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.
I hope everybody had a joyous Christmas! Next up … the New Year. Until then, on to this week’s financial commentary …
The rich invest their money and spend what is left. The poor spend their money and invest what is left.
— Robert Kiyosaki
Ring out the false; ring in the true.
— Alfred Lord Tennyson
Credits and Debits
Debit: Did you see this? A recent study found that there are six million people on the Social Security rolls who are 112 or older — even though there are currently fewer than 40 those people in the entire world. As a result, the government’s failure to do something as simple as verifying death has cost US taxpayers $2.8 billion over the last four years alone. Imagine that.
Debit: In other news, although movie theaters were struggling before a pandemic that only magnified their troubles, they’re now having to deal with yet another blow: ‘straight to streaming’ movies. That’s because Disney announced that 80% of their new titles will be bypassing the box office from now on. Which means theaters are going to be in a precarious position heading into 2021 — regardless of what happens with the pandemic.
Debit: With that in mind, this week US lawmakers approved a $900 billion COVID “relief” bill that includes a $600 direct payment, and a $300 federal unemployment benefit boost. Then the President announced he would veto it — and for good reason: It turns out that the majority of the bill was shameless pork that was only going to benefit those with tight connections to the politicians and lobbyists in DC. In other words …
Debit: Meanwhile, the gap between the rich and the poor is now reaching historic proportions. If you don’t believe me, just ask any one of the 26 richest people on earth in 2018 who had the same net worth as the lower half of the world’s population of 7.6 billion people. But, hey … don’t be discouraged. There’s still plenty of opportunities out there …
Attention young people:
Today I made my own avocado toast, saving $5.
If I did this every day for 2,920,548 years, I’d have as much money as Citigroup’s 2008 bonus pool. pic.twitter.com/LRKqObk1Vm
Dr. Rudy Havenstein, an open-ended growth company. (@RudyHavenstein) July 13, 2019
Credit: Before you finalize your New Year’s resolutions, you may want to know that Egon Von Greyerz predicted this week that “2021 is likely to be a year of awakening; a year when the world will start to realize that the $280 trillion global debt has no value and will never be paid back.” Or to put it another way: It’s the year the middle class realizes it’s not as wealthy as it thought it was.
SPOTTED: Fed making everyone believe the economy is flying. pic.twitter.com/oO1oBkkKz8
Sven Henrich (@NorthmanTrader) December 23, 2020
Debit: After all, there are two sides to every balance sheet, and Von Greyerz points out that, “on the other side of the balance sheet, there will be an even bigger shock for investors and property owners as debt implodes” and credit dries up — and “since asset valuations are a function of the debt, when the debt implodes, so will asset prices.” Uh huh. At least until the Fed is forced to save its fraudulent debt-based monetary system by printing even more currency.
Credit: As macroeconomist Alasdair Macleod noted this week, this month’s massive increase in the US money supply, “gives an indication on where we are in the hyperinflation process. The signal given by the rise in M1, including the extent that it’s fueled from savings deposits, is that it will eventually lead to an acceleration of money disposal by all bank depositors. But we’re not there yet.” No? Ugh. The man loves to tease, doesn’t he?
Credit: Macleod also surmises that, “with smaller depositors protected by the FDIC, the deposit shifts will mostly be in balances larger than $250,000, almost certainly reflecting a financially-informed depositor class who are liquidating their savings deposits to invest in inflating assets. The apparent suddenness of the change in attitude among large depositors should pique our interest.” Yep. And it looks like he’s not the only one who feels that way …
Hey Siri – Why am I hearing about bidding wars for houses breaking out in Parma, Ohio & Indianapolis, Indiana in the midst of a pandemic? https://t.co/VfUkHjtnu1
Luke Gromen (@LukeGromen) December 22, 2020
Debit: Of course, with the Fed committed to keeping interest rates near zero, while at the same time openly ignoring its responsibility to keep inflation in check, it’s a mystery why anybody would allow the banks to hold a significant amount of their hard-earned cash. Oh … and speaking of mysteries:
Credit: Asset manager Kyle Bass says nobody should hold their breath waiting for interest rates to return to normal because the Fed is hamstrung by the enormous debt. In fact, Bass says, “there’s no turning back” from the abyss. He says US interest rates will continue falling into negative territory until the ever-growing debt finally collapses the system. The only question is when the “gold pays no dividend!” crowd finally realizes that zero is more than a negative number.
Credit: In the meantime, stocks continue to soar. However, as MN Gordon warns, the “idea du jour that the Fed can permanently inflate stocks using its seemingly unlimited supply of credit is nearing its expiration date — and as it turns from ripe to rot, investors who are counting on there always being a greater fool will discover what happens when you overpay for future cash flows.” But until then, the Wall Street toadies will continue to move the goalposts.
Powell: P/Es no longer relevant.
Wall Street: price to sales no longer matters.Notice how they all have to abandon traditional metrics to justify raising price targets. https://t.co/9TtC1ffuLs
Sven Henrich (@NorthmanTrader) December 23, 2020
Credit: In reality, the only reason the US economy — and our standard of living — hasn’t collapsed is because the dollar is extremely over-valued. In fact, macroeconomist Peter Schiff says, “The only reason the Fed has gotten away with all of the (currency printing) and bailouts is because the world’s been buying up all of their dollars. But now that the world is starting to hemorrhage those dollars, the whole process is going to unravel.” Heh. And you thought 2020 was bad.
The Question of the Week
[poll id="352"]
Last Week’s Poll Results
What was your Christmas dinner main course this year?
- Ham or Pork Roast (32%)
- Turkey (26%)
- Beef Roast or Tenderloin (20%)
- Something else (15%)
- Prime Rib (5%)
- Fish or Seafood (3%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that the plurality of those surveyed had pork roast or ham on their Christmas dinner table. As for the Penzo family, Christmas dinner has always been “sauce” with homemade cavatelli. Delizioso!
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
With the New Year just around the corner, I thought I’d share a few facts on one of my favorite movies of all time, Back to the Future, which was released in 1985:
$0 Wages paid to actor Ralph Macchio (of Karate Kid fame). Macchio declined the role of Marty McFly, which ultimately went to Michael J. Fox.
3 Actors considered for the role of Doc Brown before it was finally given to Christopher Lloyd. (Jeff Goldblum, John Lithgow and Dudley Moore)
1.21 GigaWatts of electricity Doc Brown said was required to operate the time machine.
63 Number of clocks that can be seen in the movie.
62 Number of clocks showing the time as 7:53.
7 DeLoreans that were used in the movie.
2015 In Back to the Future II, the year that the hapless Chicago Cubs finally win the World Series, ending 109 years of futility.
2016 The year the Cubs actually broke their long World Series drought.
$454,000,000 The movie’s US box office gross (in current-year dollars). Back to the Future was the biggest movie of 1985.
40 Number of movie studios that rejected the script.
Contributing Source: Back to the Future Wikia
Useless News: Modern Medicine
A woman went to the hospital and was seen by one of the new young doctors on the staff. After about four minutes in the examination room, the lady started screaming and ran down the corridor.
An older doctor who had been at the hospital for many years stopped her and asked what the problem was; so she told him her story.
After listening intently, the veteran doctor escorted her to his office. “Please sit down and try to relax,” instructed the doctor. “I promise I’ll be back shortly.”
The older doctor then marched directly to the young doctor’s office and demanded, “Doctor! What’s the matter with you? Mrs. Terry is 63-years-old. She has four grown children and seven grandchildren — and you told her she was pregnant?”
The new doctor, who finishing up his notes on Mrs. Terry’s chart, said without looking up, “Does she still have the hiccups?”
(h/t: Cowpoke)
Other Useless News
Here are the top five articles viewed by my 35,505 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 5 Things Nobody Tells You About Being Poor — for Good Reason
- 10 Red Flags That May Signal You’re in Serious Financial Trouble
- 3 Smart Financial Moves Everyone Should Consider Before the New Year
- Caught Ya! My Teenager’s Sly Attempt to Get His Own Credit Card
- Careers You Can Get Into Later In Life
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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
After reading one of my most popular articles of all time, an oldie-but-goodie entitled, Your Big Fat Expensive Wedding: Stupid Is As Stupid Does, Ellis shared this:
There’s an old saying that politics is show business for ugly people.
True. But despite being eminently qualified, I have no intention of running for office.
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
I’ll be curious to see if another covid stimulus bill ever gets passed. Seems like Congress is not capable of creating a simple 2 or 3 page bill that isn’t filled with SPAM, SPAM, SPAM, SPAM, SPAM.
I’m still waiting for my first check and I know there are lots of other people like me.
The trouble is, all bills are no longer written by the people we elect to Congress; they are written by highly-paid ‘K’ St. lobbyists.
That’s how instead of a five-page bill that gets to the heart of the matter, we get 10,000 page bills filled with pork for every interest group under the sun.
Corrupt money leads to a corrupt society. The game will not end until the fiat dollar system is replaced with a monetary system backed by honest money (gold and silver).
Hi Len,
That money supply graph is scary. Straight up!!! Can’t wait for this year to finally be over.
I’m keeping my head down and will just keep stacking silver until the system breaks for good.
Sara
Believe it or not, I have a feeling 2021 is going to be worse than 2020.
Hope I’m wrong.
I just found your site a couple weeks ago. The Black Coffees hooked me. Knowing what you know, I’m curious to know how you are investing your money. Thanks!
Hi J.
I’ve got slightly more than half my retirement account investments in a mixture of stocks, bonds, and cash, just like most people. The rest is in a mixture of gold and silver mining stocks, gold and silver mining ETFs, an actively-managed precious metals stock fund, and some physical precious metals.
Are TIPS good protection from hyperinflation? Thank you in advance.
Gail, this is just my opinion — so keep in mind, that and $4 will get you a cup of coffee.
TIPS (Treasury Inflation-Protected Securities) are specialized bonds that are designed to hold their value in relation to rising prices. My two issues with that:
1) They use the inflation rate as determined by the government. And since the government tends to understate inflation, those bonds probably won’t maintain 100% of your purchasing power over the long run.
2) Since they are bonds, if the dollar hyperinflates, those dollar-denominated bonds will be decimated too.
So, no; TIPS will not protect you if hyperinflation strikes the dollar.
I’ve said it before and I’ll say it again. All you need to know is that when you take out a credit card, the bank is the unsecured creditor, the debt is unsecured and they charge 29%. Yet when we loan the bank our cash by putting it into savings/checking accounts, the rate that we unsecured creditors receive is almost 0%.
Yep.
Len, can you explain for a dummy like me what a “debt-based monetary system” is? I’ve seen you mention it a few times (only been following you for a few weeks) but I guess I don’t get it. Is it any system not backed by gold? Or is there more to it than that?
In a debt-based monetary system all of our “money” (specifically: legal tender currency) is another entity’s liability. In our case, the dollars in our wallets and retirement accounts are a liability of the Fed — they are debt; an IOU, backed only on faith and confidence that those dollars truly have value. As a result, they can be created without limitation, thereby sharply reducing the purchasing power of all dollars already in existence. It is legalized theft.
In a gold-based system, the paper dollars in your wallet or retirement accounts are at least partially-backed by real money that is nobody’s liability — specifically, the amount of gold reserves held in the Treasury. Most importantly, those dollars are freely convertible into gold (and silver) coins upon demand at any bank.
In an honest monetary system backed by gold, it is impossible to print an excess of paper currency in an amount that is significantly more than the amount of goods and services being created in the economy — at least without causing a run on the gold available at the banks. This ensures the purchasing power of your savings remains intact over long periods of time — the only way we can do that in a debt-based system is to own physical precious metals (i.e., real money), or speculate in investments that will hopefully outpace inflation.
Peter Schiff is a complete moron! Hes been a conspiracy theorist for along time. If you look at the other experts on the economy they are not a fan of Mr Schiff. Im sure you can look for yourself and see.
That’s your opinion, Bobby. But when I hear somebody accuse another of being a “conspiracy theorist,” it suggests the accusation is based on emotion, rather than facts.
I have been following Schiff for a long time; he understands macroeconomics as well as anybody. If you don’t believe me, simply google the term “Peter Schiff was right” for ample evidence.
In the early 2000s, Peter Schiff was routinely mocked for saying the wild run up in stock and real estate prices at the time was an unsustainable bubble created by the Fed’s ridiculously low interest rate policy — but he was proven correct in 2008. (Video montage here)
He was also mocked incessantly during the last decade for saying that QE was a monetary roach motel from which the Fed could never escape, and that the Fed’s plan to taper its QE program was just a bluff. Again, he was proven correct in 2013. (Video montage here)
Finally, in 2019 Schiff predicted the Fed would be forced to reduce interest rates back to 0% and resume QE — and that the next round of QE would be bigger than the three previous rounds of QE combined. Again, there were scores of incredulous disbelievers … but he was proven correct in March 2020. (Video here)
Now he is saying the dollar is on its last legs and the usual mockers in the mainstream media are out in force.
Ignore him at your own financial peril.
We always do Italian for XMASs. Usually baked ziti but son wanted stuffed shells. Unfortunately could not find them so went with ravioli this year. And of course the sausage and meatballs and Italian cookies.
I do miss my now deceased parents homemade manicotti, though.
Ravioli is another one of my faves, Mary Ann.
Up until I was in my late 20s, and I was still blessed to have my first gen Italian-American relatives in our celebrations, our Christmas Eve dinners were centered around fish: eel, clams, oysters, shrimp, calamari — as well as spaghetti with anchovy sauce (which always stunk up the house) and could be smelled by the neighbors two doors away on either side of us! Great memories!