Black Coffee: Hope Is Not a Plan

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.

Let’s get right to this week’s financial commentary …

The first duty of a man is to think for himself.

— Jose Marti

The last duty of a central banker is to tell the public the truth.

— Alan Blinder, former Vice Chairman of the Fed

Credits and Debits

Credit: Did you see this? Warren Buffett’s Berkshire Hathaway unloaded more than a quarter of its stake in Wells Fargo — and 61% of its position in JP Morgan Chase — while acquiring a new position in the largest gold miner in the world, Barrick Gold. That’s right; he’s dumping banks for gold mines. Or, to put it another way: hell has officially frozen over.

It’s hilarious that #Buffett who always said that Gold doesn’t produce anything now buys a big producer of stuff that doesn’t produce anything. #barrickgold #GOLD

Daniel vd Berg (@danielvdberg1) August 15, 2020

Credit: Buffett’s move into the yellow metal had macroeconomic guru Bill Holter asking a few questions: “Does this mean he no longer believes gold to be a ‘pet rock’? Can it be he finally sees how bankrupt the US has become? Does he finally see the credit risk of paper assets? Did someone show him that gold has increased roughly eight-fold in dollar terms since 2000 — and done so with zero credit risk? Welcome to the party, but what took you so long?” Indeed, Bill. Indeed.

Credit: Not surprisingly, fellow macroeconomist Alasdair Macleod concurs with Holter. “In these bizarre markets, the elephant in the room is systemic risk — visible to all, but ignored (because) everyone in government, central banking, and the mainstream media, believe our economic problems are due to COVID-19; so when the pandemic is over normality will return. But that’s a conjurer’s distraction.” Why? Well … because when the pandemic ends, the debt will remain.

Debit: By the way, signs of this systemic risk are everywhere. In fact, Macleod warns that highly leveraged Eurozone and Chinese commercial banks officially classified as “systemically important” are facing the prospects of soaring bad debts. Unfortunately, their asset-value-to-market-cap ratios strongly suggest investors know the banking system will be unable to cope with the deteriorating economies as time goes on. Uh huh. Speaking of not coping …

Debit: Needless to say, the risks extend beyond the banking system. A new survey via online rental platform, Apartment List, found 32% of renters and homeowners entered August with unpaid housing bills. At least 20% of respondents owed more than $1000. Among renters with back rent due, 49% have renegotiated lease agreements with their landlords or are doing so.

Debit: Then there’s this: As of August 9th, 424 US companies have filed for bankruptcy this year; that exceeds the number of bankruptcy filing for any comparable period since 2010. Never mind the more than 100,000 small businesses that have been forced to permanently close their doors due to the pandemic. The good news is: It’s impossible to have a V-recovery without first experiencing massive carnage to the economy. So there’s that.

Credit: Then again, despite the continuing bad economic news on Main Street, stocks continue to soar near all-time highs. As asset manager Egon VonGreyerz notes, “The biggest miracle currently is the stock market. After the March collapse, we’ve seen a rally that defies reality; a total disconnect with economic facts, based on a combination of hope and worthless printed money.” In other words: Let’s all pray that the Fed has a Plan B.

Credit: Of course, the incompetent Fed only has one plan. As MN Gordon notes: “The Fed, through willful cleverness, painted itself into a corner over several decades; there’s no escape. So the Fed will keep doing more of what it does. More money printing. More dollar debasement. More economic destruction.” Very true. Not to mention more of what central bankers do best of all …

Credit: Meanwhile, central banks around the world will continue to downplay the importance of the yellow metal because, as Dave Kranzler points out, “Gold is the kryptonite of fiat currency and the fractional banking system. It’s sunshine to the vampires who control the money supply and conjure fairy tales which purport the ability to control the laws of economics through modern monetary policy tools.” Yes; which is why they hate silver (crosses) too.

Debit: Central bankers hope that, after more than a decade, their unfettered money printing campaigns will one day make the massive global debt problem magically disappear. But that’s insanity; all that does is keep zombie companies solvent and misprice assets into the stratosphere. Eventually, inflation will make the worldwide debt problem “go away” — but only because the most basic of all economic laws still applies: there’s no such thing as a free lunch.

The Question of the Week

[poll id="335"]

Last Week’s Poll Results

What is the average gasoline mileage of your primary car?

• 20 to 30 mpg (71%)
• Less than 20 mpg (19%)
• More than 30 mpg (11%)

More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that just 1 in 9 currently drive a car that averages more than 30 miles per gallon. According to the US Environmental Protection Agency’s latest Automotive Trends Report, the average annual fuel economy for all US cars manufactured last year was slightly more than 25 mpg.

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.

By the Numbers

I couldn’t find any interesting financial stats to share with you this week, but maybe you can amaze your friends with these bigfoot facts:

17 Length, in inches, of the typical sasquatch footprint.

1811 Year that the first sasquatch footprints were discovered.

35 A bigfoot’s top running speed, in miles per hour.

10 The maximum height of a bigfoot, in feet.

490 Typical sasquatch weight, in pounds.

80% Supposedly, the chance of surviving a bigfoot confrontation if you offer it food. (No, really.)

1965 Year that Russia put the sasquatch on its endangered species list. (Two years later, France and Germany did too.)

Source: Mirror

Useless News: Math Test

A football coach walked into the locker room before a game, looked over to his star player and said, “I’m not supposed to let you play since you failed math, but we need you on the field tonight. So, what I have to do is ask you a math question, and if you get it right, you can play.”

Seeing that he had no other choice, the player reluctantly agreed. The coach then looked into his eyes intently and asked, “Okay, now concentrate as hard as you can. Tell me the correct answer to this: What is two plus two?”

The player thought for a moment — and then he thought for a couple more. Finally, he answered, “Four?”

“Did you say ‘four’?” the coach exclaimed, excited that the star got it right.

Just then, all the other players on the team began screaming, “Come on coach! Give him another chance!”

(h/t: Sam I Am)

Other Useless News

Here are the top five articles viewed by my 33,814 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. 9 Guilt Free Ways to Rip Off Your Credit Card Company
2. My 12th Annual Cost Survey of 10 Popular Brown Bag Sandwiches
3. The World’s Greatest Chicken Marinade Recipe
4. Power to the Pinched! The Personal Finance Anarchist’s Cookbook
5. 11 Ways to Make Your Retirement Savings Grow Faster

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(The Best of) 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

Michael in SoCal left this comment after reading my post that explains why getting a tax refund may be smarter than you think:

My wife and I have a formula we use for tax refunds: 25% to our travel budget, 25% to savings, 25% to spend how we want, and 25% to pay down debt.

Cool! At my house, we let democracy determine how any tax refunds get spent: one vote for me, and two votes for the Honeybee.

If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message.

Photo Credit: public domain