Len Penzo dot Com

The offbeat personal finance blog for responsible people.

Black Coffee: Parasites and Leeches

By

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.

Okay, let’s get right to it this week …

I’d call it a new version of voodoo economics, but I’m afraid that would give witch doctors a bad name.

— Geraldine Ferraro

He who sells what isn’t his’n, must buy it back or go to prison.

— Daniel Drew

Credits and Debits

Debit: Did you see this? The natural gas spot price exploded from $3.46 two weeks ago, to $377.13 last Friday — that’s an increase of 32,000%. And it wasn’t only nat gas — severe electricity shortages are expected to result in many customers seeing four-digit February electricity bills, as prices climb from less than $0.25 per kWh to upwards of $4 per kWh. The good news is those stimulus checks should cover most of it. Well … at least for one month.

Debit: Meanwhile, the paper silver price continues to hover near $27 — even though you can’t buy the physical metal anywhere for less than $33 or so. Assuming you can find it. Oh … and did I mention that SLV amended its ETF prospectus this month, all but admitting they have less physical silver in their vaults than they claim? Uh huh. If I didn’t know any better, I’d say Wall St. has been caught red-handed, selling precious metal they don’t have. Imagine that.

Credit: Billionaire businessman Hugo Salinas Price added perspective on this week’s shenanigans, observing that “in today’s world, money isn’t gold or silver, nor is it an unquestioned claim upon gold or silver. Under the current fiat monetary system, there can be no justice or fair trading because the money is fake — so everyone’s trying to out-smart everyone else. Humanity is fundamentally at war with itself.” Heh. You can say that again …

Debit: In other news, earlier this month the Bank of England told its member banks to prepare for negative interest rates to be used in an effort to ‘stimulate’ the economy. Yes, yes; the BoE clarified by saying they had “no plans” to implement them, but they wanted the banks to be prepared. You know … just in case. Translation: negative rates are coming. And sooner rather than later.

Credit: As economist Daniel Lacalle notes, “Negative rates are the destruction of money, an economic aberration based on the mistakes of many central banks that assume inflation and growth are low due to excess savings.” On the other hand, people who are buying those negative yielding bonds are making a big mistake too because they subject themselves to big losses whenever faith in government debt wanes.

Debit: In fact, negative interest rates are a self-inflicted scourge that results in an anemic listless economy teeming with unproductive companies, caused by excess debt borne from — surprise, surprise — central bank zero-interest rate policies. Or, to put it another way: Central bankers are modern-day financial witch doctors who keep telling us that the patient will get better by simply adding a few more leeches.

Debit: Unfortunately, financial assets are skyrocketing because many investors are gobbling up stocks and debt issued by companies that can only turn a profit — or remain on life support — in this artificially-low interest rate environment. They just better hope the central banks can continue to keep a lid on those rates because, as of now, they seem to be having some trouble.

Debit: By the way, did I mention that negative rates also make governments more dependent on cheap debt, rather than strengthening the economy? It’s true. After all, the printing press — which ultimately leads to these ridiculously low interest rates — has always been the preferred fiscal “solution” for cowardly spendthrift politicians who endeavor to stay in power by promising benefits to their constituents.

Credit: As Lacalle explains, abnormally-low interest rates result in “a huge transfer of wealth from savers and real wages, to the government and the indebted. A tax on caution. The destruction of the perception of risk that always benefits the most reckless. The bailout of the inefficient.” The impacts used to be hidden, but now the fraud is so rampant that almost everybody can see it. Yes, it’s a rotten deal, but you’ll learn to like it. Eventually …

Debit: Of course, negative interest rates risk bank runs by unwilling savers — which is a big reason why central banks and governments want to eliminate cash. It’s all about control. After all, if all money is electronic, privacy will become a thing of the past; and all wealth will become state-controlled. Not coincidentally, control is why the powers-that-be also discourage private precious metal ownership, and push universal basic income (UBI).

Credit: Speaking of UBI, asset manager Egon VonGreyerz asks, “Why should anyone work when printing money can create 30% of GDP in just 10 months by buying stocks? Investors aren’t worried that stocks aren’t rising due to rising profits or improving fundamentals. What they don’t realize is that a global crash is right ahead — a crash that will destroy 90% of their illusory wealth.” Yes … but you’re preaching to the choir, Egon.

Credit: I know what some of you are thinking: Is there a way to avoid this crash? Of course there is. Best of all, this protection has proved itself time and again throughout 5000 years of human history. It’s wealth insurance; typically 5% or 10% of your net worth in physical gold and silver, held in your possession, away from the scurrilous bankers‘ fraudulent debt-based monetary system. Sadly, the challenge today is finding any on the shelves.

The Question of the Week

[poll id="360"]

Last Week’s Poll Result

What’s the smallest coin you’d ever consider picking up off the street?

  • penny (66%)
  • none (12%)
  • nickle (10%)
  • quarter (7%)
  • dime (4%)

More than 2200 Len Penzo dot Com readers answered last week’s poll question and it turns out that 2 in 3 of them are still willing to take a lowly penny off the street and put it in their pocket, which is quite remarkable when you consider there isn’t much — if anything — you can buy with a penny these days. Frankly, I wouldn’t consider picking up anything smaller than a quarter off the street — and even that probably wouldn’t be enough.

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.

By the Numbers

Here are the average 401(k) contribution rates as a percentage of compensation by age range during the second quarter of 2019, according to data released by Fidelity Investments:

7.0% The contribution rate for those between ages 20 and 29.

7.8% The contribution rate for those between ages 30 and 39.

8.5% The contribution rate for those between ages 40 and 49.

10.1% The contribution rate for those between ages 50 and 59.

11.2% The contribution rate for those between ages 60 and 69.

Source: Fidelity Investments

Useless News: The Pillsbury Doughboy (1950 – 2021)

The Pillsbury Doughboy died yesterday in Minneapolis of a yeast infection and traumatic complications from repeated pokes in the belly. He was 71.

Doughboy was buried in a lightly greased coffin. Dozens of celebrities turned out to pay their respects, including Mrs. Butterworth, Hungry Jack, Duncan Hines, the California Raisins, Betty Crocker, the Hostess Twinkies, and Captain Crunch. The gravesite was piled high with flours.

Aunt Jemima delivered the eulogy and lovingly described Doughboy as a man who never knew how much he was kneaded.

Born and bread in Minnesota, Doughboy rose quickly in show business, but his later life was filled with turnovers. He was not regarded as a very smart cookie, wasting much of his dough on half-baked schemes.

Despite being a little flaky at times, he still was a crusty old man and served as a positive roll model for millions.

Doughboy is survived by his wife, Jane Dough, and three children: John Dough, Play Dough and Dosi Dough, who has a bun in the oven. He is also survived by his elderly father, Pop Tart.

The funeral was held at 3:50 for about 20 minutes.

He will be remembered for always rising to the occasion and cheering up someone having a crumby day and kneading a lift.

(h/t: RD Blakeslee)

More Useless News

I currently have nine followers at Gab. Hooray! Here’s hoping one of you out there will help me get to double digits soon!

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. Ontario (1.92)
3. Manitoba (1.85)
4. Saskatchewan (1.81)
5. Nunavut (1.67)

9. Alberta (1.48)
10. British Columbia (1.45)
11. Quebec (1.41)
12. Yukon (1.25)
13. New Brunswick (1.13)

Whether you happen to enjoy what you’re reading (like those crazy canucks in Newfoundland & Labrador, eh) — or not (ahem, all you hosers living on the frozen New Brunswick tundra) — please don’t forget to:

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Thank you!!!! 😊

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

I’m not sure why, but this week I clearly struck a nerve with Mary Sue, who felt compelled to drop this little piece of advice into the Len Penzo dot Com complaint box:

Your blog costs money. Get rid of it because you’re clearly not qualified to give rational advice.

Actually, in the blogging world … being unqualified makes me over-qualified.

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

Comments

  1. 1

    TnAndy says

    Poll on savings account this week is interesting. If you answered “YES…..I will close my account if rates go negative”, you might want to get to closing, as REAL returns have been there for quite a while. Get a 1% return on a standard savings account when REAL inflation is clearly running 4-6% and then throw income taxes in on top of that, and you’re probably losing 3- 5% already.

    Gold has a 15yr average return of over 10%/yr according to Goldprice.org

    I think it’s past time to throw the old ‘gold should make up 10% of your portfolio’ advice out the window. In retirement now, gold and silver make up 72% of our savings with the rest in bank accounts.

    • 2

      Len Penzo says

      You are spot on, Andy. Real (inflation-adjusted) rates are indeed negative.

      As for the 5% to 10% figure for physical precious metal holdings, that is one of those rules of thumb that has been around for a long time.

      That being said, I am quite confident that 10% will fully insure one’s paper net worth when the system finally fails. I also suspect any allocation above that would actually result in a net gain if the system were to fail.

      In my opinion, an allocation of more than 10% stops being insurance and instead becomes more speculation (although I don’t mean “speculation” to be a perjorative term in this case).

  2. 3

    Sara King says

    Hi Len,

    I’m with Andy. I think holding 5-10% in silver or gold is too low these days.

    Have a great weekend!

    Sara

    • 4

      Len Penzo says

      You are not alone, Sara. I know more than a few people who feel the same way.

  3. 5

    Cowpoke says

    This is so frustrating. When people are getting 3,772% returns by mistakenly buying Marathon Patents instead of Marathon oil we have entered the twilight zone.

    Historians are going to look back at this time period and mock us for being complete fools.

    • 6

      Len Penzo says

      I agree, Cowpoke.

    • 7

      Bill says

      Some people over 60 already do.

  4. 8

    RD Blakeslee says

    Andy, I can’t answer the question because it assumes I have a savings account. I don’t.

    • 9

      TNandy says

      RD:

      I do for 2 reasons.

      1. Keeps my wife happy…though listening to me preach on metals for 20 years must be having some effect, as she said to me last January “think we ought to buy some more gold ?”

      2. Gives us access to instant cash in an emergency. I’d hate to HAVE to convert metal to paper at the wrong time, or be waiting on a check from Apmex.

      • 10

        RD Blakeslee says

        Gotcha. Our situation is such that we can live a normal life with our REAL savings -food,fuel, etc. – without need of money, for months, if necessary.

        Even health emergencies are covered, with Medicare and supplementary insurance.

        • 11

          Len Penzo says

          Now THAT’S peace of mind. You and Andy are the most self-reliant people I know, and I admire what both of you have done to get there. It is very impressive!

  5. 12

    Bill D. says

    The coins today are so cheap they feel like the play money I used when I was a kid. Anybody hold a quarter in their hand lately? It feels more like plastic than metal. Great roundup as usual Len. Thanks.

    • 13

      Len Penzo says

      No doubt. There are noticeable differences when you drop on the table a pre-1965 US silver quarter, a quarter minted between 1965 and, say, 2000, and then a quarter minted in the last 10 years. Actually, the difference is shocking!

      • 14

        Bill says

        Try a penny. It feels like a tiddlywink.
        (I wonder how many had to google “tiddlywink”.)

  6. 15

    J-Man says

    So the Bank of England is warning about neg rates. But how likely are neg rates in the USA?

    • 16

      Len Penzo says

      I suspect negative nominal rates in the US will not happen because it would pretty much guarantee the end of the dollar’s reserve status. But as Andy said above, real rates in the US are already negative.

  7. 17

    Kenny says

    Is that $3K electricity bill a joke?

    • 18

      Bill says

      The state of Texas allows you to choose your utility provider with some restrictions. If you so choose, you can use a source like Griddy that buys its electricity on the open market from firms that have a surplus. Your electricity rate with them is “variable”. If there is a surplus of power on the grid, you can have lower utility bills than someone who uses the local provider.
      However, when there is no surplus, Griddy has to pay extreme prices. It then passes on those prices to its customers. It is why those people have those outrageous utility bills. Griddy has been telling them to switch to someone else. Now, they’re screaming because the local utility companies can’t come switch them immediately to the local source.
      In order to save a few bucks, they gambled and lost.

  8. 19

    Kevin says

    I think one can argue we have had negative interest rates in the USA since 2008 (comparing interest paid with the rate of inflation).

    • 20

      Len Penzo says

      I agree, Kev.