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 have a thoroughly enjoyable weekend.
Okay, let’s get right to it …
The greatest guilt of today is that of people who accept collectivism by moral default; the people who support plans specifically designed to achieve serfdom, but hide behind the empty assertion that they are lovers of freedom, with no concrete meaning attached to the word; the people who believe that the content of ideas need not be examined, that principles need not be defined, and that facts can be eliminated by keeping one’s eyes shut.
— Ayn Rand
You can observe a lot just by watching.
— Yogi Berra
Credits and Debits
Debit: Did you see this? Forbes is reporting that through the first week of July, 8708 retail store units have, or are planning to, shutter operations in the US this year — and that number could quickly surpass last year’s total of 9302 before the end of September. Yes, yes; I know what you’re thinking … but the V-recovery isn’t expected until October.
Debit: On a related note, casual or fine dining sit-down restaurants and mom-and-pop diners with little savings are, not surprisingly, expected to experience the brunt of this crisis. Unfortunately, that comprises the vast majority of non-chain eateries; the Independent Restaurant Coalition says up to 85% could permanently close by the end of the year. Sad.
Debit: With the ensuing economic contraction, highlighted by thousands of retail stores and restaurants permanently closing their doors, it’s clear that at some point the stock market is going to have to adjust to account for the ensuing deep economic scarring resulting from all of these lost jobs. Speaking of deep scarring …
Debit: Of course, that will have to be some other time because, despite the massive pullback in March and April and all of the other rotten economic news that is occurring, on Monday the S&P actually moved into positive territory. No, really.
Debit: In other news, Peter Schiff says that China is considering stopping all trade with the US. Assuming that’s true, the only question is: What took China so long to consider this option? After all, America no longer has the industrial capacity to reasonably satisfy the trillions of IOUs we’ve given to China over the past two decades. I mean, how many Harleys, cases of Bud, and pallets of MyPillows do they really need?
Need a laugh?? This. Is. Really. Hilarious! Police called out to investigate a motionless man out in the cold hugging a pillow.
Turned out to be a cardboard cut-out of the @MyPillowUSA creator Mike Lindell. 😂😂😂🛏#MyPillow https://t.co/fU8OonmLjhKari Lake (@KariLakeFox10) March 2, 2019
Debit: In essence, Schiff says that by producing real goods for nothing but paper promises, China has been artificially propping up Americans’ standard of living. But by stopping, China will raise its citizens’ living standards at the expense of most Americans. For the US, that would be the worst trade since the Red Sox sent Babe Ruth to the Yankees for $100,000 in 1919. Yes, even though the dollar was actually still worth something back then.
Credit: Meanwhile, for the first since the Great Depression, Americans are having to wait in line for an ever-growing list of limited resources. As J. Jeffrey Inman, an associate dean at the University of Pittsburgh, notes, “The US got spoiled because we’ve always had a plentiful, efficient supply chain. But now we’re seeing what happens when it gets disrupted.” Uh huh. But it’s not just supply chains that are breaking …
Credit: I see that long-time deflationist, Russell Napier, threw in the towel this week, and admitted that inflation will be 4% by 2021. Why the switch to an inflationary outlook? Napier says its because “control of the money supply has permanently left the hands of central bankers. As a result, the money supply will now be set by politicians seeking re-election.” Yep. And I suspect even Stevie Wonder could look at this chart and see where the pols took over …
Debit: Once you know that politicians have a tighter grip on the money supply than ever before, you can see why at least one senator who sits on the Banking Committee is asserting that Fed board nominee, Dr. Judy Shelton, is “dangerous” because she’s a gold advocate. I agree … an honest monetary system backed by gold is dangerous — to Congressmen who love big government and mortgaging our kids’ future to buy votes. (Psst. That would be virtually all of them.)
Judy Shelton, Trump nominee for the Fed, has DANGEROUS economic views. Her beliefs?
▶eliminating the Fed’s independence and federal deposit insurance
▶returning the U.S. to a gold standardWe need sound economic policy, NOT fringe theories, at our central bank. #StopShelton pic.twitter.com/q2k7AnZgTw
Sherrod Brown (@SenSherrodBrown) July 14, 2020
Credit: Currently, the economy requires more than $4 in debt to manufacture $1 of economic growth — as a result, the Fed has no choice but to continue monetizing the debt indefinitely. Unfortunately, as investment advisor Lance Roberts notes, “The wheels will come off the cart if interest rates rise for any reason.” Heh. I see Lance is a Formula 1 fan …
Credit: The normally very staid macroeconomist Alasdair Macleod continues to turn heads by warning that “a banking crisis is a near certainty. But this time it will almost certainly require banks to be taken into public ownership. The cost will be immense; paid for by inflation. And the scale of it will mean unprecedented destruction of wealth.” Agreed. Oh … by the way, Alasdair: the tin foil hat looks absolutely fabulous!
Credit: As Egon VonGreyerz reminds us, “A world used to rising living standards based on debt and fake money is under the illusion that’s all that’s needed to create wealth — but sustainable wealth can never be achieved by financial wizardry and hocus pocus money. It requires the creation of real value based on hard work with the production of goods and services.” Sadly, most people are going to find that out the hard way.
By the Numbers
Here are the top selling automobiles in the US this year through 31 March 2020. Is your car on the list?
10 Nissan Sentra (thousands of cars sold: 23.0)
9 Hyundai Elantra (25.7)
8 Chevrolet Malibu (35.3)
7 Ford Fusion (36.9)
6 Tesla Model 3 (42.0)
5 Honda Accord (47.1)
4 Nissan Altima (47.3)
3 Honda Civic (63.2)
2 Toyota Corolla (69.2)
1 Toyota Camry (77.2)
Source: Autoweek
The Question of the Week
[poll id="330"]
Last Week’s Poll Result
What percentage of your portfolio is comprised of physical precious metals?
- 0% (78%)
- 1% to 10% (17%)
- More than 10% (5%)
More than 2000 Len Penzo dot Com readers answered last week’s poll question and it turns out that just 2 in 9 of them own at least some physical gold or silver. And while that may sound like a paltry total — especially in the current economic climate we find ourselves in — it’s still higher than the 17.6% of all Americans owned physical precious metals in 2019, according to this survey by Gold IRA Guide.
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.
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Useless News: Love and Marriage
While attending a marriage seminar on communication, Wally and his wife Carolyn listened to the instructor declare, “It’s absolutely essential that husbands and wives know the things that are important to each other!”
The instructor then specifically addressed the men, “So, gentlemen … how many of you can describe your wife’s favorite flower?”
Upon hearing that, Wally leaned over, gently touched Carolyn’s arm and whispered, “It’s Pillsbury All-Purpose, isn’t it?”
(h/t: Sam I Am)
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. Yukon (1.68 pages/visit)
2. Ontario (1.65)
3. British Columbia (1.59)
4. Alberta (1.58)
5. Quebec (1.55)
9. New Brunswick (1.42)
10. Saskatchewan (1.41)
11. Northwest Territories (1.33)
12. Newfoundland & Labrador (1.29)
13. Prince Edward Island (1.20)
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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
After reading my piece on things people overpay for, Kenny Schneider added this additional pearl of wisdom regarding the high cost of first-class air travel:
Coach gets you there just as fast.
So true, Kenny. Too bad it doesn’t keep the TSA from making air travel, ahem … frisky business.
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
Times are going to be increasingly hard, for a long time, I think.
Not many of us are alive who lived through the great depression of the 1930s, but those of us who did have some idea of what’s ahead.
I’m afraid you are correct, Dave. When the money printing machine finally throws a rod, those who are largely dependent on the government for their income — both directly and indirectly — are going to be in for a shock.
That being said, I believe those who are collecting SS will be the least affected, if at all.
I’d disagree Len. As Alan Greenspan testified to Congress in 2005:
“We can guarantee payments, but not purchasing power”
Social security recipients have been getting reduced purchasing power for decades due to under figuring real inflation in the COLA adjustments, and at some point down the road, they will lose most or all of their purchasing power assuming they still get a monthly deposit.
I realize the purchasing power will decline … but I believe that they will try to radically adjust the checks upward to compensate for that. Of course, I could be wrong, but politically, I think they have no choice.
It’s definitely stormining out there. Economically storming. Politically stormining. I was in clinic 3 hours late in clinic due to child custody issue and police were called, this is all due to the downstream effects of all this upheaval. It’s funny how people don’t realize that their life circumstances are all created by these forces. What can one do? I just sit there and be an anchor in society and watch the storm pass and hope we all make it.
Great attitude, Dr. P.
I think that is the responsibility of all of who can do so.
As I’ve said here many times before, the world is not going to come to an end; monetary resets have occurred many times before in human history. But it will require some serious adjustments that will force people to be more self-reliant and focused on personal responsibility.
Hi Len,
Great roundup this week! I’m a bit surprised the number of your readers who own silver and gold isn’t higher than 22%. Even if you don’t have a lot of money at about $25 an ounce you can still buy a little silver every month like I do.
Sara
I am too, Sara. The hardest part is buying that first physical ounce. It seems that, for many people, as soon as they get over that hurdle, the light comes on and they have no trouble building their stack from there.
Gold standard may not be dangerous, but getting rid of FDIC insurance is.
Why is getting rid of deposit “insurance” dangerous?
Deposit “insurance” comes with moral hazard. It’s primary flaw is that it removed the natural wariness that people used to have when handing over their hard-earned savings to a bank; a wariness that in turn forced the banks to be somewhat responsible with their customers’ deposits.
In the old days, poorly run banks routinely went out of business — so it paid to be careful which one you entrusted your cash to. Thanks to deposit “insurance”, poorly-run banks no longer need to worry about a run on their deposits when the word gets out that they’re being reckless or suffer from incompetent management.
And if you’re wondering why I put “insurance” in quotes, it’s because FDIC insurance has about $20 billion — with a ‘B’ — available to cover the approximate $9 trillion — with a ‘T’ — in insured accounts.
Yes, the Fed can print the shortfall if the banking system collapses — but what do you think that will do to the currency?
Len,
If you would be comfortable doing so, I and many of your readers would perhaps be interested in knowing how much of your wealth is in metals (as a percent of your wealth, not as an absolute dollar amount which would be tacky/nosy/rude). You have been a strong advocate of holding some wealth in metals and was curious as to the percent of your holdings and in what form (IRA, ETF, held personally). Given your position on the failure of fiat currency, I would guess it is over 20 percent. Very curious, if you are comfortable in answering. Thank you.
I appreciate the question, Erik.
I own no precious metals ETFs like GLD or SLV — as I have said here many times before, unless you are purely buying for speculative purposes, it makes zero sense to own these precious metal ETFs because they are rife with counterparty risk, as evidenced by the number of issued shares far in excess of the metal they purport to have on hand.
Without getting too specific, my physical precious metals, managed precious metals fund IRA (stocks only; no physical), precious metals mining stock ETFs, and speculative mining stocks, currently comprise about 45% of my net worth (excluding home equity). The rest is tied up in my 401k (with no precious metals exposure) and cash.
Now in retirement, but still stacking with excess retirement funds (and the love that keeps on coming from Uncle Sam in the form of ‘stimulus’…ahahhaaaa), our ratio is 22% cash/CDs to 78% physical metals.
When I retire, my 401k will be divided between the managed precious metals IRA and physical gold (assuming there is any physical still available); not quite sure what the split will be, but the majority will definitely be put into the precious metals IRA stock fund, rather than physical metal.
“If you tell a lie big enough and keep repeating it, people will eventually come to believe it.” – Joseph Goebbels
Napier says inflation is going to be 4% next year? That’s a riot!
It’s been 10% for a long time now. The Chapwood Index is proof.
You got that right. ShadowStats too.
I put in my car vote: Japanese. It still counts if it’s a 1990 model, right? 😀
It’s really hard to know what in the world is going to happen in the near future with how crazy the world economy is.
The US is going to keep getting clobbered, whether that’s tied directly to the virus or shutdowns.
The worst part is that all the pumping means it’s incredibly difficult to keep funds in low-risk assets (savings, bonds) as it all gets left behind by inflationary pressure in stocks and abysmally low-interest rates.
Guess we’ll see.
Yeah, Chris. The criminal Fed has been punishing financially responsible people (i.e., savers) for more than a decade now in favor of reckless borrowers.
The only silver lining is that I am in the process of refinancing my home loan for the sixth time since 1997 — 30 yrs at 2.75%! Thanks, Fed!
Len, wasn’t the game over the moment that every dollar of debt could no longer generate more than a dollar of production?
The game was technically over in 1971 when Nixon broke the dollar’s anchor to gold. But you’re right … once a buck of debt could no longer generate in excess of that amount in GDP, the US entered a doom loop from which there was no escape.
High unemployment from restaurants/shop closures – the stock market will boom! The higher the unemployment the higher stocks go.
Regarding vetting banks, I get your point but it is near impossible for the average Joe to vet a major bank. If even if Joe did so, he would have to keep doing so continuously as any bank can make an idiot decision at any time in the future. So much work for 1%…. No good solution but to maybe lower the insurance level. Most folks don’t have $400 for an emergency if you believe the polls, so why set is so high at $250K.
If China stopped trade with the U.S. it would be M.A.D. for both parties.
Cheers,
I’m becoming increasingly convinced that the stock markets are not going to fall to levels commensurate with historic P/E levels because the Fed printing can’t be stopped. It may drop 20% or so, but the Fed will come in and flood the markets with whatever liquidity is required to keep the markets elevated. Of course, the dollar will lose purchasing power greater than the rate that stocks rise, so in real terms it will be a net loss.
I’ve been saying for a few years that the Dow-gold ratio was headed to 1 or less. If I am correct, then whether the Dow falls to 5000, or keeps rising (thanks to the Fed) to 30,000 or above, it will be positive for gold.
Silver is “up” (a lot) in fiat dollar price, which actually means the fiat dollar is down a corresponding percentage amount, measured against silver. Same for gold, a little less, right now
In the short run, who knows what comes next in the phony world of international monetary manipulation?
Long run, the human condition will determine the outcome and I’m sure it will be in favor of precious metals, primarily gold, as it has been for thousands of years.
Yep … silver up almost 7% today (Tuesday). Another great day for the miners too.
I couldn’t choose more than one topping for your hot dog survey. Instructions say to choose all that apply, but I got an error message saying only one choice allowed. LOL, yes, there are more important things to worry about, but thought I would let you know.