It’s time to sit back, relax and enjoy a little joe …
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.
Okay, away we go …
“We spend too much, we borrow too much, and we distort the markets. The bigger the distortions, the bigger the bust will be.”
– Ron Paul
“In the kingdom of the blind, the one-eyed man is king.”
– Desiderius Erasmus
Credits and Debits
Debit: With the petroyuan due to debut on January 18th, the Bundesbank was adding renminbi to its currency reserves this week. There’s just one problem: China failed to get its new oil-for-yuan contract off the launchpad this week. Instead, the first contracts are now scheduled to begin trading in late February or early March. So King Dollar gets a reprieve – albeit a brief one.
Debit: Meanwhile … whether it’s the tea company that put the word “blockchain” in its name only to see its stock rise by several multiple, or the Swiss National Bank, using currency it printed out of thin air to buy stocks, recently selling a portion of its holdings to earn $55 billion in “profits,” or the world mired in $233 trillion worth of debt that can never be paid off, absurdity is the new normal.
Credit: How absurd? Well, Brandon Smith explains that, “Trillions in uncontrolled central bank stimulus and years of artificially low interest rates have poisoned every aspect of our financial system. Nothing functions as it used to. In fact, markets move in the exact opposite manner as they did before the debt crisis began in 2008.” Maybe so, but the stock market bulls aren’t complaining; they’re busy reaping profits.
Credit: One blatant example of the markets working in reverse can be seen in the falling US dollar index over the past year, despite the Fed’s tightening campaign. As you can see, the market is completely ignoring the Fed’s interest rate hikes:
Graphic: Zero Hedge (click to enlarge)
Debit: In other news, I see that bitcoin spent most of this past week tumbling, briefly falling below $10,000 – a 50% drop since mid-December – before recovering near $12,000. One thing is certain: Anyone who wishes to dip a toe in the highly-speculative cryptocurrency waters better be sure they have the intestinal fortitude to endure bitcoin’s incredible volatility. No, thanks; I continue to prefer physical gold and silver.
Credit: On the other hand, stocks are still soaring, with higher share prices, rising investor optimism and fresh cash being funneled into the stock market by euphoric investors who fear missing out on gains despite the market’s lofty levels. Buying stocks still seems to be a smart investment strategy – at least until the supply of greater fools finally dries up.
Credit: So while most folks are celebrating the big increases in their quarterly 401(k) statements, Jim Rickards is trying to temper expectations by warning that, “The market is especially susceptible to a sharp correction, or worse.” What a party pooper.
Credit: Rickards is correct, of course. But for now, the US economy seems to be humming along. Despite the labor participation rate near a multi-decade low, the job market is supposedly as tight as ever, with US filings for unemployment benefits plummeting to their lowest level in almost 45 years. Hooray!
Debit: The tight labor market is one reason why the US Treasury collected almost $400 billion in tax revenue during the month of December. Even so, the government still ran a $225 billion deficit – that is an annualized rate of $2.7 trillion added to the National Debt. Can you imagine how bad the numbers will be when the US enters its next recession?
Credit: With that in mind, it should be no surprise that China downgraded the United States’ creditworthiness this week – as a result, the US is on par with countries like Peru, Colombia and Turkmenistan. Yes, that Turkmenistan.
Debit: Then again, the US doesn’t care what any Chinese rating house thinks. Why should they? Especially with Fitch and Moody’s in its back pocket. As ZeroHedge notes: “China’s move is far more political than economic, and sends another shot across the bow as the (US) prepares to launch a trade war. Still, Fitch and Moody’s give the US their top ratings, (despite) their concerns.”
Debit: Let’s just hope Congress doesn’t try to close their revenue gap by following Seattle’s lead. Residents of the Emerald City are now “enjoying” a 1.75 cents per ounce (!) sweet-drink tax passed by their uber-liberal city council. After the tax took effect, the price of a case of Gatorade skyrocketed from $15.99 to $26.33. Thankfully, that extra tax revenue will be put to really good use. On second thought … no, it won’t.
By the Numbers
The US economy definitely improved in 2017 from previous years – but the employment figures are still sending mixed signals:
4.1% The US unemployment rate at the end of 2017; that’s down 4.7% in January 2017.
4.0% Rate traditionally considered by economists to be full employment.
62.7% The US labor participation rate which measures the percentage of people who are either employed or actively looking for work.
2,100,000 The number of new jobs created in 2017; that’s the lowest annual figure in seven years.
184,000 The number of new manufacturing jobs created in 2017.
Source: Houston Chronicle
The Question of the Week
Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.
Last Week’s Poll Result
How many cars do you currently own?
- 2 (37%)
- 1 (31%)
- 3 (16%)
- 4 or more (13%)
- None (3%)
More than 1300 people answered this week’s survey question and it turns out that 3 in 8 Len Penzo dot Com readers own two cars. Another 1 in 8 have at least four autos – and hopefully a very big garage to keep them in!
Useless News: Irish Parents
A man in Ireland called his son in London the day before Christmas Eve and says, “I hate to ruin your day but I have to tell you that your mother and I are divorcing; forty-five years of misery is enough.”
“Dad, what are you talking about?’” the son screamed.
“We can’t stand the sight of each other any longer,” the father said. “We’re sick of each other and I’m sick of talking about this, so you call your sister in Leeds and tell her yourself.”
The son was frantic and dutifully called his sister, who exploded. “Like hell, they’re getting divorced!” she shouted at her brother. “I’ll take care of this.”
So she immediately called Ireland and when her father picked up the phone she screamed, “You are NOT getting divorced! Don’t do a single thing until I get there. I’m calling my brother back and we’ll both be there tomorrow. Until then, don’t do a thing! DO YOU HEAR ME?” and hangs up.
The old man hung up his phone and then turned to his wife.
“All done! The kids are coming for Christmas – and they’re paying their own way!”
Other Useless News
Here are the top – and bottom – five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. British Columbia (4.36 pages/visit) (!!)
2. Manitoba (2.38)
3. Alberta (2.07)
4. Saskatchewan (2.03)
5. Quebec (1.87)
9. Prince Edward Island (1.50)
10. Ontario (1.49)
11. Nova Scotia (1.19)
12. New Brunswick (1.08)
13. Northwest Territories (1.00)
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Letters, I Get Letters
Every week I feature the most interesting question or comment – assuming I get one, that is. And folks who are lucky enough to have the only question in the mailbag get their letter highlighted here whether it’s interesting or not! You can reach me at: Len@LenPenzo.com
My article explaining why Miracle Whip doesn’t belong on a tuna sandwich received a lot of comments from those who disagreed, including this one from Deb in SD:
I currently use a mixture of MW (or mayo) and Greek yogurt on my tuna. Works on egg or chicken salad too.
If you don’t mind, Deb, if I ever come to your house, I’d prefer peanut butter and jelly.
I’m Len Penzo and I approved this message.
Photo Credit: (coffee) brendan-c