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.
Here’s hoping I don’t get banned from the Internet for expressing opinions that somebody more powerful than little ‘ol me deems to be too “dangerous” for anybody else to read …
It was a bright cold day in April, and the clocks were striking thirteen.
— George Orwell
There are no markets; only interventions.
— Chris Powell
Price is what you pay; value is what you get.
— Warren Buffett
Credits and Debits
Debit: Did you see this? Two decades of global passenger traffic growth was wiped out in a matter of months last year because of flight restrictions to mitigate the spread of the virus, reducing traffic to levels not seen since 1999. In comparison to last year, passenger traffic is estimated to be down 67% in 2020. Other than that, though, the airline industry is doing great!
Debit: The number of international arrivals since 1980 — regardless of the transportation mode — skyrocketed from 277 million to 1.5 billion in 2019. Then the COVID panic set in and international arrivals declined 75% — that equates to a decline of more than 1 billion international arrivals. That’s also a level the industry last saw in 1990 … when traveling was fun and getting from Point A to Point B wasn’t a massive pain in the ass.
Debit: Meanwhile, I see that American homeowners extracted $100 billion in home equity via cash-out refinancing last summer — that’s the highest total for any quarter since 2007, during the height of the last housing bubble. Say, you don’t think that means the current housing market is getting a little bit frothy again, do you? Yeah … you’re probably right. Coincidence.
Debit: Amidst the ongoing anemic economic news, Chicago Fed president Charles Evans announced on Monday that, “The Fed’s policy stance will remain accommodative for quite a while, so economic agents should prepare for (more) low interest rates and an expansion of our balance sheet.” Let me translate for those who aren’t well-versed in Fedspeak: The dollar printing presses are going to remain on overdrive. Forever.
We need more inflation. pic.twitter.com/LTIHXD562J
Rudy Havenstein, Remember Who Did The Iraq War. (@RudyHavenstein) November 6, 2020
Credit: As macroeconomist Alasdair Macleod notes, “Publicly, the trigger for the Fed’s inflationary magnanimity in 2020 was COVID — but, reflecting on the repo crisis in September 2019, when the banking system ran out of balance sheet capacity and an equity bear market loomed, one wonders. COVID provided cover for unprecedented monetary expansion that was required to save the economy from the maelstrom of bank credit contraction.” Yes. And it worked like a charm, as this chart shows:
Debit: Even the Fed openly admits their complicity in artificially raising asset prices via the printing press. As if on cue, Philadelphia Fed President Patrick Harker said on Thursday that QE tapering “could cause disruption in the markets if we try to do it too soon,” adding that as a result, “it should be steady-as-she-goes until we start to really see the economy healing.” Uh huh. Monetary iceberg, dead ahead, Captain.
And be clear: The Fed’s Harper linking a reduction in QE with a disruption in markets means they know full well that they are goosing asset prices higher.
It has nothing to do with “investors confidence in the recovery”
Liquidity & money printing is what’s pushing everything up. pic.twitter.com/rXlD5eulze
Sven Henrich (@NorthmanTrader) January 7, 2021
Debit: The reality is, after a decade-long currency printing campaign, the Fed no longer fears inflationary consequences. If Macleod is correct, that may be backfire on them; he’s warning that “the Fed is likely to see its (QE) policy rumbled fairly early in 2021, with an increased likelihood of the 1929 crash replaying in current times, taking down the commercial banks and zombie companies.” We’ll see. And speaking of epic take downs:
Credit: Analyst Peter Schiff says to watch the dollar index this year. Although it closed 2020 at 90, he says “things will start getting scary” when it falls below 70 — even though that could be another year or two away. In the meantime, he says “people will enjoy the dollar’s decline because it’s going to help push asset prices up — but eventually they’re going to (wake up) and we’re going to have a real dollar crisis.” Frankly, they should have woken up a long time ago.
Another warning sign that #USD is in trouble. Despite record #federalreserve purchases of US Treasuries, interest rates are rising, meaning tipping point has been reached. Rates are now rising because of Fed purchases. Fed is debasing USD signalling higher #inflation ahead. pic.twitter.com/JJrfXz7x9g
James Turk (@FGMR) January 6, 2021
Credit: For his part, money manager James Turk agrees with Schiff. He says that although the currency market will sniff out the dollar’s demise first, “the dollar will be finished” only when Americans finally figure out that the price inflation they see — not just in assets, but everything else — is the direct result of the Fed’s dollar debasement policy. That’s also when those who should have known better will feel like a giant … well, you know …
Credit: This week, investing legend Jeremy Grantham warned that we’re in midst of “one of the great bubbles in financial history — along with the South Sea Bubble, 1929, and 2000 — but it will burst in due time, no matter how hard the Fed tries to support it, with damaging effects on portfolios and the economy. Make no mistake: this could be the most important event of your investing lives.” Well … he should know.
Debit: By the way, Grantham also thinks that living in the midst of an historic financial bubble that could burst at any time “is both intellectually exciting and terrifying at the same time.” That being said, Grantham is pragmatic about the end game: “So here we are again,” he says, “waiting for the music to stop — in a game that’s the ultimate deal with the devil.” The good news is, by holding physical gold or silver, you can avoid giving the devil his due.
Ending will be the same too. Total collapse in the parabolic blow-off symbols (down 90%+) and huge shift to value stocks & precious metals. In the meantime, with so little trading volume in metals, they’re vulnerable to -$25 all-in-a-few minutes smashes in wee hours of night.
fred hickey (@htsfhickey) January 8, 2021
The Question of the Week
Last Week’s Poll Result
Do you think 2021 will be better or worse than 2020?
- Better (38%)
- Worse (33%)
- About the same (29%)
More than 2300 Len Penzo dot Com readers responded to last week’s question and it turns out that slightly more than 3 out of 5 believe 2021 will be either the same or worse than last year. I’m definitely in the “worse than” camp.
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
When it comes to interstate migration, can you guess which states had the most outbound traffic in 2020? Here are the top 10:
10 Maryland (55%)
9 Ohio (56%)
8 Massachusetts (57%)
7 North Dakota (57%)
6 Kansas (58%)
5 California (59%)
4 Connecticut (63%)
3 Illinois (66%)
2 New York (67%)
1 New Jersey (70%)
Source: United Van Lines
Attention! Important Programming Note #1
My friend, Stacy Johnson, from MoneyTalksNews was kind enough to invite yours truly as a guest on his terrific “Money!” podcast, where we discuss how much money is really “enough” for retirement. We also touch on my retirement planning and strategy. You can find it here.
So if you have a little time, please be sure to stop by Stacy’s place and check it out!
Oh … and here’s a fun fact about the two of us that I’ve never shared: Did you know that between Stacy and me, we’ve won a total of two Emmy Awards. Of course … he won both of them.
Attention! Important Programming Note #2
As most of you know, you can also catch me most weeks at Joe Saul-Sehy’s multiple award-winning Stacking Benjamin’s podcast, where yours truly is a member of his weekly Friday Round Table group.
As a reminder, you can always get to Joe’s podcast from any of my blog pages by clicking the big Stacking Benjamins icon in the right sidebar.
Useless News: Amazing Grace
An atheist was walking through the woods and he thought to himself: What majestic trees! What powerful rivers! What beautiful animals!
Suddenly, he heard a rustling in the bushes behind him. He turned to look and saw a 7-foot grizzly bear charging towards him. So the atheist began running as fast as he could along the path.
As he was running, he looked over his shoulder and saw that the bear was closing on him.
After running a little bit more, he looked over his shoulder again. This time, the bear was even closer.
Then the atheist tripped and fell.
Rolling over to pick himself up, he found the bear was right on top of him, reaching towards him with its left paw, while raising the right paw for a deadly strike.
At that instant the atheist cried out, “Oh my God!”
Time Stopped. The bear froze. The forest was silent.
Then a bright light shone upon the man, and a voice came out of the sky: “You deny my existence for all these years. You teach others I don’t exist, and even credit creation to a cosmic accident. Do you still expect me to help you out of this predicament? Am I to count you as a believer?”
And with that, the atheist looked directly into the light and replied, “It would be hypocritical of me to suddenly ask you to treat me as a Christian now … but perhaps you could make the bear a Christian?”
“Very well,” said the voice.
The light disappeared, and the sounds of the forest resumed.
Then, to the atheist’s amazement, the bear immediately dropped his right arm, brought both paws together, bowed his head … and spoke:
“Lord, bless this food, which I am about to receive.”
(h/t: RD Blakeslee)
Other Useless News
Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:
1. Idaho (1.99 pages/visit)
2. Wisconsin (1.87)
3. Michigan (1.77)
4. Texas (1.72)
5. Florida (1.72)
46. Oregon (1.21)
47. Maine (1.16)
48. Colorado (1.12)
49. Maryland (1.08)
50. New York (1.03)
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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
I got this note from Peter Wong last week:
I have a million dollar investment portfolio that involves money deposited in my bank in China. For $575 I can easily transfer it to you as beneficiary.
No offense, Peter, but I only deal with total strangers who keep their investment portfolios in Nigerian banks.
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