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.
I hope everybody had a terrific week. Now that the hardest part of it is over, let’s get right to this week’s commentary …
The opposite of courage is not cowardice; it’s conformity. Even a dead fish can go with the flow.
— Jim Hightower
Credits and Debits
Debit: Did you see this? According to none other than Pennsylvania’s Secretary of Public Welfare, Gary Alexander, government has distorted the economy so badly that single moms in his state are “better off earning a gross income of $29,000 with $57,327 in net income and (welfare) benefits, than earning a gross income of $69,000 with net income of $57,045.” Imagine that.
Debit: Then again, that’s assuming anyone can find a job paying $69,000 annually. After all, the US has sent most of its high-paying manufacturing jobs overseas to hold costs down after the dollar was de-anchored from gold in 1971. As a result, there’s an ever-increasing proportion of Americans who find themselves trying to earn a living in low-paying low-skill entry-level jobs that were never meant to support a family in the first place.
Debit: On a somewhat related note, with the US federal deficit for April nearly one quarter of a trillion dollars, the overall budget picture has never been uglier: For the first seven months of fiscal 2021, the US Treasury collected $2.1 trillion in receipts — but spent $4.1 trillion. For those counting at home, that means America is now spending 90% more than it earns. Even more shocking, that kind of gross fiscal indiscretion is typically only found in banana republics. Oh, wait.
Credit: Unfortunately, financial analyst Simon Black points out that the federal government is just going to continue its insane borrow-and-spend binge: “This is the big one. Between the regular budget, COVID stimulus, and proposed legislation, the US is hoping to spend a whopping $11 trillion this year — and it’s only May. Obviously, Uncle Sam doesn’t have the money; so they have to borrow it.” Uh huh. And I thought this was a bad idea …
Credit: Meanwhile, investment manager Jeffrey Gundlach pointed out this week that the latest federal debt surge doesn’t fully capture just how much money the US government owes because there are unfunded liabilities which, when combined with all local, state and federal debt, leave Americans on the hook for $163 trillion. Not surprisingly, this leads to a rather inconvenient truth:
Uhhh…I think I will take the “under” on that 15 year thing Druck. Could he have meant months? #Fed $USD
BLKSR71, CFA (@BLKSR71) May 11, 2021
Debit: By the way, Gundlach also noted that any attempt to actually pay for those unfunded liabilities would result in negative economic growth— for the next 77 years. In other words: The US can never reduce — let alone retire — its current debt and future promises. So the US has no choice but to continuously refinance. At least until our fraudulent monetary system finally collapses once and for all. As for the economy, the latest data shows that it’s already in Weekend at Bernie’s mode …
What about the pEnT uP dEmAnD? Oh thats another false narrative from the financial media? Figures.
Fiona (@fer2889) May 14, 2021
Credit: Not coincidentally, market analyst Paul Wong is warning that, “The world is now forced to attain economic growth at all costs due to record debt-to-GDP.” Put another way: The debt-based monetary system now requires constantly rising asset prices to avoid imploding. Thus, “any threat to growth such as falling stock markets can’t be tolerated.” Translation: ZIRP will continue. The trouble is, with each $1 of new debt now generating less than 40 cents of economic growth, the math no longer works.
Blame Congress as well for allowing buybacks. And blame the market for not caring that Amazon made no money for decades and allowed the company’s equity to be useful collateral. No one cared, though, since Amazon allowed us to get cheap goods fast (while killing other companies).
grych8 (@grych8) May 12, 2021
Credit: With core prices in April rising at the fastest pace since 1981, another respected market analyst, Peter Boockvar observed this week that, “Inflation is a tax; the higher it goes, the more difficult it is to sustain our standard of living. What this means for the bond markets and anything priced off interest rates could be profound; so if the Fed is wrong on inflation being temporary, their credibility will be in tatters.” Hey, wait a minute … the Fed’s credibility is already in tatters.
Don’t worry, they’ll adjust the index soon and inflation will be all gone. *wink* *wink*
sathoarder (@sathoarder) May 12, 2021
when the system is broken, anyone looking to the system for answers is an idiot
Eugene Schubert (@eschuber8) May 10, 2021
Debit: Typically, 10% of the average Americans’ disposable personal income is spent on food; however, the poorest households spent an average of 36% in 2019. Fuel is another key segment of household spending and, like food, its price is rising too. In fact, US gas prices surged six cents this week to $2.96 — that’s the highest pump price for May since 2014. Hey … it could be worse: the average pump price in California is $4.10 — and rising. No, really. Welcome to my world.
Oh good, I was worried the price of video games would increase again.
The Chaos Emperor (@realChaosJester) May 13, 2021
Credit: But as Michael Snyder points out, the percentage of disposable personal income the average US household spends on food is expected to reach 40% in 2021 — with poor households spending well over 50%. Yikes. That’s scary, if true. Let’s hope that will at least be the trigger that finally gets the public to demand a new monetary system based on real money, rather than debt. In the meantime, the currency printing will continue …
Um … does anybody with the bulk of their retirement savings in US dollars and Treasury bonds see a problem here? Heck, does anybody with ANY assets denominated in US dollars see a problem here?
Debit: Of course, when the government decides to live beyond its means and pay for its excessive expenditures via the printing press, rather than by increasing economic output, massively-higher grocery bills should be expected. In the meantime, we can only hope that the misguided experts who keep telling us long-running large deficits are okay because “we owe it to ourselves,” will finally figure out that there really is no such thing as a free lunch. Speaking of “experts” …
Credit: And while I’ve been extolling the importance of holding physical gold and silver as wealth insurance since 2013, legendary market analyst Jim Grant believes precious metals have become more than that now: “Gold isn’t a hedge against monetary disorder; it’s an investment in monetary disorder, which is what we have — floating-rate currencies, manipulated exchange rates, and manipulated interest rates. When the cycle turns, people will want gold and silver.” They will indeed. The trouble is, at that point, most people won’t be able to get it, let alone afford it.
Historically, gold is an asset investors would have liked to have held w hindsight but never quite knew why they held it for the future. My best guess is history will continue. #notinvestmentadvice
Axel Merk (@AxelMerk) May 13, 2021
Last Week’s Poll Result
Which of these items has you most concerned about rising prices?
- Food (69%)
- Energy (14%)
- Rent (9%)
- I’m not concerned about inflation (5%)
- Medicine (2%)
More than 2200 Len Penzo dot Com readers answered last week’s poll question and it turns out that, when it comes to the basic necessities of life, most of them are most concerned with the impacts of a higher grocery bill. Can’t say that I blame them; I feel the same way.
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.
The Question of the Week
[poll id="372"]
By the Numbers
In terms of affordability, here are the top — and bottom — five states for retirement, based on average annual living costs of people who are 65 and older for housing, food, transportation, Medicare Part B and Part C, entertainment and personal care:
50 Hawaii (average annual expenses: $52,511)
49 California ($51,084)
48 New Jersey ($50,976)
47 Massachusetts ($48,950)
46 New York ($48,127)
5 Indiana ($31,029)
4 Alabama ($30,884)
3 Mississippi ($30,292)
2 West Virginia ($29,763)
1 Arkansas ($29,736)
Source: Infogram
Useless News: Success Story
Every morning, the CEO of a large bank in Manhattan walked to the corner for a shoeshine. He would sit in an armchair, and examine the Wall Street Journal while the shoe shiner buffed his shoes until it had a beautiful mirror sheen.
One morning the shoe shiner asked the CEO: “What do you think about the situation in the stock market?”
The businessman answered arrogantly, “Why are you so interested in that topic?”
The shoe guy replied, “Well … I have millions in your bank and I’m considering investing some of the money in the capital market.”
“Is that so?” the executive asked with a sheepish eye. “What’s your name?”
“John H. Smith,” said the shoe shiner.
After getting his shoes shined, the CEO made his usual short walk to the bank and then took the elevator to the top floor, where he asked his chief accounts manager, “Say, Harry … Do we have a client named John H. Smith?”
“We most certainly do!” answered the manager. “In fact, he’s a high-net-worth customer with $12.6 million in his account.”
So the executive immediately got back into the elevator and, upon reaching the ground floor, he made a beeline back to the street corner. He approached the shoe shine guy and said, “Mr. Smith, I’d like to invite you to be the guest of honor at our monthly board meeting next Monday so you could tell us the story of your remarkable life. I’m quite sure we could all learn something from you.”
The shoe shiner told the CEO it would be an honor to do so, and promised he would be there.
At the board meeting, the chairman introduced the shoe shiner to the members sitting around the ornate table. “Gentlemen,” the CEO said, “I think we all know Mr. Smith from the corner shoeshine stand — but many of you probably aren’t aware that Mr. Smith is also an esteemed customer here at the bank. In fact, some of you may be surprised to learn that he is one of our biggest clients. So I invited him here to tell us his remarkable life story, as I’m sure there’s something we can all learn from him.”
And with that, Mr. Smith walked to the front of the board room and began his story…
“Thank you all for having me here today. I came to this country 50 years ago as a young immigrant from Europe with an unpronounceable name; I got off the ship without a penny. The first thing I did was change my name to Smith. I was hungry and exhausted. I started wandering around looking for a job but to no avail. Fortunately, I found a dime on the sidewalk and I bought an apple with it. I then had two options: eat the apple and satisfy my hunger, or start a business. So I sold the apple for 25 cents and bought two apples with the money — then I decided to sell them too. Before I knew it, I had myself a thriving business selling apples. After I started accumulating a few dollars in profit, I was able to buy a set of used brushes and shoe polish and started polishing shoes. I didn’t spend a penny on entertainment or clothing; I just bought bread and some cheese to survive. I saved penny by penny and, after a while, I bought a new set of shoe brushes and polishes in different shades and expanded my clientele. The whole time I continued to live like a monk, saving every penny I could. After a while, I was able to buy an armchair so my clients could sit comfortably while I shined their shoes — and that brought me more clients. Through it all, I didn’t spend a single penny on the joys of life; I kept saving every cent. A few years ago, when the previous shoe shiner on the corner decided to retire, I had already saved enough money to buy his stand at this great location.
“Then, six months ago, my sister, who lived her entire adult life as a hooker in downtown Chicago, passed away and left me $12.6 million.”
(h/t: Rickshaw)
More Useless News
I have exactly 14 followers at Gab — which means I gained one (1) new follower this month. Hooray! Here’s hoping you can help me get into the twenties soon by the end of the year!
Free speech lovers … you can join me at Gab. https://t.co/XRrdR4rSLO pic.twitter.com/2DaJ4G3Gvs
Len Penzo (@LenPenzo) January 11, 2021
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. Saskatchewan (1.88 pages/visit)
2. Manitoba (1.83)
3. Yukon (1.67)
4. Alberta (1.62)
5. Nunavut (1.50)
9. Quebec (1.40)
10. British Columbia (1.33)
11. Ontario (1.28)
12. New Brunswick (1.17)
13. Newfoundland and Labrador (1.11)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Saskatchewan, eh) — or not (ahem, all you hosers living on the frozen Newfoundland 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
After reading my article explaining why private schools are a financial rip-off, Jack left these words of encouragement in the comments section:
Good job kicking that hornet nest, Len!
Thank you, Jack; the article definitely created quite a buzz.
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
Good morning, Len! I got a chuckle from today’s Black Coffee title; much appreciated considering the rest of the news these days! I was talking w/an Argentine friend and she can’t believe the direction the US is heading (reminds her of their “Peron years”). We also talked about how a gov’t. can seize bank accts. or limit citizens’ access to them, as has happened recently in Greece and Venezuela. Another reason to consider PMs (and maybe LUMBER these days! ;o) )
I think lumber is the new gold. Went to Home Depot to get 4 2x4s on Thursday and it cost $45!
Stan:
I bought a Woodmizer saw mill in 1991. Although thru the years it has more than paid for itself, this year it’s been gravy of the highest order !
Had a lightning hit tree I took down on our place recently, yielded four 12′ saw logs, which I cut into bit over 100 2x4x12′. It sure didn’t LOOK like a thousand dollar tree, but turns out it was.
Wow! Well done, Andy. People can do this with food too … for example, buy a case or two of canned vegetables today and if, say, the price of corn rises 25% year-over-year, that return is transferred to you. Plus, if there are shortages, it can help you weather the storm. Of course, I’m not telling my fellow preppers anything they don’t already know.
Hi, Lauren! Yes, we’re heading straight to Argentina — although it seems to me that every year in Argentina can be labeled a “Peron year.” Despite the continuous promises of reform, the nation continually votes for Big Government politicians who refuse to live with any budgetary restraints.
As for government seizing accounts or imposing capital controls, that is another reason to own some physical precious metals — those kind of draconian moves are very hard to enforce on those who own a little silver and/or gold.
Hi Len,
It’s feeling like the 1970’s all over again with the high inflation everywhere you look and long gas lines. All we need now is for Congress to put the speed limit back to 55.
Have a great weekend!
Sara
Oh, God. Please don’t give our pols any more bad ideas, Sara.
Re this week’s “Question of the Week”:
You CAN retire before age 50, in these days as in all others, if you devise a plan to do so and start early to kick the mainline economy out of your life.
Eg: https://lenpenzo.com/blog/id22017-how-i-live-on-less-than-40000-annually-ralph-from-west-virginia.html
Note that in this case the locale is West Virginia : “In terms of affordability, here are the top — and bottom — five states for retirement, based on average annual living costs of people who are 65 and older… West Virginia – second lowest cost .
Before you sniff at that, doubt the “revealed wisdom” stereotype and do a little research re West Virginia.s Eastern counties.
All this by way of example, only. Your plan will be entirely different, and based on intelligent appraisal of realistic options and your resolve to see it through, successful.
I was actually surprised at the average costs for those states on the other end of the spectrum, Dave. They seem kind of low to me … $52,511 for retirees living in Hawaii makes island living almost seem doable.
Anybody who is not getting a raise this year that matches inflation is getting a pay cut. I’m guessing that will be 95% of the workforce.
I think that number is too low, Cowpoke. Although I see at least some fast food joints here in SoCal that are desperate for workers now offering $15 per hour — or close to it.
This is the result of the government mandating a higher minimum wage through the back door, so to speak. By them paying people to stay home, they are forcing businesses to raise pay rates in order to keep old employees and find new ones.
The trouble is, all that really accomplishes is stoking price inflation — so much so that, over time, there is no net improvement in purchasing power, despite higher pay.
Like I said, government screws up almost everything it decides to get involved with.
I used to be young and poor. After years of working hard, I’m proud to say that I’m no longer young.
As my 78-year-old father-in-law likes to say: “Youth is wasted on the young.” 😉
Is that really apropos to your comment? Not really. But the older I get, the more it makes sense!
Your father in law is a wise man.
Hi, Len! Why can’t the Fed raise rates to 20% like they did in 1980 in order to deflate this bubble?
Because the debt is too large now; 20% interest on $30 trillion is $6 trillion per year. That would mean every last penny the US took in via taxes and other revenue would go service the debt … and that still wouldn’t be enough.
The rub is, the Fed has no choice but to keep printing like mad now to keep interest rates as low as possible on America’s enormous debt load — but that is only hastening the destruction of the dollar. Thus, the Fed is hopelessly trapped — it’s a situation which became inevitable after the dollar was decoupled from gold in 1971. Fifty years later, the chickens are finally coming home to roost.
The con game is almost over.
Well at least as one of your loyal fans on GAB, I left a comment for you. 😀
1/14 aint bad.
People need to Embrace “New tech”. Bitchute, Rumble, Presearch, Len you should do a “Substack” page (hint-you can get paid for all your hard work here), Gab etc. There is actually so many other sites their washing themselves out. Creation Social is cool too. But low engagement. Sooner or later words like ours here will be totally banned on the big 3 so get used to other platforms now, follow your creators there.
Thanks, Paul. Yes, the Ministry of Truth is now in control of most communications. I never thought 1984 would get here. Then again, I also never thought the US media and governing agencies would eventually become a carbon copy of what went on in the Soviet Union and Iron Bloc countries before their societies finally collapsed under the weight of all their propaganda and outright lies.
The truth always wins out in the end; but sometimes it can take a while.