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 …
A US dollar is an IOU from the Federal Reserve Bank; a promissory note that doesn’t actually promise anything.
— PJ O’Rourke
Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it.
— Ayn Rand
Credits and Debits
Debit: Did you see this? Amazon founder and world’s richest man announced he is stepping down as CEO later this year, after reporting record revenue for the fourth quarter of 2020. Then again, with the government shutting down most of Amazon’s small-business competitors in the name of “saving” humanity from the COVID pandemic, I suppose those record profits shouldn’t come as much of a surprise.
Bezos To Spend Newfound Free Time Bulldozing Small Businesses In Person https://t.co/dKinAIQ2pv
The Babylon Bee (@TheBabylonBee) February 3, 2021
Debit: In other news, I see the Fed is still holding rates at zero and buying $120 billion in bonds every month, while increasing their bond purchases every time the market has threatened to roll over. Curiously, since rallying off the March 2020 lows, all that liquidity freshly-printed currency has also perfectly coincided with increased speculation in the stock market. Although I’m sure those two events are completely unrelated. Like, totally.
Credit: If you ask Charles Hugh Smith, he says “the stock market has been punctured by the thin blades of truth. It’s fatally wounded but nobody dares notice; the wounds are barely visible, but the internal damage is mortal.” As a result, he says, “The stock market is already stumbling and will soon crash.” Sadly, it appears that Charles decided to stop taking his meds. After all, everybody knows that stocks only go up.
Why are you buying it?
Because it’s going up.
Why is it going up?
Because others are buying it.
Why are they buying it?
Because others are tweeting about it.
Why are they tweeting about it?
Because it’s going up.Sven Henrich (@NorthmanTrader) February 1, 2021
Debit: This week Goldman Sachs warned that the recent short squeeze events with Gamestop and other stocks “demonstrate that unsustainable excess in one small part of the market can create broader turmoil, boosting the risk of one fund’s unwind snowballing through the market.” In other words: if retail traders continue to push the most shorted stocks higher, the entire market could crash. How ’bout that; it looks like Goldman Sachs is a big fan of Charles Hugh Smith.
Credit: For his part, market analyst Wolf Richter says the latest short squeeze fiasco on Wall Street has finally exposed to the masses that, thanks to the Fed, not only are the big players over-leveraged, but also that the stock market is both broken and rigged: “The idea that price discovery takes place on a rational transparent basis, but free of rampant manipulations, has totally imploded.” Well … better late than never. I think.
StockCats (@StockCats) February 4, 2021
Credit: On a related note, Pam and Russ Martens report that, “What’s being ignored is that the largest federally-insured banks in this country, that now double as trading casinos thanks to the repeal of the Glass-Steagall Act, have every incentive to suck in small investors to create an escape route for themselves; this occurs — by hook or crook — at every market bubble top.” Oh … and speaking of escape routes:
Credit: So while Gamestop traders can put the stock market at risk, the asset with the most potential to bring down the entire financial system is silver. And when you consider that global investment demand for silver last year was $10 billion — give or take a few — it’s easy to imagine just how high the silver price could get if just 1% of the estimated $100 trillion currently invested in stocks, bonds and real estate decided to migrate into precious metals.
Pirate SILVERSQUEEZE (@p1r473) February 2, 2021
Credit: Of course, the tiny silver market’s ability to expose the entire monetary system sham is exactly why COMEX allows the sale of paper silver contracts at a rate that require nearly 200 days of silver production to cover them. Even more absurd is what happened on Tuesday. As Renaissance Men observed, “silver was smashed $2 after the banks sold 900 days of production. That’s not hedging; it’s open price suppression. This is how empires fall.” Heh. You can say that again.
Silver, gold and platinum remain severely undervalued because bullion banks are allowed to create the illusion of abundant supply via naked short selling . Yes, it’s blatant fraud — and it’s tacitly permitted by the government. (Surprise, surprise.)
Credit: In 1729, Voltaire observed that fiat money always returns to its intrinsic value of zero — a fate that asset manager Egon VonGreyerz is now warning will strike the dollar no later than 2024. Hey … it’s possible. Just don’t tell the mainstream media; they believe paper dollars conjured out of thin air by the Fed are superior wealth protection to “unbacked” physical gold and silver. Yep. Now quiet on the set! Roll cameras in 3 … 2 … 1 …
Credit: As financial analyst James Turk notes, “The real cause of today’s trials and tribulations is a broken monetary system. Money is the heart of economic activity, and inferior money results in an inferior economy. So the consequences of Nixon’s decision in 1971 to abandon gold are coming home to roost, which isn’t a surprise to anyone who knows monetary history.” Nor should it be to you. (Otherwise, I really need to do a better job here.)
Debit: So … how broken is the current debt-based monetary system? Consider this: A lawful US dollar was originally promised as being equivalent to 0.7734 troy ounces of silver — which is why US coins had silver in them until 1965. But over time, the government gradually weakened the law. In fact, the US dollar can now be legally debased to zero — which is why a paper dollar in your pocket today will fetch just 0.0300 ounces. And even less tomorrow.
Debit: Unfortunately, most people don’t realize how devalued the US dollar has become. When measured against gold, the dollar is already down 99% since 1913. But, as VonGreyerz reminds us, “a 100% loss of value from today is actually that remaining 1%.” And that means the game can end at any moment — all it’s going to take is one modestly-wealthy investor to call the bankers’ bluff and demand delivery of the physical silver that they claim to own, but clearly don’t have.
By the Numbers
With this week’s announcement that Jeff Bezos is stepping down as CEO of the company he founded, Amazon, let’s look at some figures related to his wealth:
$192,300,000,000 Bezos’ approximate net worth on Jan 22, 2021.
1 Bezos’ rank among the world’s richest individuals.
$82,000 Bezos’ annual salary as Amazon CEO.
$149,353 Amount of cash Bezos earns every minute.
$2,489 Amount Bezos earns every second.
Contributing Sources: Business Insider; WebBee
The Question of the Week
[poll id="358"]
Last Week’s Poll Results
How many months of expenses will your emergency savings fund cover?
- One (33%)
- Three (23%)
- Less than 1 (17%)
- More than 3 (16%)
- I have no savings (7%)
- Two (4%)
More than 2200 Len Penzo dot Com readers responded to last week’s question and it turns out that almost 2 in 5 have three months’ expenses or more of emergency savings set aside for a rainy day. Hooray! On the other hand, almost 1 in 4 have less than one month of expenses held in reserve. That’s scary.
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: True Confessions
Wife’s diary …
Dear Diary:
Tonight, I thought my husband was acting weird.
We had made plans to meet at a nice restaurant for dinner. I was shopping with my friends all day long, so, I thought he was upset at the fact that I was a bit late, but he made no comment on it. Conversation wasn’t flowing, so I suggested that we go somewhere quiet so we could talk. He agreed, but he didn’t say much. I asked him what was wrong. He said, ‘Nothing.’ Then I asked him if it was my fault that he was upset. He said again that he wasn’t upset, that it had nothing to do with me, and not to worry about it.
On the way home, I told him that I loved him. He smiled slightly, and kept driving. I can’t explain his behavior. I don’t know why he didn’t say, ‘I love you, too.’
When we got home, I felt as if I had lost him completely, as if he wanted nothing to do with me anymore.
He just sat there quietly, and watched TV. He continued to seem distant and absent. Finally, with silence all around us, I decided to go to bed. About 15 minutes later, he came to bed. But I still felt that he was distracted, and his thoughts were somewhere else.
He fell asleep; I cried. I don’t know what to do. I’m almost sure that his thoughts are with someone else. My life is a disaster!
Husband’s diary …
A one-foot putt. Who the hell misses a one-foot putt?
(h/t: RD Blakeslee)
More Useless News
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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 finding my blog and reading more than a few articles, Prometheus sent this:
You do realize how demeaning it is to refer to your wife as Honeybee?
Not really — but if it’s true I’m lucky she hasn’t caught on yet.
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
Good morning Len, and thanks for the cuppa Joe! I did my best to follow what was happening w/the Game Stop ‘fun’ this week, but MAN, the action was way too crazy! The good news is that PMs are a really good value right now, assuming one can FIND any. Enjoy your day!
I think more people are finally waking up to the importance of owning precious metals, Lauren — but we may need your hubby to make another purchase soon to make the price more affordable for the rest of us! 😉
HA! I’ll be sure to tell him, Len! ;o)
Hi Len,
Like Lauren says, very little silver to be found! It looks like APMEX has some Eagles for $39 and some generic rounds for $33 but the paper price is $27. If that doesn’t show how the system is rigged I don’t know what does. The official price is a lie. The real price is what the dealers are selling it for.
Sara
Based on the actual supply of fiat floating around the world, even the APMEX price is a steal, Sara.
Silver premiums to spot are very high now. Do you think it is better to wait until they come down or jump in and buy now even if I have to wait 4 weeks for delivery? I should have listened and bought earlier. Stupid I know, but it wasn’t high on my priorities. Now I get it. Silver and gold are precious and when the system topples over nobody will be able to get any at all.
That is understandably a question that is on a lot of people’s minds.
Franklin Sanders, who has sold gold and silver for many many years, noted in his newsletter yesterday the following:
“I dug out some charts from 2008 today to check whether it paid to wait until the premiums went down. It took nearly 8 months for premiums to normalize, but by then silver had risen so much that you were no worse off going ahead and buying early with the high premium.”
So there you go.
Apmex is my “go to” place for humor these days.
Up until 2005, I had been piddling around buying silver, mostly generic rounds when I could get them for under 5 bucks. BIG silver move then was a dime/day, up or down.
2005, I finally decided silver (and gold) were going to be the places to be long term….that all paper and paper promises (pensions, SS, stock, bonds, etc) were likely going to fail about the time of life my wife and I really needed them, so I cashed out my IRA and put it all in $1,000 face bags of 90% US silver coin (715oz silver amount in $1,000 face).
I bought from Tulving Co, a California dealer (now out of business) for 50 cents UNDER spot on the ounce, the bags ran $3800 to bit over 4,000 (I split my IRA withdrawal over 2 tax years to minimize the hit).
Today, Apmex is offering a ‘pre-sale’ price of $28,500 on them….pre-sale meaning they don’t have any, but hope to get some, and if they do, they’re gonna get a 55% premium over spot. WOW…..
The day I see them hit $100,000/bag, I think I’ll sell one just for fun…if there is something I REALLY need to buy and have burned thru every paper buck to my name…….ahahhahaaaa
I relate this story not to brag (ok…maybe a little), but to point out to folks just starting, or maybe mid-stream, in their stacking to look long term. Silver is such a critical industrial metal, as well as a monetary metal, that the future for it is as close to a guarantee as you will ever see in the world of money. Buy some along as you can, try for the dips and not the crazy times, but don’t lose sight of the end goal…..to have some real money when the day comes you need it.
Andy, you got lucky with Tulving!
As you know, his company was a ticking time bomb because he was basically running a Ponzi scheme to get those “under spot” prices.
A lot of people got caught holding the bag when the whole scheme collapsed — which is why I think it’s wise to pay slightly more to buy physical at reputable large and/or long-established bullion dealers like APMEX or Miles Franklin.
And although I have never done business with Franklin Sanders, he has been around a long time too. His sons are now running Volunteer Precious Metals.
Len,
At the time, 90% coin was at or under spot at several dealers….it had true ‘junk’ status because of having to go to the melting pot before the silver could be sold as silver….sorta like grandma’s sterling tableware.
Personally, I like 90% coin for several reasons…it’s still legal tender, it comes in fraction units of silver that might come in handy for trade in a Mad Max world, it’s too small to bother counterfeiting, etc. I bought it as property tax protection oddly enough, too many small farms went to tax sales in the 30’s because of the lack of a little bit of coin to pay the tax…..so I wanted enough coin set aside to take care of that issue.
Tulving did later get in a sling, and burned a bunch of people, but it was years after I last dealt with him. I got lucky there.
I dealt mostly with Apmex after that, and another small broker, Don Stott, of Colorado Gold, both of which have been very good to deal with.
I quit dealing with Ampex once they caved into the States on sales tax collection. If I buy a US eagle now from them (silver or gold), which is US legal tender, they collect sales tax……in Tennessee, that amounts to 9.5% ON TOP my order to change my legal tender paper to legal tender coin. I could ‘maybe’ understand if buying bars or generic rounds/etc….but to get hit with that kind of tax on top the dealer premium is a no-go for me.
So the last several years, I’ve dealt exclusively with Colorado gold, who does not collect sales tax. They are a broker, not a dealer, so they don’t carry the range of products you’ll see at most online dealers, and they have a stiff minimum sale….but that works for me at this point.
There is currently a bill in the TN legislature to adopt what several other State have done and ‘allow’ us to buy gold/silver tax free, and if it passes, I’d certainly go back to dealers like Apmex.
Volunteer Precious Metal is based in your home state of TN too, Andy.
And I agree about sales tax on gold and silver bullion and specie — frankly, it’s an outrage. It’s the equivalent of going to the bank and getting taxed for exchanging a $100 bill for five twenties.
California is going the other direction: they had no sales tax on PMs until recently. Now it is charged on any PM sale under $1500 — so you can avoid the tax if you want to buy an ounce of gold … but it affects people who can’t afford to make those higher-dollar purchases and instead buy their gold and silver in smaller increments. Scoundrels!
Lauren, there’s still gold and silver readily available in the small quantities we peons buy, but there are signs that it’s tightening: The U,S, Treasury announced it has reached the limit of the number of coins it can produce per day because of = get this – Covid 19 caused worker shortagge
The people telling us that are poLIEticians.
How can you tell a poLIEtician is lying? Their lips are moving.
I’m sorry but I just can’t wrap my head around earning almost $2,500 per SECOND. Incredible!
Isn’t though, Cowpoke? It’s truly mind boggling.
Len, thanks for doing these every week. What are your thoughts on SLV? With silver in short supply is it a good alternative to real silver?
PSLV…..they get audited and have what they claim to have. SLV was created to con the public into buying paper backed by a fraction of silver.
What Andy said. If you are not going to hold physical, then PSLV is probably your next-best bet — although there is still a counterparty involved, unlike holding your own physical.
.
I personally love APMEX, Dave. You can find slightly lower prices elsewhere, but their reputation is impeccable, and their customer service is second to none, IMO.
I agree, Len.
They just seem to be “standing down” for a spell – wise, I think – to see where things are going.
I don’t get the silver thing. Does it have uses other than jewellery or picture frames? Isn’t it a mostly useless metal? Maybe chip manufacturing? It’s a really odd place to try and store wealth.
Actually, it’s not odd at all. Silver was used as money before gold — which is why, in many languages, the word for money and silver are identical.
As for its non-monetary uses … After crude oil, silver is the second most important commodity in the world. It is used in everything from electronics and solar panels to mirrors — and it also has anti-bacterial properties.
Before the advent of the digital camera, silver was a key component in film manufacturing.
Every time you flip on a light switch in your home, you use silver…..contacts on the switch.
Home air conditioning or a refrigerator ? High strength silver solder used to braze copper lines in the system.
Every time you ride in a vehicle, you use silver coated on the ball bearings to provide a cushioning effect.
Use a cell phone ? 1/2 gram in the average phone…..in fact, the US Geological Survey estimates 75 million ounces of silver sitting around in old cell phones.
Solar panels ? 2/3 oz in the average panel, times millions and millions of panels.
Cruise missile ? Around 30 lbs each in wiring, contacts, batteries…..and all of it truly expendable…..ahahahhaaa
The list of stuff that silver is used in is almost endless.
Len, TnAndy,
Thanks for listing all the uses of silver. Much appreciated.