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.
It’s hard to believe that Christmas — and the New Year — is only a few days away. I swear the older I get, the faster time flies by.
Okay, let’s get right to it this week …
Gold is money — everything else is credit.
— J.P. Morgan
All fiat currency eventually returns to its intrinsic value — zero.
When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter. Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion. When you see that in order to produce, you need to obtain permission from men who produce nothing. When you see that money is flowing to those who deal, not in goods, but in favors. When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you. When you see corruption being rewarded and honesty becoming a self-sacrifice, you may know that your society is doomed.
— Ayn Rand, Atlas Shrugged
Credits and Debits
Credit: Did you see this? A recent analysis shows that the S&P 500 has rallied 36% since April, but on an unusual schedule: Almost all of the upside happened outside of US trading hours (+38%), and on Mondays and Wednesdays (+31%). See? It’s so easy, even a monkey can do it.
Credit: Impatient day traders will be interested in another research report that found that all one had to do to capture the majority of those stock market gains was to buy at 11:30 pm ET — and then sell at 3:30 a.m. ET. Now that’s quite a trick. Although I wonder if it would receive the same reception that this one did:
Credit: Hey … speaking of stocks, money manager Bill Blaine isn’t impressed. He says the market continues to rise on “ill-informed bluster, while the consequences multiply.” Blaine warns that, “While everyone talks about how the pandemic is accelerating new-technology adoption, capitalism is failing to discipline unprofitable zombie companies, which block new niches.” Uh huh. See: Telsa. Creative destruction — a hallmark of free market capitalism — disappeared long ago.
1636: Tulip prices only go up
StockCats (@StockCats) December 17, 2020
Debit: In other news, I see that Russia received more euros than dollars for its 2020 exports to China; this is a direct result of President Vladimir Putin’s long-time pledge to reduce Russia’s dependence on the dollar. Say what you will about the man, but don’t ever accuse him of reneging on his promises. How many politicians and bankers can make the same claim?
Credit: Even so, Russia’s new currency policy has barely diminished the greenback’s dominant role in the global financial system. So far. In fact, the share of currency trades in dollars actually increased to 88.3% in 2019 from 87.6% in 2016. At the same time, the proportion of foreign reserves held in dollars has remained steady over the past decade at roughly 60%. Okay. Now let’s see if the Fed’s recent commitment to debauch the dollar can make an impact.
A country can’t run massive(unprecedented) twin deficits, hand out dollars to its citizens, create trillions of $ out of thin air, have asset prices so high they’re unattractive to foreigners (so they sell) & think there won’t be repercussions eventually. Free lunches don’t exist
fred hickey (@htsfhickey) December 17, 2020
Credit: Macroeconomic analyst Luke Gromen believes the dollar’s continuing status as the premier global reserve currency is far from secure, noting that “tectonic shifts are quietly occurring.” For example, the dollar’s share of trade between the world’s biggest energy exporter and the world’s biggest energy importer was 100% in 2014 — but only 40% today. More ominously, Gromen warns that, “tectonic shifts tend to happen little-by-little — and then all at once.” Uh oh.
Credit: With the Fed openly trying to let the inflation genie out of bottle, it’s good to know which assets perform best in that environment. Financial strategist John Buttler says history holds the answer: “If the 1970s are any guide, commodities will outperform both bonds and stocks generally — but metals are likely to do best of all, especially precious.” I doubt anybody who lived in the Weimar Republic of the 1920s — or, say, Venezuela today — would argue with that.
Quite something to see people cheer the destruction of their currency and purchasing power.
In real USD terms markets gains may not be what they’re cracked up to be.
But hey, everything is relative these days. pic.twitter.com/MvbIbnrXOn
Sven Henrich (@NorthmanTrader) December 17, 2020
Debit: Then again, Mr. Buttler goes on to warn that, “Beyond a certain point, central banks might decide they’ve created too much of a good thing. Reversing such expectations is indeed possible, but remember: Once inflation psychology shifts, this will only be possible by raising rates in excess of whatever is already priced in, perhaps significantly so.” Put another way, it’s a prison from which the Fed cannot escape — unlike this place:
Debit: You know, it took 2000 years for global debt to grow from zero to $5 trillion in 1971. But then the dollar’s anchor to gold — real, honest money — was broken and the debt grew over the next 29 years, to $80 trillion in 2000. Since then the world has been on the business end of the exponential growth curve, with debt ballooning to more than $200 trillion. That’s reality. And so is this: the vertical portion of the curve is just around the corner. (Psst. That means game over, folks.)
Credit: So how much longer do we have? Well … asset manager Egon Von Greyerz said this week that he believes, “the hyperinflationary phase is likely to start in 2021.” He also says “anyone who can’t see what’s happening is either blind or hasn’t studied history.” Yep. Although I’d argue there are many people who are actually both. That being said, macroeconomist Alasdair Macleod believes the dollar is already out of time. No really:
US M1 money supply rose 14% in two weeks to 30 Nov. Hyper-inflation is here! pic.twitter.com/kZ6vHIAIgw
Alasdair Macleod (@MacleodFinance) December 11, 2020
Credit: Thankfully, the death of fiat currency comes with a silver lining. As Macleod notes, if “the government pursues sound money policies and allows the private sector to recover wealth without an undue burden of the state, it shouldn’t take more than a year or two for economic stability, competition and human progress to return — but people will have learn to look after themselves and be responsible for their own decisions.” In other words: Just like it was prior to 1971 … a.k.a. the good old days.
By the Numbers
According to the US Census Bureau, here are the 10 US metro areas with the highest percentages of people who are facing eviction or foreclosure within the next two months:
10 Phoenix (30.0%)
9 San Francisco (31.2%)
8 New York City (32.0%)
7 Detroit (32.3%)
6 Seattle (32.5%)
5 Dallas (32.8%)
4 Chicago (33.3%)
3 Atlanta (33.8%)
2 Miami (34.1%)
1 Houston (47.6%)
Source: Zero Hedge
Last Week’s Poll Result
What grade would you give the current state of your personal finances?
- B (43%)
- A (34%)
- F (9%)
- C (9%)
- D (5%)
More than 2100 Len Penzo dot Com readers answered last week’s poll question and it turns out 7 in 9 say their personal finances are in above-average or better condition. I’d say that’s not too shabby, considering the economic landmines that have been thrown our way in 2020. That being said, 14% say their finances are currently in a below-average state — or worse.
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.
The Question of the Week
Useless News: Last-Minute Shopper
It was Christmas Eve, and Nathan decided to buy his wife a little gift for the next day.
Always short of money, he thought long and hard about what that present might be, but he was unable to decide. Eventually, Nathan found himself at Macy’s, where he wandered over to the cosmetics department. He then caught the attention of the young woman behind the counter and said, “Excuse me, but I’d like to buy some nice perfume as a Christmas gift for my wife.”
Happy to oblige, the gal showed him a bottle costing $150.
“Too expensive,” muttered Nathan.
Undaunted, the young lady grabbed a smaller bottle off the shelf behind her.
“How much is that?” Nathan asked.
“$100,” said the woman.
“Yikes!’ Nathan groused, “That’s still way too much!”
By now the lady behind the counter was growing more than a bit annoyed with her customer. However, she was determined to close a Christmas Eve sale for the man’s wife. So she reached under the counter and presented Nathan with a tiny vial of her very best perfume for $25.
Unfortunately, upon hearing the price, Nathan became visibly frustrated. “Ma’am,” he whined, “What I’d like to see, is something really cheap.”
So the sales girl handed him a mirror.
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. Newfoundland & Labrador (2.25 pages/visit)
2. Nunavut (2.00)
3. Ontario (1.72)
4. Alberta (1.70)
5. Saskatchewan (1.67)
9. New Brunswick (1.50)
10. British Columbia (1.44)
11. Prince Edward Island (1.41)
12. Yukon (1.25)
13. Quebec (1.00)
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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 controversial rebuttal to an equally-controversial article about being poor, Kathy decided to write this:
Are you an idiot, or just talking about something you know nothing about?
Should I have dumbed-down the article so even you could understand it, Kathy — or are you still trying to muster up the brain cells required to contribute a cogent rebuttal to my arguments?
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