-may-2020.html","title":{"rendered":"Black Coffee: America’s Dirty Little Secret"},"content":{"rendered":"

\"\"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

And so it goes … we’re almost two full months into the ongoing financial crisis. Unfortunately, despite the relative calm on Wall Street over the past several weeks, the worst is yet to come.<\/p>\n

Okay, let’s get started …<\/p>\n

All the perplexities, confusions, and distress in America arise, not from defects in their constitution or confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit, and circulation.<\/em><\/p><\/blockquote>\n

— John Adams<\/strong><\/p>\n

Sooner or later everyone sits down to a banquet of consequences.<\/em><\/p><\/blockquote>\n

— Robert Louis Stevenson<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? The departing 59-year old CEO of AT&T is retiring with an absurdly excessive pension<\/a> that will provide him with a lifetime guaranteed income of $274,000 — per month<\/strong><\/em>. Unbelievable. Considering that AT&T’s stock price is 25% lower<\/strong><\/em> than the $39 it was when this guy became CEO in 2007, can you imagine what kind of pension he’d be collecting if the stock price had, say, doubled or tripled?<\/p>\n

Debit:<\/strong><\/span> To be fair, if you include reinvested dividends — although how many people actually do that?<\/strong><\/em> — total shareholder returns have added up to 55% over the AT&T CEO’s 13-year career. For those of you counting at home, that works out to an average of 3.5% a year. I’m sure that makes the 250,000 AT&T employees potentially facing layoffs<\/a> feel a lot better.<\/p>\n

Debit:<\/strong><\/span> Speaking of laid off employees<\/a>, if history is any guide, the following graph strongly suggests that anyone who is expecting a rapid recovery in the US job market after the coronavirus hysteria finally subsides, should probably<\/span><\/del> definitely think again.<\/p>\n

\"\"

There can be no talk of American jobs returning to pre-crisis levels until the losses find a bottom — unfortunately, the slope of that red line doesn’t suggest that will be happening anytime soon.<\/p><\/div>\n

Debit:<\/strong><\/span> Meanwhile, in an attempt to keep the corporate bond market from imploding, this week the Fed officially opened up yet another of its many so-called “special purpose vehicles” (SPV<\/a>) — this one to the tune of $750 billion for buying corporate bonds and ETFs<\/a>. Uh huh. Please … no questions. Besides, I think we’ve all seen this movie before …<\/p>\n