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.
Believe it or not, today is my blog’s 13th anniversary! When I wrote my first post in 2008 I never imagined that Len Penzo dot Com would attract more than 10 million visitors and almost 17 million page views over the following decade – but it has! So I want to thank all of you who occasionally take a minute or two out of your day to stop by and visit – and a very special thank you to those who take the time to share your thoughts and leave comments because, without that two-way dialog, Len Penzo dot Com would be a very lonely place.
I hope everybody had an enjoyable week. Without further ado, let’s get right to this week’s commentary …
Moral hazard is the big winner from the rapid-fire succession of rate cuts from the Fed; it projects an impression of central banks, yet again, coming to the rescue of leveraged investors who can’t cope with the slightest collateral damage. This pandering to global markets and homeowners has painted central banks into a corner. But having created over-valued everything through their cheap-money policies, central banks now find themselves as the ringmasters of the three-ringed circus that is cheap money, the hunt for yield, and richly-priced assets.
— Robert Guy
Credits and Debits
Credit: Did you see this? Last week bitcoin plunged from $57,000 to as low as $28,800 on some exchanges – in less than 48 hours. So much for it being a credible currency, let alone a store of value. As Wall Street on Parade opined this week, “The problem with bitcoin is the same problem that all other highly-leveraged trading instruments are having in the new world of Fed tapering. But bitcoin has an additional problem: credibility.” Ya think?
Debit: In other news, the CPI report for November was released on Friday and it shows inflation is now at a 40-year high; officially, it’s now running at 6.9% annually. Never mind that if inflation was calculated using the same methodology the government used in 1980, inflation would be more than double the “official” figure. On the bright side, the average price of a gallon of gas in the US fell four cents this week; it’s now $3.34. In terms of silver, gasoline is cheaper than it was back in 1964 – which, more than anything else, is a testament to the white metal’s ability to preserve wealth.
Credit: Speaking of inflation, the inimitable MN Gordon reminded us this week that the 21st century housing bubble was inflated by Fannie Mae and Freddie Mac, which “relaxed lending standards and, thus, funneled a seemingly endless supply of credit to the mortgage market.” He goes on to point out that while “their stated objective was to make housing affordable for Americans, their efforts did the exact opposite.” Yep. Unfortunately, while you can’t fool all of the people all of the time, you can fool some of the people all of the time…
Debit: On a related note, Mr. Gordon goes on to point out that, with Fannie and Freddie now also “jacking up the limits of government-backed loans to nearly a million bucks in some areas house prices could really jump off the charts.” Sadly, homebuyers’ incomes will not rise fast enough to keep pace – which means it probably won’t be too long before we start seeing 50-year mortgages. Hey … don’t laugh. It wasn’t that long ago when seven-year car loans were also considered a crazy impossibility.
Credit: Meanwhile, the Fed has had its liquidity firehose pumping out dollars for most of the past decade. But despite its recently-announced tapering plan – they’re still flooding the financial system with the hose valve just a notch below full force. But as economic analyst Brandon Smith notes, “without Fed support, stock markets will die.” If what happened the last time the Fed flirted with tapering in 2018 is any indication, Smith is absolutely correct.
Credit: Then again, as financial analyst Bill Blaine noted this week, “The time to cut liquidity – the amount of money sloshing around the financial system – was a long-time ago. That money fueled financial asset inflation and is now pouring into the real economy in terms of buying real assets like property, pushing up real inflation.” That even includes used cars; in the past most new cars were guaranteed to lose as much as half their purchase price the moment they were driven off the lot – but, apparently, not anymore:
Credit: By the way, if you’ve got a holiday party or three to attend this year and you’re looking for a pithy ‘elevator speech’ to jump start a conversation on the economy, may I suggest borrowing investment advisor Lance Roberts’ summation of the current predicament: “The Fed’s monetary policy has screwed Americans.” Er … just make sure you’re not trying to chat up a CNN business “journalist”:
Credit: As macro analyst Paul Wong observed this week, despite a CPI of 6.8%, the 10-year Treasury yield remains below 1.5%. Never mind that at current inflation levels, 10-year yields should be above 8%. As a result, Wong says, “real yields have reached the nadir of the 1970s. If the goal of the Fed is to (reduce) the debt via inflation, it’s doing a remarkable job. However, real wealth is also being eroded in the collateral damage – that’s financial repression at work.” Very true … see for yourself:
Debit: Of course, Roberts also observes that: “For investors who have money invested in the financial markets, the Fed’s actions had one very predictable outcome: By keeping interest rates pegged at zero for nearly a decade, the Fed forced savers to take on more risk for even a marginal rate of return to pace inflation.” Not to mention the Fed’s reprehensible introduction of moral hazard. If only tar and feathers were still in vogue …
Credit: Unfortunately, the blogger known as Roacheforque correctly points out that, “The collapse of the global-debt-as-wealth system is unstoppable, and its creators are frantically trying to deal with it, by extending it to its logical conclusion – tyranny or ‘subjugation of the masses’ as wealth.” Uh huh. Actually both. Oh … and speaking of unstoppable forces …
Debit: For those who are still wondering why the powers-that-be are now openly stooping to such tyrannical behavior, Roachforque explains that “this attack upon rule of law has a purpose: to destroy the dollar system, and bring in central bank digital currencies to control the underclasses, and the SDR for trade settlement internationally.” Yes, yes … I realize there are going to be those who will say that’s yet another “conspiracy theory” – but anybody who has been following current events over the past several years knows that most conspiracy theories eventually turn out to be conspiracy facts.
Credit: So how does this all end? Asset manager Eric Peters was wondering about that this week as well. He said he’s “concerned less by the immediate market risks; but rather, what happens when the next big stock market decline forces the Fed to ease policy while inflation remains robust. Perhaps this will be how our story ends – a run on the dollar takes hold, and the world’s reserve currency collapses.” Perhaps. Then again, if you’re one of the relatively few people out there holding wealth insurance in the form of physical precious metals, how it ends really doesn’t matter.
By the Numbers
To determine where Americans are most susceptible to identity theft, WalletHub compared the 50 states across 14 key metrics, including factors such as identity-theft complaints per capita, and the average loss due to fraud. Here are the five least and most vulnerable states (top ranking being the most vulnerable):
47 West Virginia
4 Rhode Island
The Question of the Week
Last Week’s Poll Result
What percentage of your Christmas gift shopping will be done online this year?
- More than 50% (54%)
- Less than 50% (28%)
- 100% (18%)
More than 2300 Len Penzo dot Com readers responded to last week’s question and it turns out that more than 7 in 10 are doing the bulk of their Christmas shopping online. In fact, fully 25% of those holiday shoppers – including yours truly – are buying all of their gifts this year off the Internet.
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: Pink Envelopes
One Sunday morning after the church service, and while counting the money from the weekly offering, the pastor found a pink envelope containing $1000.
Surprised though he was, he thought little of it and just accepted this generous donation gratefully.
However, the following week the same thing happened again; this time the pastor was naturally curious.
So, the following Sunday, the pastor watched closely as the offering was being collected. As he observed proceedings, he noticed an elderly woman put a pink envelope on the plate.
Unsure what to do, the pastor continued to observe proceedings each Sunday over several weeks. Each week the same thing happened.
Eventually, the pastor could no longer contain his curiosity, and so the following Sunday he decided to speak with the woman at the end of the service.
“Excuse me, ma’am,” said the pastor, “I couldn’t help but notice that each week you put $1000 in the collection plate.”
“Why yes, Reverend,” the elderly lady replied. “Every week my son sends me money and I give some of it to the church.”
“That’s wonderful ma’am and very generous of you,” the pastor replied. “However a thousand dollars is a lot of money. Can you afford this? I mean, how much does he send you?”
“He’s a really good son and he sends me $10,000 every week,” the old lady responded.
“Wow!” said the pastor, truly amazed. “Your son must be very successful. What does he do for a living?”
“He’s a veterinarian,” she said.
“Well now, that’s certainly an important profession,” said the pastor. “However I had no idea it was so well paid. Where does he practice?”
The old lady smiled and said proudly, “In Nevada. He has two cathouses; one in Las Vegas, and the other in Reno.”
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. Maine (2.15 pages/visit)
2. West Virginia (2.14)
3. New Hampshire (2.13)
4. Kentucky (2.04)
5. Wisconsin (2.02)
46. Idaho (1.69)
47. Oregon (1.68)
48. Delaware (1.66)
49. Hawaii (1.58)
50. Wyoming (1.57)
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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 reading my article explaining why waterbeds are for suckers, Bill Murry left a comment with several sharp counterpoints, including this one:
Your back problem is your opinion.
Interesting. Then I’ll ask you how my back is feeling today – but let me know ASAP because I’m supposed to clean out the garage in a few hours.
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