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 wonderful week. And with that, let’s get right to this week’s commentary, shall we?
We know they are lying. They know they are lying. They know we know they are lying. And we know they know we know they are lying — but they are still lying.
— Aleksander Solzhenitsyn
You can ignore reality, but you cannot ignore the consequences of ignoring reality.
— Ayn Rand
Credits and Debits
Debit: Did you see this? Although the stock market is continuing to hover near all-time highs, the Atlanta Fed slashed its estimate for real GDP growth in the third quarter of 2021 to just 0.5% — that’s down from 1.2% on October 15, down from 6% about two months ago, and down from 14% back in May. If I didn’t know better, you’d think the stock market knows something we don’t. Is it crazy? Or crazy like a fox?
Debit: It’s no coincidence that the Fed lowered its GDP estimate at the same time it was announced that US industrial production in September plunged 1.3% on a month-over-month (MoM) basis — that’s the sixth consecutive month of basically flat or falling US manufacturing production, and the sharpest decline since February. Making matters worse, August was revised down from a 0.4% MoM increase to a 0.1% MoM decline. Uh oh.
Debit: Consumers can certainly sense that there’s an ill economic wind blowing. The latest University of Michigan Consumer Sentiment data shows falling confidence and soaring inflation expectations — which is just more evidence that stagflation expectations are getting stronger. So, with all this bad news in mind, let’s sum up the current economic situation: We’re in the midst of an economic contraction, with inflation raging and the Fed hellbent on holding interest rates at the zero bound. Hey … what could possibly go wrong?
Credit: Speaking of surging inflation, it looks like it’s copper’s turn now. And since silver is considered a base metal like copper, precious-metals analyst Craig Hemke notes that “If copper hits a new all-time high, it’s highly likely that silver will tag along for the ride too; maybe not immediately, but if copper is trading at $6 or $7, silver is not going (to remain) at $23. I can assure you of that.” Well … at least that’s how it’s supposed to work.
Debit: Meanwhile, empty store shelves are popping up with increasing frequency for all kinds of imported goods. Amazingly, despite the US being the world’s largest food producer, shortages are beginning to show up at grocery stores too — and they’re expected to get even worse in 2022. The good news is, there’s no shortage of chocolate bars. At least not yet …
Debit: Even better news is that inflation and empty shelves are, supposedly, “a high-class problem” that we should all be grateful for. Well … at least that’s what “blue check” Harvard economics professor Jason Furman wants you to believe. Heh. Obviously, an Ivy League education ain’t what it used to be.
Debit: The insanity extends beyond the academic world; government bureaucrats are infected with the crazy bug too. To wit, a top Treasury official this week claimed that the recent surge in inflation is part of an “economy in transition” and that the only way out is to get everyone in America and worldwide vaccinated. No, really. Hey … who wants to bet the same official moonlights as a car salesman on the weekends?
Credit: By the way, what that same official isn’t telling you is that inflation is a tax that disproportionately affects the poor and the middle class. Macro analyst Peter Schiff says you can protect yourself by, “Buying things that you think you’ll need in the future now — especially nonperishable goods — because they’re going to be in even shorter supply than they are today, and with much higher prices.” Then again, that’s not necessarily a bad thing. Er … or so we’re being told:
Debit: Of course, nobody on Wall Street really cares about inflation and the fearful sentiment on Main Street — and why should they, when the Fed is relentlessly pumping stocks and bonds up with a never-ending stream of liquidity? Heck … big-time celebrated stock investors traders have it so easy now that even the most basic research is no longer required. Ground control to Major Tom:
Credit: Alasdair Macleod also observed this week that, the public is now trying to minimize the impacts of high inflation and supply chain shortages by rushing out and buying items it doesn’t need now, but may need in the future. He then goes on to warn that, “This is the earliest sign of a crack-up boom — and a crack-up boom is the final destruction of paper currencies.” And now you know why Alasdair is considered a heretic in the hallowed halls of the Eccles Building.
Credit: Asset manager Egon VonGreyerz reminds us that “central bankers can either squash inflation by raising rates, thereby creating a liquidity squeeze that will kill a (government) in need of constant stimulus, or they can continue printing worthless currency and digital dollars. The choice is obvious, as history tells us they’ll do the only thing they know — which is to push the inflation accelerator pedal to the bottom.” Imagine that.
Debit: If you add everything up, folks, this is what economic collapse looks like. Just remember that the Fed isn’t going to save you because they can’t. In fact, they’ll only remain solvent as long as they can continue to pretend everything is under control while simultaneously monetizing debt and keeping the rest of the world mesmerized by their monetary policy hocus pocus, better known as QE. When that stops working, the US dollar is toast. And that’s also when a dumbed-down populace will finally learn the difference between fiat currency and real money.
By the Numbers
With almost everybody now being affected by long wait times, shortages and/or higher prices, here’s a look at some of the numbers behind the current global supply chain crisis:
$933,000,000,000 Expected e-commerce sales for all of 2021.
24% The increase in e-commerce sales from 2020.
$1300 Cost to move a freight container from Asia to the US West Coast in 2019.
$3800 Cost to move a freight container from Asia to the US West Coast in 2020.
$17,000 Cost to move a freight container from Asia to the US West Coast in 2021.
$20,000 Cost to move a freight container from Asia to the US East Coast in 2021.
$5,300,000,000 The projected annual profit for shipping giant Maersk at the beginning of this year.
$18,500,000,000 Maersk’s latest revised projected annual profit for 2021.
Source: Forbes
Last Week’s Poll Results
Which basic living expense has increased the most for you in the past year?
- Food (50%)
- Gasoline (36%)
- Utilities (9%)
- Rent (5%)
More than 2200 Len Penzo dot Com readers responded to last week’s question and it turns out that half of them are feeling the pinch of inflation primarily at the grocery store, while slightly more than 1 in 3 say their biggest case of sticker shock occurs at the gas pump. I think I’ll ask this question again in a few months when we’re in the dead of winter, as I’m curious to see if the results will change — especially with respect to utility costs.
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.
The Question of the Week
[poll id="395"]
Useless News: Dead Duck
A woman brought her very limp pet duck, Cuddles, into a veterinary surgeon.
As she laid her beloved duck on the table, the vet put his stethoscope to the bird’s chest and listened carefully.
A moment later the vet shook his head and said sadly, “I’m really sorry, ma’am — but Cuddles has passed away.”
The woman became quite distressed and began to cry.
“Are you sure?” she said with tears flooding from her eyes.
“Yes ma’am,” the vet responded, “Your duck is definitely dead.”
“But how can you be so sure?” the woman protested. “I mean, you haven’t done any testing on him or anything have you? Perhaps he’s just stunned or in a coma or something.”
The vet rolled his eyes, then turned around and left the room.
A few minutes later he returned with a black Labrador retriever.
As the duck’s owner looked on in amazement, the Labrador stood on his hind legs, put his front paws on the examination table and sniffed around the duck from top to bottom. He then looked up at the vet with sad eyes and shook his head.
The vet patted the dog on the head and took it out of the room.
A few minutes later the vet returned with a cat. The cat jumped on the table and delicately sniffed the bird from its head to its webbed feet. After a moment the cat looked up, shook its head, and meowed softly. The vet nodded solemnly to the feline, which then jumped off the table and sauntered out of the exam room.
The vet then looked at the woman and said, “Look, ma’am; I’m really sorry, but as I said before, this is most definitely a duck that is no longer of this world. Cuddles is dead.”
The vet then turned to his computer terminal, hit a few keys and produced a bill, which he handed to the woman.
Still in shock, she looked at the bill and saw it was $150. Incredulous, she shouted, “What??? You want $150 just for telling me that my duck is dead?”
The vet shrugged his shoulders and said, “I’m really sorry, ma’am. If you had taken my word for it, the bill would’ve only been $20 — but the lab report and cat scan isn’t cheap.”
(h/t: Cowpoke)
More Useless News
Here are the top five articles viewed by my 40,661 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- 18 Bizarre Facts You Didn’t Know About the $2 Bill
- 5 Strategies for Protecting Your 401k from Economic Collapse
- 9 Things We Routinely Overpay For
- 23 Creative Ways to Earn Extra Money
- Mailbag: When It Makes Sense to Take the 401k Early Withdrawal Penalty
Hey, while you’re here, please don’t forget to:
1. Click on that Like button in the sidebar to your right and become a fan of Len Penzo dot Com on Facebook!
2. Make sure you follow me on my new favorite quick-chat site, Gab — oh yeah, and Parler too! Of course, you can always follow me on Twitter too. Just be careful what you say there.
3. Subscribe via email too!
And last, but not least …
4. Please support this website by patronizing my sponsors!
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 out to me at: Len@LenPenzo.com
This week Claire dropped the following question into the Len Penzo dot Com mailbox:
I have $12,000 in credit card debt and $90,000 in school loans. I’m earning $37,000 a year. Any advice on the best way to erase these loans quickly?
Yes! Ask your boss for a really REALLY big raise.
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
Hi Len,
I always love to start my weekend with a big cup of your famous joe!
Silver and gold are starting to make their moves but they still have a long way to go to catch up with reality.
Sara
Thank you, Sara. I think you may be right. At least I hope so!
Love the Ayn Rand quote. A great example of ignoring reality to sell a narrative is the energy crisis going on in Europe. They shut down a lot of their nuclear plants and have shut down many of their coal mines while forcing everyone into green energy like wind and solar. Now they’re finding out that green energy can’t possibly satisfy the demand and nat gas and other carbon based fuels are in short supply and prices are going through the roof.
Yeah … green energy such as wind and solar is great, but it will take a very long time before it will be able to replace hydrocarbon-based fuels – for many reasons.
That Joe Isuzu commercial is a peek at what a REAL normal functioning economy looked like. Did you notice they were advertising financing at 5.9% as a special offer?
Car dealers today would sell very few cars with those terms. LOL!
They could do it, but It would have to be a 30-year loan.
They’re getting there even without the higher rates, Robert. It was too long ago that six- and seven-year car loans were unheard of — now they are pretty common (not to mention, stupid).
You know, I remember in the late 90s checking interest rates daily, because the rates actually impacted my decision on when to buy a new car!
I remember the inflation of the late 70’s and early 80’s. It was an insane time. The dollar was losing value to be sure, but that was offset by the banks that were paying out 10% or more on savings accounts. And there was little incentive to invest in stocks because bonds were paying out 12%.
Banks paying 10% for money in a savings account? That sounds like heaven!
As a teenager I remember getting double digit returns in my savings account too. It was pretty nice! Think about it … at 10%, your savings would double every seven years.
I’m always amazed at those Mark Dice video. If he crossed paths with me, I’d take that silver bar off his hands in a heartbeat. He does the same thing with gold coins too. People choose the candy bar every time.
Well … those videos are being made in downtown Encinitas, California. All you have to do is hang out there and wait! The key is knowing when he’ll be there.
The economic situation in the U.S. is echoed, one way or another, throughout the world.
In China, the wealth of households has been built by buying apartments, analogous to speculation in stocks, here. This has been “force drafted” by the government there, which has “commanded” growth rates only possible with debt. The result: thousands upon thousands of empty apartment buildings!
These are in process of being systematically devalued, impoverishing households.
These are the kinds of situations which have traditionally led governments to go to war, to retain the loyalty of the citizenry. Scapegoating a foreign enemy always works and the people suffer loss of life instead of loss of wealth, but the government saves itself.
Afterthought: At least one exception; The Nazi Government did not save itself. It was totally destroyed, ushering in the high point of U.S. culture, after which the inevitable hubris set in.
Scary thought, Dave. What you say is true. That being said, I hope it doesn’t pan out that way this time … fingers crossed.
Great summary this week, Len. I’m surprised that Mark Minervini got caught off guard. He is a pretty famous investor.
I wouldn’t call him an investor. The guy is a momentum trader who has made a lot of money analyzing the charts.
Look at those shipping costs! You have to wonder how prices for the stuff we get from China and the rest of Asia aren’t higher than they already are. Haven’t been in a Wal-Mart for a long time, but it can’t be as cheap as it used to be, can it?
I haven’t been in a Walmart in a long time either, Sam. Maybe someone else can let us both know if the prices there are noticeably higher. (I’ll bet they are though.)
Used to buy bags of Walmart popcorn for $1.80 a month ago. Now its $2.00. Plenty of empty shelves, too.
I wouldn’t be surprised if the size of the bag is also smaller, thereby further magnifying the price increase!
In 1980, a 6 month $10k CD was paying 13%. I had one. I wish I’d locked it up for longer than 6 months.
Yep … those were the days when market rates were priced to accurately reflect risk (for both inflation and default) to savers. Today the risk to savers is an order of magnitude greater, and yet you’re lucky to get a 6-month CD that’s paying 0.70%
This is the clown world we are now living in.