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.
Despite the continuing economic slowdown, I hope all you dad’s out there have a thoroughly enjoyable Father’s Day weekend. You can bet I’m planning on it!
Okay, let’s get started …
Giving money and power to the government is like giving the car keys and whiskey to teenage boys.
— P.J. O’Rourke
There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.
— Ludwig Von Mises
Credits and Debits
Debit: Did you see this? During the past 13 weeks, more than twice as many Americans have filed for unemployment than the total number of jobs that were created in the 10 years since the the Great Financial Crisis ended. Specifically: 22 million jobs created since 2010, versus 45.7 million jobs lost since mid-March. By the way, that’s 388 lost jobs for every confirmed US coronavirus death. But I’m sure the economic shutdown was worth it.
Credit: And while the economy is slowly getting back to normal, don’t expect pent up demand to save us from what’s coming. As Harley Dalton notes, “Individuals will clearly suffer in their quality of life; and this is especially true for society’s poor (because) an economy which produces less than before will be forced to sacrifice the availability of all kinds of privileges we once enjoyed.” Uh huh. Oh, and speaking of suffering individuals …
Credit: The financial market is already producing less returns too. As market analyst Bill Blaine points out, “We’ve reached a curious limbo in markets. For 10 years they’ve been hopelessly dislocated by central bank interventions and regulatory blunder; the unlimited liquidity means all the cash pumped into markets remains invested in financial assets, resulting in massive price inflation.” Imagine that.
Debit: Now for punchline: Blaine notes that, “To get the same return from investments you made 10 years ago, you have to invest 10 times as much today, which is why most of us will never ever be able to retire.” The good news is that won’t bother the 15% of Americans who have never invested a penny for their retirement.
Debit: Of course, the current economic meltdown is precisely why the Fed has been forced to monetize the debt. In fact, US Treasury debt has increased by $2.86 trillion in 2020, which is less than the $3.0 trillion increase in the Fed’s balance sheet over the same period. For those counting at home, that means the Fed has monetized 105% of all Treasury issuance this year alone. Tick tock, Almighty Dollar. Tick tock.
Debit: It’s no secret that beginning in 1981, the National Debt has, on average, doubled every eight years. Most recently, from 2009 to 2016 the National Debt doubled from $10 to $20 trillion. And although it seemed improbable in 2017, recent events suggest that the National Debt will almost certainly reach $40 trillion by the conclusion of the next eight-year cycle in 2025. Then again, it may just surpass that figure — and by a long margin.
Credit: The current economic turmoil is entirely because our debt-based monetary system has finally reached the end of the line. But, as macroeconomist Alasdair Macleod notes, that isn’t stopping those who depend on that corrupt system — mainly government and so-called academics — from justifying limitless fiat currency expansion via modern monetary theory (MMT) in a last ditch attempt to save it. Sounds like Utopia to me …
Debit: Meanwhile, markets everywhere remain completely broken — highlighted by absurdities such as negative nominal interest rates in Europe, negative oil prices, ten-fold gains for stocks of bankrupt corporations, and record highs for the Nasdaq during a depression. It’s absolutely crazy. Before you know it, an ephemeral bitcoin will cost five times more than an ounce of real physical gold. Oh, wait …
Credit: As the great Bill Holter observed about the broken markets this week, “Equities have rallied sharply off the lows while the real economy has bottomed. Stocks were already at record valuations in February before the shutdown; now they’re priced far beyond perfection, while debt has dangerously ballooned far beyond anything I’ve ever seen — at the same time the real economy is on life support!” Okay, Boomer …
I’m so old I remember when asset prices actually corrected during recessions.#nevercorrect#alwaysbubble pic.twitter.com/RFcCDMhChc
Sven Henrich (@NorthmanTrader) June 18, 2020
Credit: Market analyst Dave Kranzler felt like reminiscing too: “This stock bubble is little more than a money transfer mechanism from the public to Wall Street. I said 15 years ago the Fed would eventually print enough money to enable the elitists to sweep every last crumb of the public’s money into their own pockets before allowing the system to collapse. We may be on that final stretch.” We certainly are. And despite all of the warning signs, most people still don’t see it coming.
By the Numbers
Here are six high-frequency indicators that can be used to track America’s progress toward economic recovery:
441,275 Total number of US air travelers on June 7th (vs. 2.7 million on the same day last year).
75 Percentage decline in total restaurant diners through June 6th (vs. the same period last year).
11 Consecutive weeks that gross movie ticket sales have been $0.
43 Year-over-year percentage decline in hotel occupancy through the first week of June.
20 Percentage decline in gasoline consumption through May 2020 (vs. same time last year).
41 Year-over-year percentage decline in US public transit riders through June 6th.
Source: Calculated Risk
The Question of the Week
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Last Week’s Poll Result
What would you do if you owed significantly more on your mortgage than it was worth?
- Keep making payments (52%)
- I’m not sure (37%)
- Give the keys to the bank (11%)
More than 2000 Len Penzo dot Com readers answered last week’s poll question and it turns out that 1 in 9 of them say if they were seriously underwater on their home mortgage, they’d be sending an envelope full of jingle mail to their lender. Considering that the cash for the loan was created out of thin air, I would too.
This week’s question was provided by reader Frank. And if you have a question you’d like to see featured here, please send it to me at Len@LenPenzo.com and be sure to put “Question of the Week” in the subject line.
This Week’s Sponsor: Get the Best Insurance Rates with Gabi!
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Useless News: New Driver
After Martin received his brand new driver’s license, the entire family trooped out to the driveway, and climbed into the car so he could take them on a ride for the first time.
As they got to the car, Dad immediately headed for the back seat, directly behind the newly-minted driver. Spying his dad in the back of the car, the beaming boy said to his father, “I’ll bet you’re back there to get a change of scenery after all those months of sitting in the front passenger seat teaching me how to drive!”
“Nope,” replied Dad. “I’m gonna sit here and kick the back of your seat as you drive, just like you’ve been doing to me for all these years.”
(h/t: Jon)
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. Ontario (1.91 pages/visit)
2. Alberta (1.87)
3. Saskatchewan (1.83)
4. Yukon (1.81)
5. Nunavut (1.75)
9. British Columbia (1.41)
10. Nova Scotia (1.39)
11. Quebec (1.33)
12. Prince Edward Island (1.30)
13. New Brunswick (1.25)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Ontario, eh) — or not (ahem, all you hosers living on the frozen New Brunswick tundra) — please don’t forget to:
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Thank you!!!! 😊
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
After reading my article explaining why corner lots are for suckers, Tim Sanders left this on my comment board:
You’re a f***ing idiot. I can’t believe I just wasted three minutes of my life reading this.
Actually, Tim, you wasted four minutes of your life — I deleted your comment.
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.
Photo Credit: stock photo
Hi Len,
There is nothing I can do to stop whats coming, which is why I’m setting aside a small portion of my weekly pay to buy real silver. Slow but steady saving. I hope it will be enough!
Happy Father’s Day!
Sara
Thank you, Sara!
p.s. – You’ve been stacking for as long as you’ve been commenting here, so I suspect what you have will be enough to protect you.
Len,
I am beginning to believe more and more that this truly was a Plandemic. I think this whole virus thing was put in motion to distract from the world central banks economic failures. I think the reset will eventually come from this, however I havent a clue as to in what form or fashion it will be.
Did you see the idea of the next government stimulus package paying 50% of the bill on peoples vacations up to $4000. 😆
Im guessing the next stimulus package will be introduced in the next few weeks, so I expect to hear the currency machine to go into overdrive!
BBBBBBBRRRRRRRRRRRRRRRRRRRRRRR
I didn’t see the story about a stimulus program that will pay half of your vacation bill. Sounds like a story from the Onion or Babylon Bee.
On the other hand, I have a 25th wedding anniversary next year, so that would come in handy. 😜
Might not be that long!
https://youtu.be/l9xeSOdr9Uc
“As Harley Dalton notes, Individuals will clearly suffer in their quality of life”
It’s already being promoted by the lackey press (The rich, “celebrities” and the like, will remain in their mansions and hideouts):
https://www.businessinsider.com/tiny-home-most-popular-us-states-2020-6
“Market analyst Dave Kranzler … : ‘This stock bubble is little more than a money transfer mechanism from the public to Wall Street. I said 15 years ago the Fed would eventually print enough money to enable the elitists to sweep every last crumb of the public’s money into their own pockets before allowing the system to collapse. We may be on that final stretch.’ We certainly are. And despite all of the warning signs, most people still don’t see it coming.”
But the rich are now starting to see it coming and buying gold:
https://www.reuters.com/article/us-health-coronavirus-gold-wealth-analys/worlds-ultra-wealthy-go-for-gold-amid-stimulus-bonanza-idUSKBN23P253
Well, Dave … when the smart money is buying gold, you’d hope more people would pay attention!
I’m paying attention. In the past 2 months I bought two gold eagles from the local coin shop. Can’t wait to buy more real money. I can see how this can get addicting.
Caution Shaun…it’s extremely addictive !
Been buying off and on since I stopped by a local coin shop in the 90’s and bought my first 1/2 oz eagle for $190.
Early this year, (@ $1550) added a few one ounce eagles to the stack, which seems cheap now with spot gold @ 1730’ish.
Shaun,
Yes it is addicting! I’ve been stacking silver since 2013. You just know you are saving something of true value.
Sara
Saw a great comment the other day that said the stock market keeps rising now because TINA and FOMO are happening at the same time.
The stock market used to signal the health of individual companies, but it’s all a mirage now. I don’t know what it is telling us.
I knew FOMO is “fear of missing out” but I had to look up TINA (“there is no alternative”). I agree somewhat; precious metals are an alternative — but the media still stigmatizes them for the most part.
One could also argue it was like that before the first market crash in March.
It’s not rocket surgery! The Fed has created over $5 trillion bucks in the past few months. All of that money is going into the stock market.
Almost all of it. As the printing continues, I expect to see more of it leaking into the real economy, driving up prices. We are watching the destruction of the currency going into its terminal phase.
What really gets me mad the more I think about it (and I think about it a lot these days) is that every new dollar printed by the Fed reduces the real pay I am getting from my paycheck. It’s infuriating.
Yes, Marc; it is.
The lack of tax revenue from the shutdown is only going to make things worse. I think things are going to get really bad later this year.
I’m with you, Tom. Everybody should be using this period of relative financial calm to prepare as much as they can.