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.
We’re now ten weeks into the Greatest Depression and the markets are still broken beyond repair. Don’t expect that to change because the game is over — however we’re going to be forced to continue playing until the public finally realizes it. On to the commentary …
There are only three ways to meet the unpaid bills of a nation: the first is taxation; the second is repudiation; the third is inflation.
— Herbert Hoover
By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
— John Maynard Keynes
Credits and Debits
Debit: Did you see this? The financial research team at Bank of America expects the corona crisis to ultimately wipe out four years of GDP growth, with BofA expecting real GDP at the end of 2021 to be where it was at the end of 2017. Think for a minute about the ramifications of that. No, really … I’ll wait.
Debit: Now for more bad news: Calculations by Goldman Sachs suggest that if the Fed insists on avoiding negative rates, then Chairman Powell will have no choice but to increase the size of the latest quantitative easing (QE) injections, thereby unleashing yet another debt deluge of freshly printed currency into the financial system. As if a 27% annualized increase in the money supply since February isn’t bad enough already.
Debit: Of course, some people just love QE — like bond investors who benefit from the Fed’s bond buying. But there’s a dark side for them too. As Bloomberg noted this week, with “the threat of inflation amid a global fiscal splurge exceeding $8 trillion, bond investors face toxic risk in the not-too-distant future.” The “threat” of inflation? Apparently, Bloomberg’s writers don’t shop for groceries. Or pay rent. Or have medical bills. Or kids in college. Or …
Credit: Meanwhile, as macroeconomist Alasdair Macleod notes, “Today, through monetary debasement nearly everyone benefits from monetary redistribution. But this is not a costless exercise. Governments are no longer robbing Peter to pay Paul, they’re robbing Peter to pay Peter as well.” On a somewhat related note …
Debit: Unfortunately for the Fed, they’re trapped between a rock and a hard place: they can keep holding down interest rates via QE and let the debt continue to skyrocket; or let interest rates rise, which will increase debt service costs — and force debt to skyrocket too. In fact, the chief researcher for K2 Asset Management, George Boubouras, is warning that at some point “in the medium term” the Fed is going to have to blink — and then the entire scheme “will likely unravel.” Imagine that.
Credit: Somewhat perversely, the global economic shutdown has temporarily delayed our inevitable day of reckoning by sharply — if not conveniently — reducing money velocity. But ironically, as Zero Hedge notes, “this means that an end to the coronavirus crisis is the worst thing that could happen to a world that’s now habituated to helicopter money and virtually unlimited handouts.” The bad news is, at some point that “luck” is finally going to run out:
Debit: Hyperinflation is the endgame for the current monetary regime, which is why you’re excused if you believe anyone in a position of authority who actually understands how our debt-based monetary system works will allow the coronavirus economic lock down to end without a fight. If you ask asset manager James Turk, he believes an early — but important — sign of hyperinflation is already starting to rear its ugly head:
Another chart of approaching #hyperinflation. WTI #crudeoil has risen from near zero to almost $30. Even though there is an #oil glut, the glut in fiat currencies is bigger. In hyperinflation people move from debased currency into useful tangible real things: oil, food, gold, etc pic.twitter.com/ZfMilkmkeS
James Turk (@FGMR) May 18, 2020
Credit: You can bet asset manager Egon VonGreyerz has had enough. He warns that “the whole world is living a lie” thanks to a fake world created by central bankers. How fake is it? Well … as VonGreyerz describes it: “We have fake money, fake markets, fake companies, fake banks, fake interest rates, fake income, fake pensions, fake social security, fake wealth, fake bailouts, fake buildings, fake holidays, and fake cars.” (Psst. Hey, Egon; how could you forget fake boobs?)
Credit: By the way, VonGreyerz also correctly notes the only solution is a return to a monetary system backed by precious metals, even though he acknowledges “that will involve a lot of suffering — but it’s a punishment the world must endure.” Indeed. In the meantime, we wait for the reset. Until then, the insanity will continue, perfectly exemplified by the latest inane edicts from yet another nanny-state authoritarian lording over her hapless constituents. Tennis anyone?
Credit: Regardless of what the inevitable monetary system reset eventually looks like, as the always on-point Sven Henrich notes: “By the time this is all over the poor will be poorer, the middle class will be smaller, the country will be horrifically in debt, and unemployment will be much higher than before — but the top 1% will be largely fine.” Uh huh. Same as it ever was.
By the Numbers
Here is an update on the decimated US restaurant industry, based on the latest survey data of 330 restaurant owners across America:
90 Percentage of restaurant owners who say their establishments are currently closed or only offering severely reduced services.
65 Percentage of owners who believe it will take three months to a year before they can return to normal operations.
85 Percentage of owners who say they expect to be open in some capacity within the next six weeks.
25 Percentage industry revenue increase over last month. Unfortunately, that’s far below normal revenue compared to last year, and not nearly enough to cover the losses of the last two months.
80 Percentage of diners who say they intend to continue ordering delivery or pickup even after restaurants in their areas reopen.
42 Percentage of restaurant workers receiving unemployment who say they’ve avoided returning to work explicitly because the compensation would be less than their unemployment payments.
The Question of the Week
Last Week’s Poll Results
What percentage of your investment portfolio is in stocks?
- Less than 40% (38%)
- More than 75% (27%)
- 40% – 75% (26%)
- I don’t have any investments yet. (9%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than 1 in 4 of them haven’t been scared away by the recent bear market in stocks — as they still have more than 75% of their portfolio in equities. On the other hand, 1 in 11 have yet to dip their toe in the investment world at all.
This week’s question was suggested by Oscar. If you have a question you’d like me to ask the readers here, send it to me at Len@LenPenzo.com — and be sure to put “Question of the Week” in the subject line.
Useless News: Grim Times
News continues to pour in regarding local business failures all across America. For example:
- A bra company has gone bust
- Local dog kennels called in the retrievers
- Roto-Rooter has gone down the drain
- Florists have pruned back business
- A food blender manufacturer was liquidated
- Strip clubs have gone tits up
- A submarine inspection company has gone under
- The paper company supplying origami enthusiasts has folded
- Many excavation companies may never dig out, and …
- Several drilling companies have warned they’ll never get out of the hole
Meanwhile, this week a financially despondent vendor was found dead in his ice cream van covered with nuts and strawberry sauce; police said he had topped himself.
Other Useless News
Here are the top five articles viewed by my 32,112 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 38 Secrets for Success: My Personal Finance Manifesto
- 10 Thankless Low-Paying Jobs That People Often Accept Anyway
- Great Tips for Seniors Who Want to Live Frugally
- How to Start a Booming Money Lending Business
- 7 Ways to Save Money on Your Monthly House Expenses
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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
After reading my recent article outlining 18 things the millionaire next door doesn’t want you to know, Tina left this comment:
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