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 commentary …
There are only three ways to meet the unpaid bills of a nation. The first is taxation. The second is repudiation. The third is inflation.
— Herbert Hoover
The American people have a love-hate relationship with inflation. They hate inflation, but love everything that causes it.
— William E. Simon
Credits and Debits
Debit: Did you see this? With another round of COVID-relief checks in the mail, the latest government-funded spending spree has commenced. Bank of America data shows that, for the first week of the new year, total credit- and debit-card spending was up 10% year-over-year. For the lowest income tier spending was up 22% — which makes sense when you realize that lower-income households have the highest propensity to spend financial windfalls.
Debit: Meanwhile, growing demand for both new and existing homes has pushed house prices to record levels. However, that has also managed to place homeownership beyond the reach of average earners in 55% of US counties — that’s compared to 43% a year ago. Thankfully, the economy is booming — and that’ll ensure that wages continue to keep up with these rapidly-increasing living costs. Oh, wait …
Debit: The truth is, a lot of people seem to think rising prices are a sign of pending economic growth when it’s actually a sign of monetary inflation. And you can bet that home prices aren’t the only thing that’s skyrocketing — commodities are booming too. Then again, when you consider the money supply has been rising uncontrollably for quite a while now, that shouldn’t be a surprise to anyone. Okay … at least to anyone who is paying attention.
jeroen blokland (@jsblokland) January 11, 2021
Debit: In case you haven’t noticed, oil and gasoline prices are also on the move, while agricultural commodities are on fire; the latter are up 40% since July. And many other important commodities are at five-year highs. For example, copper — which is an economic bellwether — is up 30% in the last six months alone. Oh … and by the way, it looks like commodities aren’t the only things on fire right now:
Debit: Of course, these sharply rising prices are especially bad news for those who are still looking for a job. Believe it or not, nearly one million people sought unemployment aid last week — that’s the largest number since late August. The good news is that, as long as there’s a stock market nobody needs to work anymore. All you need is a Robinhood app and you’re good to go:
the clarification in the comments tho pic.twitter.com/nUEbqBLNLX
Turner Novak (@TurnerNovak) January 17, 2021
Debit: Speaking of jobs, with a new president now in office, there’s a renewed call in DC for “a national minimum wage of $15 an hour.” Ironically, that will actually end up making it even tougher for the lower class to secure any kind of entry level position, and harder for small businesses to keep their head above water — just don’t tell that to the pols, most of whom have never run a business in their lives.
Credit: But not to worry. After all, the government plans to enact another $1.9 trillion ‘stimulus’ package in the coming weeks. Unfortunately, Peter Schiff says that, rather than stimulating the economy, “the stimulus is going to sedate it. This isn’t a rescue plan. It’s the equivalent of throwing a drowning man an anchor.” And, no, Peter isn’t confused … er, unlike this nice lady:
Debit: The Fed is certainly stuck in a land of confusion — they keep insisting the current debt problem can be fixed with … more debt. The trouble is, after ten years, their strategy still isn’t working. The proof? Well … despite the money supply being nearly four times greater today than it was in 2000, real GDP has grown just 40% over the same timeframe, and nominal GDP has only doubled. (Psst. Just don’t tell that to the stock market.)
No one appears to care, but I’ll keep pointing out the historic distortion: Market cap to GDP 192.9%. pic.twitter.com/I1pBko87rO
Sven Henrich (@NorthmanTrader) January 21, 2021
Debit: So after more than a decade of failure, rather than admit they were wrong, the world’s major central banks have changed the objective of their unfettered currency-printing policy — otherwise known as QE — from stimulating the economy by raising asset prices, to outright monetizing rapidly-increasing government budget deficits. But, hey … I’m sure that change of tack will finally fix things. Or not.
Let this sink in.
In November & December the government issued $505B worth of Treasury notes and bonds.
The largest 2-month issuance ever.
The Fed only bought 1/3 of that.
No way around this.
Monetary policy is clearly becoming a funding tool for the government. pic.twitter.com/3du0SCfekW
Otavio (Tavi) Costa (@TaviCosta) January 18, 2021
Credit: In the meantime, physical gold and silver remain severely undervalued based upon the original government inflation methodology in 1980. In fact, their real value is absolutely breathtaking, with inflation-adjusted 1980 all-time highs of nearly $21,000 for gold and $1000 for silver. No, those aren’t typos. And, yes, it seems impossible today — but when the fiat facade finally fails, those numbers won’t seem crazy at all.
By the Numbers
Here’s a look at the stock market’s record-breaking Fed-induced growth during the four years that Donald Trump was in the White House:
$16,000,000,000,000 Growth in the market value of all US stocks.
230% The increase in Apple’s market cap since January 20th, 2017.
$110,000,000,000 Amount that Amazon-founder Jeff Bezo’s net worth increased.
51% The four-year gain in the Dow Jones Industrials index.
140% How much the tech-heavy Nasdaq has skyrocketed since the previous Inauguration Day.
68% The four-year return that the broader S&P 500 delivered during Trump’s tenure.
The Question of the Week
Last Week’s Poll Results
Are you expecting an income tax refund this year?
- No (54%)
- Yes (46%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out slightly more than half do not expect to receive a tax refund this year. I do. At least that’s the plan; I’ve been surprised before.
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: Sad Story
Three writers, Al, Ben, and Carl, who were attending a writing convention, booked a room on the 75th floor of a hotel.
When they arrived back at the hotel from the convention, the receptionist told them, “I’m terribly sorry, but the elevator is broken. In the meantime, you will have to take the stairs.”
Now, Al was a writer of funny stories, Ben was a writer of scary stories, and Carl was a writer of sad stories. The three of them agreed that, to make it less boring, Al would tell the other two his funniest stories while they climbed from floors 1 to 25, Ben would tell his scariest stories from floors 26 to 50, and Carl would tell his saddest stories from floors 51 to 75.
They started to climb the stairs, and Al started to tell funny stories. By the time they reached the 25th floor, Ben and Carl were laughing hysterically.
Then Ben started to tell scary stories. By the time they reached the 50th floor, Al and Carl were hugging each other in fear.
Then it was Carl’s turn to tell some sad stories. “I’ll tell my saddest story of all first,” he said. “There once was a man named Carl who left his hotel room key in the car …”
More Useless News
After last week’s request, I currently have five followers at Gab. Hey … I realize Rome wasn’t built in a day. After all, it took me 12 years to get more than 6500 followers on Twitter! Thank you cryptoaj, neilc111, Tennessee Andy and Paul N — not to mention Special Ed, who was the very first victim to take the plunge.
Len Penzo (@LenPenzo) January 11, 2021
Other Useless News
Here are the top five articles viewed by my 36,281 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- The Best Personal Finance Book I’ve Ever Read
- 3 Great Hobbies That Are Investments Too
- 5 Ways to Ring In the New Year By Cleaning Out Your Financial Garage
- Are Gas Clothes Dryers Worth the Extra Money?
- A Simple Test to Know If It’s Better to Buy or Rent a House
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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
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You seem oblivious to the fact that you’re more often than not so very wrong on so many things.
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