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 …
A board of directors is one or two ambitious men — and a lot of ballast. Groups of men are vacuums; great big empty nothings. Sit at any committee meeting. The point is only who chooses to fill that nothing.
— Ayn Rand
Credits and Debits
Debit: Did you see this? More than two-thirds of American movie theaters have been open since Labor Day — but even the release of top-notch movies by big-time directors isn’t putting people back in the seats. After two weeks, Christopher Nolan’s latest flick, Tenet, has earned 80% less at the same point than his previous blockbusters Inception, Interstellar, and Dunkirk — and it’s still struggling to attract movie-goers.
Credit: Apparently, the 160 WalMarts that turned their parking lots into drive-in movie theaters this summer were unable to revive interest in the movie business — although it seems to have boosted WalMart’s bottom line.
Debit: Curiously, despite WalMart’s growing sales, the company decided it would be a good idea to increase the rank and file’s workload by cutting employee hours — which suggests everyone would be much better off if we had more people like this on the top floor who are tasked with making all of the important business decisions:
Credit: Maybe nobody is going to the movies because everybody’s out buying new homes. After all, with the average 30-year fixed-rate loan at 2.9%, first-time homebuyer activity was up 19% in August from July. As a result, existing home sales are expected to hit their highest level since — get this — December 2006, near the height of the last housing boom. So … is this the sign of a booming market — or merely an exodus from the cities to the suburbs?
Debit: Meanwhile, by the time the fiscal year ends in a few days, the US government will have spent $6.6 trillion. Unfortunately, it will have collected just $3.3 trillion in revenue. This prompted David Stockman to note that, “a government that borrows one-half of every dollar it spends is ‘banana republic’ stuff.” Uh huh. Hey … that’s a damning indictment coming from the man who was Director of the Office of Management and Budget under President Reagan.
Beautiful Japanification of the US…. read read read the history of Japan… #USDebt #StockMarket pic.twitter.com/95NDJm9h1N
Datatistic (@datatistic) September 23, 2020
Debit: Speaking of damning indictments, a recent study by the Congressional Budget Office found that the US federal debt held by the public will surpass its historical high of 106% of GDP in 2023 and continue to climb thereafter. It gets worse; the CBO says that by 2050, debt as a percentage of GDP will be 2.5 times what it was in 2019. Heh. What’s truly funny is the CBO actually believes the current system will still be around in 2050.
Credit: According to Mr. Stockman, the world’s central banks have badly miscalculated by erroneously believing that: 1) inflation is too low; 2) low interest rates fuel real growth; and 3) savers hinder the economy. As a result, Stockman says, “Sooner or later, the monetary house of cards erected by the Fed and its fellow central banks over the last several decades is coming down.” I’ll take that action — put me down for a hundy on “sooner.”
If you showed this pic to anyone in 2019 theyd think Powell is robbing a bank.
Turns out hes just robbing the bottom 90%. pic.twitter.com/wfeNBZRYNz
Sven Henrich (@NorthmanTrader) September 22, 2020
Credit: And now you know why last week China announced that they may gradually reduce its holdings of US Treasury bonds to about $800 billion from the current level of more than $1 trillion. By the way, China also hinted that they could dump all of their Treasury bonds in a military conflict with the US, but at least a war would distract most Americans from the inevitable decline in living standards that would result. So there’s that.
Credit: But seriously, China’s comments should have most Americans on edge because, as macroeconomist Alasdair Macleod warns, “the fact that China is willing to escalate its financial war with the US is very serious. The message should be clear: The Chinese are prepared to collapse the US Treasury market.” Okay … but if they want to succeed, they’ll need to be truly committed to completing the job. Unlike this guy …
Credit: Of course, if China did sell all of its US Treasuries, it would significantly impact the dollar’s purchasing power — and not for the better. Mr. Macleod warns that “if China was to dump its all of its US Treasuries, don’t think other foreign holders would stand idly by — this action would probably end the dollar’s role as the world’s reserve currency.” As for the most likely replacement reserve currency? One word, folks: gold. And maybe silver. (Yes, that’s four words. So sue me.)
Debit: The ailing greenback is precisely why a digital Fed dollar is in the works that, as Zero Hedge notes, “will revolutionize the entire fiat monetary system; effectively removing commercial banks as financial intermediaries, as they’ll allow the Fed to make direct deposits into Americans’ ‘digital wallets’ — a process that also makes Congress redundant, as a handful of technocrats quietly take over the US.” If only for a little while.
By the Numbers
More people than ever are working from home. Here are some selected results from a recent survey of more than 1000 Americans on the impacts of this new work-from-home lifestyle:
81% Respondents who say they are working a full-time job from home during the COVID outbreak.
5% Respondents who worked full-time from home in 2018, according to the US Census Bureau.
49% Respondents who say they are more productive when they work from home.
42% Respondents who say they are less productive when they work from home.
72% Respondents working from home who say they do at least some of their job every week while in bed.
The Question of the Week
Last Week’s Poll Results
Do you smoke tobacco, cannabis, or electronic-cigarette products?
- No (69%)
- No, but I used to. (22%)
- Yes (9%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that just 1 in 11 are currently active smokers. That is significantly lower than a 2018 survey that found 14% of all Americans smoke cigarettes.
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: A Man of Few Words
Jack was always insisting to his wife that women talk much more than men. In order to prove his point, he showed her a study which indicated that, on average, men use approximately 1300 words per day as opposed to women, who use approximately 2600.
His wife thought about that for a moment and then replied, “That’s very easy to explain. Women have to use twice as many words as men because we have to repeat everything they say.”
Other Useless News
Here are the top five articles viewed by my 34,281 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 4 Good Reasons Why Some Quarters Are Painted Red
- 18 Crazy Things You Didn’t Know About the National Debt
- 8 Stupid Fees Consumers Hate to Pay — But Often Do Anyway
- Are You Smarter Than a Fifth Grader? Then Calculate This Bill’s Tip
- How Do I Choose the Best Air Miles Credit Card?
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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
Jeremy left this comment after reading my taste test experiment on six different varieties of kid cereal that suggested the little ones could be easily fooled by putting low-cost generic knockoffs in name-brand boxes:
You’re a wise man, Len. I think everything you say makes a lot of sense!
I’ve been telling the Honeybee that for 25 years now, Jeremy — and she still doesn’t believe me.
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
Retired Medic says
Hey Len how about another choice on the question of the week. Retired but still buying some gold and silver . Thanks for your weekly insights . I start every Saturday off with a cup of joe and your writings .
Len Penzo says
Thanks, RM! I know there are more than a few retired people out there who are slowly converting some of their cash savings into physical precious metals.
Sara King says
I love Jerry Lewis (God rest his soul)! He made some great movies in the 50’s and 60’s.
One last thing. Silver is back on sale! So much for triple digits any time soon.
Have a great weekend.
Len Penzo says
I’m a huge Jerry Lewis fan too, Sara.
I loved almost every one he made through The Nutty Professor — then the quality started to lag after that.
The Errand Boy is probably my favorite Lewis movie out of all of them.
The Dark Knight says
The US is bankrupt. The debt to GDP ratio is banana republic material. The debt is getting harder and harder to service. The only way rates continue to stay low is because the only bidder in the market is the Fed. Have I missed anything?
Oh yah, there is no way out.
Len Penzo says
A monetary system backed by honest money (precious metals) will put us back on the right course — but we’re going to have endure the pain that comes with paying the piper regardless.
Len, as you explained last week, we’ve gone from a nation of producers to a nation of consumers. It’s been that way since Nixon closed the gold window, and it will stay that way until the system resets or collapses beforehand. I’m hunkerin down because the storm is just getting started.
If you consume more than you produce it will eventually catch up to you. We’ve been able to keep the ruse going with complicated accounting tricks – but that game is coming to an end.
Len Penzo says
The piper will be paid. We’re all going to have to endure the pain that comes with that. Unfortunately, it won’t be evenly distributed — the middle class will end up feeling the brunt of it.
The Fed keeps pumping trillions and trillions into the system to keep their Ponzi scheme going. When this breaks, Lord help us all.
Len Penzo says
I’ve said it before and I’ll say it again. The U.S.A. is buried under a huge mountain of debt. But the dollar will always be the cleanest dirty shirt available.
Len Penzo says
No, the dollar won’t always be the cleanest dirty shirt. It’s on its last legs now and something is going to replace it.
Sam I Am says
Len Penzo says
Sam: I think you’re joking but, in case you’re serious …
No, we’re not doomed. Life will go on.
Smart Guy says
The inflation bugaboo is a fairy tale. A deflationary depression is coming. The free money spicket will be left on until we are drowning in cash. As that goes on, fewer and fewer people are going to work until everything (or almost everything) completely shuts down and nothing (or almost nothing) is being produced.
Len Penzo says
For a smart guy, that is interesting logic.
If the “free-money spigot is left on and we end up drowning in cash” as you say — and I agree with you, because the Fed has no other realistic choice — then how do you conclude that all of that cash will actually cause prices to fall (which is what happens in a deflationary environment)? An increasing amount of dollars in circulation chasing a decreasing amount of goods and services will result in higher prices, not lower.
The end game is hyperinflation — loss of confidence in the dollar due to over-issuance of the currency. The Fed will go with this option because our debt-based monetary system requires an expanding currency supply to function; otherwise it would implode.
Great round-up, Len. I like that they’re both informative AND fun to read. Keep it up.
Len Penzo says
Thank you, Tabby.
China is blowing smoke. If they devalue treasuries it would be like pulling the plug on a lifeboat – with both China and the US in the same boat. We’d go down together. Funny enough, just like the old Trump real estate deals. His creditors had to save him because they would be hurt more then him. The Art of the Deal….
Len Penzo says
If China has upwards of 20,000 tons of gold — and I believe there is plenty of circumstantial evidence that suggests it does — then they have more than enough gold to offset any losses.
Remember … he who panics first, panics best! 😉
China will suffer some from dumping US debt en mass….but if (more likely when) they do, it will be because they have built themselves up to the point that domestic consumption takes the place of much that was formerly sold to the US……and no longer need the US market. They have also turned to 3rd world nations (as in Africa/South America) to develop markets and resources (Belt & Road plan) that will help minimize the potential loss of US markets.
In addition to the the unknown amount of gold held by the Chinese govt (as Len said, rumored to 20,000 tons or more), the govt has also encouraged the sale of gold to individuals over the last couple decades, so the amount in private hands there is another HUGE factor in the equation.
Precious metals have always been a traditional source of savings there, adding govt encouragement (unlike the almost 100% opposite view here) is merely icing on the cake…..but puts the population far ahead of western folks in terms of the amount of real money held. When the switch to a gold based monetary standard finally comes, both the govt and a fair amount of the population will be well positioned to take advantage of it.
Sorta poetic considering the Chinese invented paper currencies……ahhahahaaaa