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.
Now that springtime is in full swing, I hope everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …
You’ve got to be very careful if you don’t know where you’re going, because you might not get there.
— Yogi Berra
I don’t mind losing, but I don’t like losing to cheats.
— Pete Waterman
Credits and Debits
Debit: Did you see this? A California home in a Sacramento suburb received 122 offers in a single weekend amid a skyrocketing US real estate market. The modest 1400-square-foot home was listed at $399,900 and received at least one offer above $500,000. No, really.
Its all in the chart….
3 huge bubbles over the past 25 years, each bigger than the previous. With each bubble bursting, the Fed forces rates lower & lower – creating even bigger imbalances.
The Fed normalize? Then the entire house of cards comes crashing down. YCC it is! pic.twitter.com/q4PtqHBFNA
Peter Schmidt (The 92ers) (@The92ers) April 9, 2021
Debit: On a related note, this week an unopened Nintendo game that was originally purchased in 1986 — and then forgotten in a desk drawer — sold at auction for $660,000. In case you’re wondering, the same game sold for roughly $60 when it was introduced 35 year ago.
Debit: By the way, a similar copy of Super Mario Brothers sold for $114,000 just last summer. Oh … and for those of you keeping score at home, that marks a nearly six-fold price increase since just last year. Nope — nO SiGn of InfLaTiOn THeRe! (Psst. And if you don’t believe me, just ask the Fed.)
according to the Big Mac Index, this was the average price for a simple Big Mac in the US by year:
2010 – $3.58
2020 – $5.66
this is a 58% increase in 10 years, which works out to +4.68% per year on average
Alex K. (@alexkvan) April 8, 2021
After Unprecedented Delay, BLS Admits Huge Jump In Producer Prices In Marchhttps://t.co/4Qo50xaF5N
Stalingrad & Poorski (@Stalingrad_Poor) April 9, 2021
Credit: Frankly, I’m still trying to figure out how anybody could be so stupid to pay $660,000 for an unopened 40-year-old video game. Especially when they could have paid the same price for 1650 blockchain-validated (!) digital farts. And for all you “inflation is tame” proponents who continue to believe everything the Fed says, I’m almost certain that before this year the price of a digital fluffer-doodle was less than a dollar. (Please, folks; no nasty-grams … I said “almost.”)
You’re not a banker. You’ve become an entrepreneur!
Oh wait. There’s really no value to the picture is there? Never mind. You’re still a banker.
Howard Wetsman MD (@addictiondocMD) April 9, 2021
Credit: Meanwhile, Credit Suisse and Japanese bank Nomura are licking their wounds after last week’s $30 billion implosion of the highly-speculative Archegos hedge fund. In fact, Credit Suisse is rumored to be on the hook for as much as $5 billion and may have to raise capital. The good news is their depositors can rest easy knowing that their cash is safe in the bank’s vault and probably hasn’t been used to fund those speculative investments. Oh, wait …
It makes one wonder how banks calculate risk if they thought Archegos was a safe bet. It’s hard to dismiss people being cynical about banks who regularly deny people mortgages or loans for homes and businesses but nearly go bust lending billions for gambling.
Mike Freedman (@thewordthatcuts) April 9, 2021
Debit: Of course, with the Fed holding interest rates near zero, there are plenty of speculative highly-levered hedge funds out there gambling with the Fed’s green confetti. And why not? If a casino was giving away its chips at no cost to the players, I’d grab as many as I could carry and lug them over to the high-roller table too. After all, that strategy isn’t as risky as when you’re playing with your own cash …
Credit: In other news, asset manager Egon VonGreyerz is warning that, with $1.4 quadrillion in derivatives out there, the Archegos disaster is just a small taste of what’s to come: “When this unravels, the massively over-leveraged financial system will be paralyzed as stock, bond and property values evaporate. Then the world will the realize that all the credit and printed money that backed these assets had zero value.” One would hope … but I’m not so sure anymore.
Credit: Speaking of worthless currency, VonGreyerz also reminds us that when the dollar crisis finally unfolds, physical “gold and silver owners will be able to get assets for five cents on the dollar. It sounds impossible — but people familiar with the Weimar Republic know this actually happened then, as well as during other major (currency) crises.” Don’t scoff; you thought tyrannical government decrees forcing small business owners to shutter their doors were unfathomable too.
You cant keep the ball under water forever…
Peter Wahlgren (@wahlgren82) April 1, 2021
They are taking money, shorting the spot price, with the view that they can buy it all back cheaper.
If price falls they win and you lose.
If price rises, they reimburse you, and you lose as prices rise.
Do people see this yet?
Aidan #silversqueeze (@BuyingMyFreedom) April 7, 2021
Debit: The day of reckoning may be closer than we think, as government debt is increasing at a record pace. In fact, $650 billion of new Treasuries must now be created every month to not only support stimulus spending, but also roll over old T-bills. Yes, the Fed is buying much of that debt, but the slack that private investors are being asked to cover is absolutely staggering. The bad news is Treasury issuance will only increase over time — and they’re running out of suckers. Talk about playing a losing game …
Credit: As macroeconomist Alasdair Macleod observed this week, “Spendthrift governments have taken it upon themselves to finance virtually all economic liabilities which are not being financed by bank credit. It has become a circularity with no meaning to it other than hidden costs: taxes and inflation take away from production and consumption in greater amounts to provide the capital and stimulus in lesser amounts.”
Jacqueline Harris (@jhn6jun) April 8, 2021
Debit: Making matters worse, Macleod says because “the state is clueless about how the diminished quantity of input is best spent, the direction of inflated currency is inevitably aimed at supporting government and political interests to the detriment of a free-market economy.” In other words, folks: the private sector now exists to serve our leviathan government and its employees — not the other way around.
Hey, weren’t you already in line yesterday?
No that was my twin brother…
Jason Stockwell (@jstock37) April 8, 2021
Man Still Clinging To Outdated Belief In Good, All-Powerful, Generous, Loving Government https://t.co/sXgV0CdDLr
The Babylon Bee (@TheBabylonBee) April 8, 2021
Debit: Unfortunately, in an attempt to assuage the public, the US is disbursing multiple checks under the guise of “COVID relief.” But continuing to dole out currency without a corresponding increase in the production of goods will eventually result in too much money chasing too few goods. And the only way to correct that is via higher prices — or rationing. So get ready — because if you think inflation is bad now, well … you ain’t seen nothing yet.
we need to start producing goods ( NOT fin services or trickery) in US. Instead of focusing on the next war, focus on cleaning corruption & waste coming out of DC.
LordJackass (@lordjackass4u) April 9, 2021
Dave Kranzler (@InvResDynamics) April 8, 2021
By the Numbers
After a banner year in 2020, gold and silver have gotten off to a rocky start in 2021. Here is the 1Q performance overview of gold and silver versus other major asset classes:
23.4% Crude oil
12.2% Commodities (COMT)
7.8% Dow Jones Industrials
5.8% S&P 500
-5.9% Bonds (10-year US Treasuries)
The Question of the Week
Last Week’s Poll Result
What is the best way to pay for new road infrastructure and highway maintenance?
- Gasoline tax (80%)
- A combination of both (14%)
- Vehicle miles traveled tax (5%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that 4 in 5 say using the number of miles a vehicle travels is the wrong way to pay for infrastructure improvements and highway maintenance. Okay … but there has to be some way to make electric vehicle owners pay their fair share too. A miles-traveled tax seems like an equitable solution. Why not a miles-traveled tax for electric vehicles and a gasoline tax for vehicles with internal combustion engines? As for hybrids …
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: Doctors’ Conference
Five surgeons from big cities are discussing who makes the best patients to operate on.
The first surgeon, from New York, says, “I like to see accountants on my operating table because when you open them up, everything inside is numbered.”
The second, from Chicago, responds, “Yeah, but you should try electricians. Everything inside them is color coded.”
The third surgeon, from Dallas, says, “No, I really think librarians are the best. Everything inside them is in alphabetical order.”
The fourth surgeon, from Los Angeles, chimes in: “You know, I like construction workers. Those guys always understand when you have a few pieces left over.”
The fifth surgeon, from Washington DC, “You’re all wrong. Politicians are the easiest to operate on. There’s no guts, no heart, no balls, no brains and no spine. Plus, the head and the ass are interchangeable.”
(h/t: RD Blakeslee)
More 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. South Dakota (1.78 pages/visit)
2. West Virginia (1.74)
3. Indiana (1.67)
4. California (1.60)
5. Pennsylvania (1.57)
46. Connecticut (1.16)
47. Utah (1.15)
48. Wyoming (1.14)
49. Montana (1.12)
50. Vermont (1.00)
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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
Etep wrote in this week to dispute my claim that waterbeds are overrated as a platform for sex:
What are you talking about? They’re great! Push once and coast for two!
I bet you’re a riot on the dance floor.
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