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.
Well … another glorious weekend is upon us. I hope everybody is enjoying these early days of the holiday season. I know I am! In the meantime, let’s get this party started, shall we?
It is what it is, but it’s not what it seems.
— Paul Hewson
Confidence is contagious; but so is lack of confidence.
— Vince Lombardi
Credits and Debits
Debit: Did you see this? A recent study has found that the median age of first-time home buyers in the US has increased to 33 — it was 32 in 2018; it’s also the oldest age since the statistic started being tracked in 1981. And as homebuyers’ ages have increased, so have their incomes; the average income of purchasers is now $93,200, as fewer affordable options squeeze lower-income potential buyers out of the market. Imagine that.
Debit: Meanwhile, there is a growing number of low-paying jobs relative to employment with above-average pay. In 1990, the jobs were evenly divided; but since then, 63% of all jobs that were created have been low-wage, low-hour jobs. As a result, there are now only four high-paying jobs for every five low-paying jobs. The increased disparity may seem insignifcant, but it’s not. And if you don’t believe me, just ask a prospective first-time homebuyer.
Credit: Of course, empires always rot from within, and Tom Luongo observed that America’s chronically-declining job quality is just one symptom of that. Luongo also sees the US finally buckling under the enormous amount of unpayable debt it has been allowed to amass ever since the dollar was decoupled from gold. He’s not the only one.
Debit: Then again, there’s always hope. For example, a pair of Federal Reserve researchers released some good news in a report that says the National Debt only becomes dangerous when it outpaces GDP; in other words, if the National Debt grows at a faster rate than the nation’s income, eventually the debt becomes unsustainable. The bad news is, the National Debt is accruing faster than national income.
Debit: But hold on … the same Fed report notes that one particular “solution” that countries with high levels of unsustainable debt can try to cover their obligations is to “borrow money by issuing bonds and then order the central bank to buy those same bonds by printing money.” Hmmm. Frankly, that sounds too good to be true. A central banker sleight of hand trick, if you will. You know … kind of like this:
Credit: As Peter Schiff notes, “The process that (the Fed report) describes is called ‘debt monetization.’ And it’s exactly what the Fed is doing today.” The report also admits that, “History shows that this leads to extremely high inflation, and often ends in economic ruin.” Actually, it always ends in economic ruin. Hopefully, I’m not the only one who sees that the Eccles Building oracles are suffering from an acute case of cognitive dissonance.
Debit: Perhaps that’s why the Fed is now considering a new rule that would let inflation run above its 2% target to make up for “lost” inflation. No, really. Never mind that the Fed refuses to admit that inflation is currently running close to 10% because they purposely measure it incorrectly to hide the dollar’s declining purchasing power. A ruse which is more important than ever after a decade of rampant money printing — er, I mean, “quantitative easing” (QE).
Debit: So how confident is the Fed in the financial system? Well … last month, chairman Jerome Powell tried to reassure those who are worried about ever-increasing levels of corporate and government debt by stating that he doesn’t see any immediate dangers being posed by America’s trillion-dollar deficits, saying (emphasis mine), “I think possibly the day of reckoning could be quite far off.” Color me unconvinced. And apparently, Mr. Powell too.
Credit: By the way, Powell isn’t the only one worried about what’s waiting around the corner. Kuppy, the proprietor of the ‘Adventures In Capitalism’ blog believes, “The road ahead is a market crash, followed by obscene fiscal stimulus. If you thought QE was nutty, wait until you see what drunken sailor mode looks like.” Uh huh. And for those of you who can’t wait, well … here’s a quick preview:
Credit: Oh, sure …I hear ya; at least QE continues goosing the stock and bond markets — not to mention workers’ quarterly 401(k) statements. But before anyone gets too complacent, it’s important to remember that, as MN Gordon notes, “Every bubble eventually finds its pin. When this bubble pops, like all bubbles pop, the remaining wealth of workers and savers will die a painful death.”
Credit: But all is not lost; at least for those who choose to purchase a little wealth protection in the form of precious metals. And, as Simon Black reminds us, “The decision to own gold should never be about the investment gain. Gold is a private, fully-redeemable insurance policy with steady cash value and zero counterparty risk; a hedge against uncertainty and risks. And there are lots of those in the world.” Amen to that.
The Question of the Week
[poll id="297"]
Last Week’s Poll Results
How much is your Christmas gift budget this year?
- More than $500 (49%)
- $101 to $500 (33%)
- $100 or less (18%)
More than 1900 Len Penzo dot Com readers responded this week’s question and it turns out that 51% plan to spend $500 or less on Christmas this year. In case you’re wondering, that result is unchanged from last year, when I asked the same question.
Hey … If you have a question you’d like to ask your fellow readers here, send it to me at Len@LenPenzo.com — and be sure to put “Question of the Week” in the subject line.
By the Numbers
Speaking of Christmas gift budgets, this week’s version of Cyber Monday raked in a new all-time for sales, including the first day in history when consumers spent more than $3 billion using their smartphones:
$9,400,000,000 Total Cyber Monday sales in 2019. That’s bigger than both Black Friday ($7.4B) and last year’s Amazon Prime Day ($4.2B).
19 Percentage increase in Cyber Monday sales over last year.
33 Percentage of all Cyber Monday sales made with a smartphone.
$11,000,000 Amount consumers spent per minute during Cyber Monday’s peak sales hour, which was between 11 p.m. Eastern time and midnight.
41 This year’s percentage increase in BOPIS (buy online, pick-up in store) sales.
$143,800,000,000 Expected total Christmas holiday spending in 2019; that’s up from $126 billion last year.
Source: Forbes
Useless News: The Office New Hire
A man joined a Fortune 500 company as a trainee. On his first day he dialed the company cafeteria and shouted into the phone, “Get me some hot coffee and a jelly donut — and make it quick!”
The voice from the other side responded, “You fool! You’ve dialed the wrong extension!! Do you know who you’re talking to?”
“No,” replied the trainee.
“I’m the company CEO, you fool!!!” screamed the voice from the other side.
The trainee shouted back, “Congratulations! By the way … do you know who YOU are talking to? You fool!!!!”
“No,” replied the CEO.
“Good!!” said the trainee. And with that, he hung up.
(h/t: Cowpoke)
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Useless News
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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 out to me at: Len@LenPenzo.com
This week, Your [sic] An Idiot left this note in the Len Penzo dot Com complaint box:
Every overly opinionated idiot with enough sense to turn on a computer has the right to publish any amount of worthless, meaningless, biased, thoughtless and useless words that they have time to salvage from the biological landfill they call their brain.
I see what you mean.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: brendan-c
Good morning Len, and thanks for another informative Black Coffee to have with MY coffee. So… Our debts are paid and we continue to stock up on wealth insurance. But what happens to our credit union accounts when all comes crashing down? Is credit union insurance any better funded than FDIC? I’m beginning to consider buying a large wooden chest and digging a hole… ;o)
Lauren, credit unions are not FDIC insured; instead most (but not all) are covered by the National Credit Union Insurance Fund which is administered by the federal National Credit Union Administration.
I’m not sure if the credit union insurance fund is better than the FDIC fund, but I hope so — the latter has only $20 billion or so backing $9 trillion in deposits.
Len, as a retired Federal Govt. worker with the superior health insurance us government retirees and workers share with congress, I am betting the feds will take care of their own first in a crisis.
So my monthly retirement payment is direct-deposited into a federal credit union account first, then its fiat funds are distributed from there.
Dave, I too have no doubt whatsoever that the Federal government will step in and cover as much as cash is needed to keep everyone “whole” — of course, that freshly printed cash will be at the expense of the dollar’s purchasing power.
Hi Len!
This Christmas I am giving all of my nieces and nephews a 2019 American silver eagle coin. I hope it will inspire at least one of them to learn about the difference between real money and the garbage we are currently using!
Sara
Great idea, Sara! At roughly $20 per coin, it shouldn’t strain most people’s Christmas budget.
That magic trick was pretty good. I wish I knew how he did it!
I know how he did it, Tina. He used sleight of hand! 😉
“Gold is a private, fully-redeemable insurance policy with steady cash value and zero counterparty risk …”
The deep state continuously publicizes the horrors of poor people mining and disseminating gold:
At a U.S. Senate subcommittee hearing … Sen. Marco Rubio called illegal gold mining in Latin America a “direct threat” to U.S. national security that has become “far more lucrative than drug trafficking” – and noted that billions of dollars worth of the illicit precious metal is entering American consumer markets through Miami.
“There is a major human toll if we do not get control of this problem”, said Rubio, citing a cornucopia of evils unleashed by illegal mining including human trafficking, corruption, disease, mercury poisoning, drug smuggling, widespread deforestation in the Amazon basin and the enrichment of powerful criminal groups and rogue governments like Nicols Maduros regime in Venezuela.
https://www.miamiherald.com/news/politics-government/article238048869.html and:
Informal methods of gold production, known in the industry as “artisanal” or small-scale mining, are growing globally. They have provided a livelihood to millions of Africans and help some make more money than they could dream of from traditional trades. But the methods leak chemicals into rocks, soil and rivers. And African governments such as Ghana, Tanzania and Zambia complain that gold is now being illegally produced and smuggled out of their countries on a vast scale, sometimes by criminal operations, and often at a high human and environmental cost.
https://www.reuters.com/investigates/special-report/gold-africa-smuggling/
The deep state is not so keen on publicizing the horrors of individuals mining the materials needed for production of their beloved “green energy” batteries: https://www.washingtonpost.com/graphics/business/batteries/congo-cobalt-mining-for-lithium-ion-battery/
Meanwhile, the momentum for a return to gold as money has grown in the individual states, as allowed by Article I, Section 8, Clause 5 of the Constitution:
https://gsiexchange.com/states-gold-silver-become-legal-tender/
Silver has been legal tender along with gold from time to time and suffered the same fate as gold, as the U.S. forced its citizenry to accept fiat money instead::
https://www.treasury.gov/about/history/collections/Pages/silver.aspx
Some really good links there, Dave. Thanks for sharing them! It is quite sad how the government and their banking cohorts work to discourage people from using and storing their wealth with the best form of money available.
I’m relatively new here and enjoy your weekly posts. I think your message about a looming crisis is true, and your strategy about owning gold is correct, but how long it takes to get there is anyone’s guess. I guess I am trying to say your economic understanding is sound, but we’re living in an episode of the Twilight Zone. The current condition we’re in could go on for years.
It has already been going on for years, Greg. No … as I have stated many times before, after almost 50 years of operating with a fiat currency not backed by gold, we are clearly on the nasty part of the exponential curve now. I believe the system will need to be reset — or the dollar will have to be sharply devalued against gold — within the next few years. Probably not long after the next recession.
Look at a dollar bill. The pyramid on the back is screaming that it’s a Ponzi scheme. To put it another way, that pyramid on the back is telling you in no unsubtle way that it’s a pyramid scheme. It’s so obvious – but hardly anyone can see it.
It’s an interesting theory, Victor. But that pyramid is from the Great Seal of the United States, which was created in 1782!
Hi Len. Letter writer has got some issues. Definitely see the average age of home buyers going up. Its really sad. I see young couples simply cant afford so cal anymore. Its hard for young families to make it. Patients all moving to Arizona, Texas or to Temecula. I wish theyd read your blog about paring down cost and living on 40k a year. Cant believe the Cyber Monday numbers. We didnt shop. We need small businesses back.
Hi Dr. P!! Yes, I am worried about my kids being able to make it in California too. There are so many less expensive places to live in the US … California has truly lost its luster as a land of opportunity for many young people looking to live a comfortable middle- class lifestyle on an average salary.
https://www.bbc.com/news/stories-50435014
Maybe gold just needs a charismatic spokesperson.? Do we labor or lobby for the dollar?
I enjoyed the inflation index link. Should there be two? One for the needs in our lives and one for the wants in our lives. The chip companies got it down. They can sell a half bag of air for full price! I struggle with the day of reckoning narrative. My day of reckoning has aways been defined when the average Joe cannot buy or locate a cold beer on Friday night within 50 miles of his home.
Thanks for the awewome link, Duke. The story on the OneCoin cryptocurrency scam was a half-hour read for me, but well worth it!
Re: cryptocurrencies. I think they are all scams; the fact that most of them are backed by a blockchain is irrelevant — I can assemble a million numbered rocks that are digitally transacted and backed with a blockchain too. What makes those one million uniquely-numbered rocks any better than a bitcoin?
Any cryptocurrency’s biggest flaw is this: Unlike gold and silver, a cryptocurrency is not tangible wealth with inherent value. Instead, a cryptocurrency is ephemeral, and unable to be measured on its own terms (like precious metals which, because they are elements on the periodic table, can always be valued physically, in troy ounces, or grams, or metric tons, etc.) — cryptocurrencies MUST be valued in terms of something else; typically, units of fiat currency.
Here is a thought experiment I always propose to other cryptocurrency advocates, and I never get a satisfactory response: If the purchasing power of the fiat US dollar goes to zero, then what is a single bitcoin (or any other cryptocurrency) actually worth?
Mathematically, “infinity dollars” is the correct response, but it isn’t a practical real-world answer. After all, if you go to a bar, how many beers will the bartender be willing to give you in exchange for your bitcoin (or some fraction of a bitcoin) that is valued at infinity dollars? Gold and silver do not have this problem because, if the fiat currency they are valued in becomes worthless, their purchasing power can still be valued in terms of their physical weight (e.g., historically, a beer has always been valued at one- or two-tenths of a gram of gold).