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 …
Hitting rock bottom is an opportunity to rebuild.
— Anonymous
We have come to the edge of the abyss. Now it’s time to take a bold step forward.
— Ed Balls
Credits and Debits
Credit: Did you see this? Both the Nasdaq and S&P 500 hit new all-time highs this week. Yes, yet again. And while the seemingly relentless upward trajectory of the stock market is great for 401(k) and other retirement accounts, just remember that the underlying reasons for those rising stock prices has less to do with the state of the economy than it does with the printing presses at the Fed.
$SPX pic.twitter.com/4xcikrkMcx
Sven Henrich (@NorthmanTrader) December 3, 2020
Credit: Speaking of high prices, economist Joseph Carson notes that, “Houses would be one of the most important measures to gauge inflation because their price cycles include three key ingredients of rising prices: easy credit, excess demand, and inflation expectations.” With that in mind, if actual house prices were used instead of rents, core CPI this year would have registered nearly twice the reported gain of 1.6%. Imagine that.
Debit: As part of its indefinite permanent quantitative easing (QE) counterfeiting program, the Fed said it plans to print $960 billion in 2021 — although many economists suggest it may have to print at least double that figure to keep the monetary system from seizing up — and that’s just for next year.
WhataTimeToBeAlive (@majida_knows) December 2, 2020
Debit: So why is the Fed willingly debauching its own currency? It’s simple: Since the value of financial assets in our highly-financialized economy is at a record 620% of GDP, the Fed now sees capital markets as a proxy for the US economy. And why is that, you ask? Because they know that means if the markets crash then the US economy will collapse in tandem — and that is verboten. Yes, even if that means destroying the dollar. If only that was as fun as destroying this stuff:
Credit: With more than $1 trillion in US Treasuries in their possession, the Chinese are well aware of what’s happening to the US dollar, which is why they’re selling them to buy and stockpile commodities. With that in mind, macroeconomist Alasdair Macleod notes that, “The most profound effect on a currency’s purchasing power comes when both foreign owners and domestic users realize debasement will continue and accelerate.” Uh huh. So we’re half way there.
Debit: How concerned are the Chinese and, presumably, other foreign nations? Well … ever since the Fed told the world on March 23rd that there was no longer a limit on how many dollars they will print to keep the monetary system from imploding, China has been dumping their Treasuries — their holdings recently hit a four-year low — while ramping up purchases of iron ore, copper, oil, wheat, cooking oil, and soybeans. Coincidence? You tell me.
Debit: You can be sure of this: It’s definitely not a coincidence that the seeds of the current monetary mayhem were planted in 1971, when the US dollar was decoupled from gold. Unfortunately, it’s that corrupt international system of currency which — for now — continues to determine the totality of life on this planet …
Credit: Of course, what makes all of this central bank monetary-malpractice so sinister is its ultimate impact on society. This week MN Gordon highlighted that fact when he noted that “the money you’ve saved, in addition to being property, also represents time and the sacrifices made to earn it. When the Fed inflates (the dollar) away it not only steals your money — it steals your life.” Sadly, if not somewhat ironically, it’s the middle class that’s affected most of all.
Credit: The good news is everyone can protect themselves from what’s coming. As asset manager Egon Von Greyerz reminds us, “It doesn’t really matter which currency wins the race” to lose all of their purchasing power first because every fiat currency has gone to zero over time. Here’s the undisputed truth: The only money that’s maintained its purchasing power throughout 5000 years of human history is gold. Okay … and silver too.
Credit: By the way, for those of you who are only thinking about the short term, keep in mind that gold is closely correlated with real — that is, inflation-adjusted — bond yields. As long as that correlation has not been recently invalidated, it at least suggests that the dollar price of gold (and silver) most likely reached a bottom last week. Then again, that and a silver quarter will get you a cup of coffee at Starbucks.
Historically, real yields & gold have a strong correlation. Note how gold took off near gold’s 2018 bottom as real yields fell. The recent drop in real yields may partially explain recent 3-day surge in gold mining stocks (even as gold kept falling). Time for gold to catch up?
fred hickey (@htsfhickey) November 30, 2020
Credit: This week, billionaire investor Ray Dalio warned that the intensifying conflict and degrading financial situation within America has the US “at a tipping point” thanks to “excessive debt and widening wealth- and political-gaps.” That being said, if central banks could dial back their reckless monetary policies, we’d have a shot at stepping away from the abyss — but they can’t. So over the edge we’ll go. The question is: Are you making plans to cushion the fall?
The Question of the Week
[poll id="349"]
Last Week’s Poll Results
How much is your Christmas gift budget this year?
- Less than $500 (47%)
- $500 – $1000 (30%)
- More than $1000 (23%)
More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that just over half of them will be spending more than $500 on Christmas presents this year. That comports with yours truly, who expects to spend just under $1000 on gifts this holiday season.
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
Here are the price increases for select assets since March 23rd, when the Fed announced it was going all-in on quantitative easing:
21% Gold
29% Aluminum
45% Soybeans
52% Copper
57% S&P 500
72% Nasdaq
86% Silver
86% Lumber
94% Oil (West Texas Intermediate)
207% Bitcoin
Source: King World News
Useless News: The Birds and the Bees
A young boy asked his father, “Dad, how were people born?”
His father said, “Adam and Eve made babies, then their babies became adults and made babies, and so on.”
The child then went to his mother, and asked her the same question. She told him, “Well, Honey … We were monkeys; then we evolved to become like we are now.”
The boy, who was now completely confused, quickly ran back to his father and said, “Dad! You lied to me! Mom said we started out as monkeys.”
The father smiled, and then replied, “I didn’t lie to you, son. Your mom was talking about her side of the family.”
(h/t: Sam I Am)
More Useless News
Hey, while you’re here, please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
2. Make sure you follow me on Twitter — oh, and Parler too!
3. Subscribe via email too!
And last, but not least …
4. Please support this website by patronizing my sponsors!
Thank you!!!! 😊
(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
After reading my article on Why You Should (and Shouldn’t) Use a Credit Card, Laddester L. Conyers shared this observation:
The credit card industry calls people like us who never carry a balance, ‘dead beats.’
Uh huh. But that’s mild compared to what most people call the credit card industry.
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
Len, it seems every day the music continues to play while we walk around the chairs. Trying to prepare for the inevitable crash, but it continues and I feel foolish to not participate in the “market” rise. Trying to comfort myself that I am as prepared as I can be. Praying for better health, wealth and happiness to all. Thanks for the weekly cup of joe.
Thanks, InhalingCO2. And I appreciate your comment.
I believe there is a balance to be had. Even though I know how this game is going to end, I can’t say for certain when it’s going to end. As a result, I still have about half my portfolio in non-mining-related stocks and stock funds, along with (shudder!) … bonds and cash.
I don’t like it, but it is the only way to keep my sanity.
I know of more than a few people who say they are completely out of the system, and holding only physical metals, mining stocks, and cash if the system were to reset suddenly.
For me, I know my current allocation in mining stocks and physical precious metals are enough to overcome the losses I would experience in my non-mining stocks, bonds and cash. That’s good enough for me.
Hi Len,
You summed it up perfectly this week. The central banks CAN’T stop the printing. Not only that, they have to keep increasing the pace! All we can do is prepare and wait until the system fails.
I’m as ready as I can be.
Sara
I’m of the opinion that you can never be prepared enough, Sara.
Good morning Len! Thanks for getting post. Always enjoy it. For us its safe reliable real estate is our gold. This is why I havent paid off our very small student loan balance. Thanks for helping us with our net worth! Cast iron skillets are so valuable! Ive rediscovered a handed down skillet and just cooking in a skillet can provide so much iron. Good anemia prevention!!! Maybe Ill invest in cast iron skillets?
I refuse to payoff my mortgage, Dr. P. I’m letting the Fed’s dollar debasement program pay the bulk of it off for me!
As for cast iron skillets, I’m with you. I love ’em.
I think the movie that speech came from was made in the 70’s but it’s eerily just as true today as it was then, if not more true.
The movie is Network, Miller.
And I agree with you.
Hi, Len. Kindda new here. Friend sent me a link to these about a month ago. Love these weekly roundups.
I have to say, just when you think the market can’t get any crazier it gets even more crazy. The valuations are insane. But I’m staying in the market because what else can you do?
You can protect your wealth with, at a minimum, 10% allocation in physical gold and/or silver. You can also prepare by having enough food and water on hand for several months, in the likely event that supply chains break when credit seizes up during the next crisis.
I provide eight other potential options in this article.
Thanks for the weekly cuppa, Len, and I’m glad to see from these comments that many of your readers feel they’re as prepared as possible! We’re in that boat, as well, and only time will tell what else we need (we even have TP, coffee and CHOCOLATE! ;o)
You’re welcome, Lauren!
I’m with you; try as we might to cover everything, we’ll only know what we forgot to prep for after the fact.
I hope they can hold the system together for another year at least. I still need more time to stack gold and silver!
Well, Shane … they’ve been managing to do it since 2008 — but their options are very limited now. Essentially, they’re out of bullets and all they can do now is use the gun as a club (yield curve control), or throw it in a final act of defiance (print the dollar into oblivion).
Our fraudulent debt-based monetary system will end when: 1) public confidence in the dollar breaks — either domestically, or internationally; or 2) the powers-that-be pull the plug on the dollar and reset the system on their own.
The best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
~ Vladimir Lenin
Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.
– John Maynard Keynes, member of the Fabian Society
My other favorite quote from Lenin is this one:
“There are decades where nothing happens; and there are weeks where decades happen.”
Been a while since i have commented. Do you have any plans / thoughts on how to protect oneself from the great reset? The more i see references about it, and in the non-definitive way major figure’s use weasel words to claim it’s a hoax then days later refer to it as a valid plan,
I believe it’s coming.
Anything with this much central planning attached to it will be a complete financial disaster. However that is really what the plan is so we can all be “saved” from what the shadowy elites are creating today.
It’s definitely coming, Paul. The term “reset” has gone mainstream. And even the 2021 Davos conference (I think it’s next month) is titled “The Great Reset” — so the powers that be are openly telegraphing it. (Score one for all of us tin foil hatters who have warning about this for a long long time!)
As I preach here every week, the best way to protect your financial wealth is by holding a portion of your assets in physical gold and silver.