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. With the hardest part of it over, let’s get right to this week’s commentary …
Morality never scratches the back of corruption.
— Kishore Bansal
Credits and Debits
Debit: Did you see this? The Energy Information Administration said this week that half of US households that heat with natural gas will pay 30% more this winter than they did last year. And if a new methane tax that was introduced in the House of Representatives gets signed into law, that could add another 17% to an average bill. Hey … why not? I mean, it’s not as if the peasants have to deal with raging inflation that makes everyday living a challenge. Unbelievable. As one commenter noted, this is your government at work: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Debit: Speaking of inflation … this week the US Labor Department reported that wholesale prices increased at their quickest pace on record in November, as the producer price index for final demand products increased 9.6% over the previous 12 months. Those numbers come with headline consumer prices running at their fastest pace in nearly 40 years and core inflation the hottest in about 30 years. The good news is the government said it is going to stop the runaway inflationary pressure by once again changing their inflation calculation methodology.
Debit: Maybe that’s why the Fed’s latest survey on consumer inflation expectations in 2022 hit an all-time high of 6.00% – that’s up from 5.65% in October, and the thirteenth consecutive monthly increase and a new series high since the inception of the survey in 2013. The survey also found that at least 25% of respondents see inflation surging to nearly double digits in 2022. Perhaps that’s because the usual tricks to hide inflation are no longer working?
Debit: In other news, 48 top executives have disposed of more than $200 million each in stock sales this year, about four times the average versus insider from 2016 through 2020. “What you’re seeing is unprecedented” in recent years, said Daniel Taylor, an Ivy League accounting professor who monitors corporate execs. He said 2021 resembles a selling wave seen nearly two decades ago during the Dot Com bubble. Then again, I’m sure that’s just a crazy coincidence.
Debit: Of course, with 40% of the current bull market being entirely due to stock buybacks, unethical corporate big wigs and other insiders have zero incentive to end them – otherwise they’d never be able to dump their stock on the muppets at mind-numbing valuations. Just sayin’.
Credit: By the way, ZeroHedge also correctly points out that “the Ponzi-like scheme corporate insiders are engaging in to increase stock buybacks is a massive misallocation of capital; money that could’ve been used to spark new investments in future growth rather than hoarded by financial elites. As for investors betting on higher stock prices, the question is: What happens if stock buybacks reverse?”
Debit: Needless to say, with the Fed now saying it will boost interest rates three times next year – and then twice per year in 2023 and 2024 – it’s not difficult to see how their plan will eventually crash the stock, bond and housing markets, which have been propped up for years on the monetary heroin better knows as QE and near-zero-interest rates. Of course, that is why virtually nobody believes the Fed will actually follow through on their plans to raise rates, as evidenced by huge post-announcement relief rallies in both the stock and bond markets.
Credit: On the other hand, if the Fed does indeed follow through on its latest plans, macro-analyst Matthew Piepenburg warns that “there is very good reason to worry about the $22 trillion Treasury market (when) the Fed begins reducing its support in a backdrop of steady and now undeniably persistent inflation because the Treasury market isn’t nearly as liquid as the Fed would wish you to believe.” Translation: Without the Fed, US Treasuries would be toast.
Debit: The reality is, despite the Fed’s most recent proclamations to the contrary, their debt monetization, interest-rate suppression and currency printing policies will never end because, as Piepenburg points out, if they did end, “stocks and bonds would likely begin falling in concert – and such malfunctioning of an otherwise rigged securities market would get harder to contain without a quick reversal.” Which begs the following question. Er … make that two questions:
Debit: Then again, with a negative 2% return year-to-date, Treasuries haven’t had a great year anyway. In case you’re wondering, that’s the worst real returns since the early 1980s, when then Fed Chair Paul Volcker was in the midst of fighting a wage-price spiral. Even worse, once inflation is taken into account, Treasury bond investors are even deeper in the hole, with real returns in 2021 at negative 8.8% – and
if when the hopelessly-trapped Fed fails to put the inflation genie back in the bottle, those negative rates are only going to grow even more negative.
Debit: But wait; it gets worse the markets are signaling that those negative real returns will continue for years. In fact, the bond market is projecting that 10-year Treasury yields will hold below the inflation rate for the next decade, meaning any investment income will be more than washed away by the rising cost of living – which is not to say that there’s anything wrong with a nice wash every now and then …
Credit: Unfortunately for all of us, Mr. Pipenburg notes that inflation is now “the Fed’s best friend, as it effectively de-levers public debt as the last desperate tool – and symptom – of a failed monetary experiment. So watch what policy makers do; not what they say. They want inflation. They need inflation. Meanwhile, they pretend to vocally ‘combat’ it. Shameless.” Indeed it is. And that means if you have any interest at all in protecting your hard-earned wealth, you’re on your own.
By the Numbers
With Christmas just around the corner, let’s take a closer look at some of the numbers behind this joyous holiday:
350 Year that Pope Julius I proclaimed December 25 the official celebration date for the birthday of Christ.
1870 Year when the United States finally declared Christmas an official holiday.
30,000,000 The approximate number of living Christmas trees sold in America each year.
21,000 The number of Christmas tree farms in the US.
15 The average age (in years) of a Christmas tree before it is sold.
20,000,000 The number of units sold worldwide for the best selling Christmas album of all time. (Elvis’ Christmas Album)
20,000 Number of “rent-a-Santas” hired each year in the US.
3,000,000,000 The number of holiday cards sold each year.
17 Percentage of all annual retail sales in the US made during the Christmas shopping season.
The Question of the Week
Last Week’s Poll Result
What is your favorite color of the rainbow?
- Blue (37%)
- Green (21%)
- Purple (16%)
- Red (13%)
- Orange (8%)
- Yellow (5%)
More than 2500 Len Penzo dot Com readers answered last week’s poll question and it turns out that 3 out of 4 prefer the cooler side of the color spectrum, with blue being the most-favored hue. As for me, I’ve always had a predilection for green.
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.
Useless News: Watch Your Step
Three women died in a car accident and were immediately sent to the gates of heaven. When they got there, St. Peter said them, “Before you enter, you need to know that we only have one rule here: don’t step on the ducks!”
The three women readily agreed and entered heaven. Sure enough, there were ducks all over the place. In fact, it was almost impossible not to step on a duck; and although they tried their best to avoid them, within minutes of crossing the Pearly Gates, the first woman accidentally stepped on one.
Shortly thereafter, along came St. Peter with the ugliest man she ever saw. St. Peter then chained the two of them together, and said to the first woman, “You’ve broken the only rule here in heaven by stepping on a duck – so your punishment is to spend eternity chained to this ugly man!”
The next day, the second woman accidentally stepped on a duck too – and it wasn’t long before St. Peter appeared again. This time, with an even uglier man than the one he showed up with the day before. He then chained the two of them together, giving the second woman the same admonishment he gave to the first.
The third woman, having observed all this, and not wanting to be chained for all eternity to an even uglier man, vowed to herself that from this point forward she would be extremely careful where she stepped.
She was true to her word.
It turns out that by walking as slow as possible and constantly keeping an eye on the ground in front of her, she managed to go an entire year without stepping on a single duck.
And then one day St. Peter came up to her with the most handsome man she has ever laid eyes on; he was very tall, with long eyelashes, steel blue eyes and muscles on top of muscles. To her delight, St. Peter then chained them together without saying a word.
After St. Peter left, the woman gave a big smile to the handsome man beside her and said, “I wish I knew what I did to deserve being chained to you for all of eternity!”
The guy, who was visibly distraught, looked back at her and said, “Well … I don’t know about you, lady – but I stepped on a duck.”
(h/t: The 3rd Dimentia)
More Useless News
Even More 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. Nunavut (2.50 pages/visit) (!)
2. Quebec (1.89)
3. Nova Scotia (1.85)
4. Manitoba (1.71)
5. Alberta (1.63)
9. Prince Edward Island (1.44)
10. Northwest Territories (1.33)
11. Saskatchewan (1.30)
12. Newfoundland & Labrador (1.22)
13. Yukon (1.09)
Whether you happen to enjoy what you’re reading (like those crazy canucks in Nunavut, eh) — or not (ahem, all you hosers living on the frozen Yukon tundra) — 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 me at: Len@LenPenzo.com
Jessie shared a personal story this week on why he dislikes gift cards:
I just found a $50 gift card for Olive Garden that was given to me last Christmas … It’s now worth $24.48.
Olive Garden, huh? Frankly, Jessie, I’m not sure why you’re complaining.
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
It’s hard to believe what is happening. We are watching the Fed refuse to raise rates despite raging inflation. Anybody who believes the Fed’s aim is to keep inflation under control is a fool. This is exactly what they want.
Len Penzo says
For the Fed, this is the equivalent of Custer’s Last Stand; they’re on Custer’s Hill with the Sioux, Cheyenne and Arapaho on all four sides. They are trapped and all they can do is try and hold off their fate for as long as possible.
Sara King says
Thanks for another great cuppa! Love that video of the dog at the car wash. Wish my pooch was that easy to clean! ha ha
Have a nice weekend,
I know, right?
Len Penzo says
Mine too, Sara!
I thought gold prices rose when there are negative real rates. What’s different this time around?
Len Penzo says
You’re correct; negative real rates are the most favorable environment for the dollar price of gold. Nothing has changed … at some point, gold will rise to address the situation. If you go back and look at the 70s, gold bided its time and then took off. Patience is required.
Unlike you, I thought the tapering was priced in already. After Friday’s market action I ain’t so sure. I was thinking we had another 5 years in this bull run as long as there is no black swan event. But if tapering really isn’t priced in, then I’ll have to wait and see.
Len Penzo says
I think 2022 is going to be a very interesting year; actually, I think it will be an historic year. Grab your popcorn and enjoy the show.
Len, a good question of the week would be to ask how many rate hikes before markets tank and Fed reverses course. I’m thinking 2 will do it.
That is an interesting question. If I had to guess, the first rate hike would do it.
Len Penzo says
Consider it done, Cowpoke. I’ll make sure that is next week’s question.
Sam I Am says
From the tweeter above: If printing works why do we have to pay taxes?
Answer: Power and control. Nothing more complicated than that.
Len Penzo says
Yes. The hunt for preferential tax breaks are a big reason why there are so many lobbyists in DC. – and those lobbyists go to great lengths to court the politicians. Of course, those same politicians can use new taxes and – as we saw with at least one recent administration – the IRS to punish their perceived political enemies.
RD Blakeslee says
Here is an example of a father’s independent preparation for his family’s safety. Ten years after he provide it, the payoff came: https://www.breitbart.com/weather/2021/12/17/video-kentucky-family-survived-storm-using-underground-storm-shelter/
Len Penzo says
That looks almost as good as my bunker! 😉
Len, it sounds bad, really bad. If I were you I’d get another case of powdered eggs for the bunker!
Len Penzo says
I prefer egg crystals, Steve. Much better than powdered eggs!
Margie Dalton says
Are food prices really going up? I live within the city limits in Philadelphia, PA and this week at my local discount grocery store, a dozen egggs were $.78 and real butter was $1.65. Famous National supermarkets in the ‘burbs charge double. Us retired people ain’t stupid. Shop smart, people!
Len Penzo says
You highlight a good point, Margie! Eggs and, to a lesser extent, dairy products tend to be very localized when it comes to prices.
On the other hand, I’ll bet the prices in Philly for meat, cereal, bread and most other groceries are much higher today than they were a year ago. 😀
Larry Burkett predicted all of this decades ago. It was already in the works back then.
The public demands the government spend money. It’s like they think there’s an infinite amount of money to be taxed, and all will be okay. Tell them what they want to hear, the fools will elect us. I believe the seeds for these beliefs were sown during the New Deal, and the Great Society of LBJ.
It doesn’t help that the US has wasted vast wealth fighting wars. It’s like we’re on the same path as Rome. The constant expense of policing the world, social and moral decay, and idiots in charge.
Time will tell.
Buck Farack says
I think LBJ proved that free government money is the ultimate political tool.