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 an enjoyable week. Without further ado, let’s get right to this week’s commentary …
The road to Easy Street goes through the sewer.
— John Madden
Never confuse investing genius with luck and a bull market.
— John C Bogle
Credits and Debits
Debit: Did you see this? The latest data from the Bureau of Labor Statistics shows that there were 3.7 million more vacant jobs than unemployed workers in November, confirming that the US labor market remains extremely broken. But what’s more interesting to note is that 4.5 million people quit their jobs in November – that’s an all-time high. For those of you counting at home, most of the quits were in food services, health care & social assistance, transportation, warehousing, and the utility sector. So … are people just looking for higher paying jobs – or is Atlas finally starting to shrug?
Debit: In other news, I see a new study is forecasting that the average price in the US for a gallon of gas will be close to $4 by June. If correct, that same study goes on to say that the average US household will spend $2341 on gasoline in 2022, compared to $1977 last year – and that would be the most households spent on gasoline since 2014. Now imagine how much higher that figure would be if people were commuting as much as they did in 2014.
Debit: If only Californians could be so lucky – with the average gasoline price in the Golden State already sitting near $4.65, that same study says residents of Los Angeles and Sacramento can expect pump prices of $5.50 later this year – and $6 in the People’s Socialist Paradise of San Francisco. Fabulous. Welcome to my world, folks.
Debit: Speaking of high prices, after a decades-long run as one of the world’s best-performing stocks, Apple’s market value surpassed $3 trillion on Monday, making it bigger than the combined economies of Northern Ireland and Great Britain – otherwise known as the United Kingdom. If that seems almost inconceivable, you’re not alone. On the other hand, it probably makes perfect sense to far too many people in today’s clown world …
Credit: If you think Apple’s current market valuation is beginning to strain credulity, you may be on to something. The inimitable MN Gordon recently observed, “The NASDAQ and Dow are both at nosebleed levels, (and) the S&P 500’s current valuation, when compared to its historical valuations going back to 1871, reveal a stock market with significant risks. As of December 30, the Cyclically Adjusted Price Earnings (CAPE) ratio is 137% higher than its long-term historical average – and well above the CAPE ratio reached in September 1929.” In the meantime, here’s something else to consider:
Debit: Now for the punchline: Gordon also notes that the only time the CAPE ratio has been higher was during the DotCom Bubble peak in 1999. Unfortunately, he also reminds us that the stock market ended up crashing “in spectacular fashion” following both CAPE ratio peaks in 1929 and 1999. Is this a harbinger of where stocks are headed in 2022? Beats me. But I do think the soaring markets could be another reason why so many people are quitting their jobs. After all, why work when you can quickly find yourself on Easy Street simply by purchasing a few key stocks, a new house, or the latest cryptocurrency darling?
Debit: Of course, these bubbles are primarily the product of unfettered currency printing and interest rate suppression by the Fed. Unfortunately, it’s only getting worse. In fact, between December 15th, when the debt limit was increased and the end of the year, federal debt grew another $587 billion – that’s $293 billion per week. Compare that to the previous 50 weeks in 2021, when the government put $1160 billion on its credit card – or “just” $23 billion per week. One day, the Fed will look back on that time as “the good ol’ days.” And probably sooner than we think.
Debit: To put that in perspective, in the last two weeks of December alone, the National Debt increased by nearly half the total debt that was racked up in the year prior to that. As Robert Lambourne observes, “No doubt a substantial proportion of this increase was to suppress the reported debt level within the $2.9 trillion limit in place as of December 15 – but the recent increase in debt still appears to be accelerating markedly.” Fortunately, the US supposedly has 8133 tons of gold in the vault for protection from an imploding dollar. Unfortunately, the Fed doesn’t understand what separates the yellow metal from other “safe haven” assets …
Credit: By the way, here is a warning from macro-analyst Matthew Piepenburg: “Unless US policy makers miraculously achieve magical productivity growth in a locked-down world, or get honest about the severe spending cuts which would kill their re-electability, the coming years will see the harsh consequences for (America’s) fiscal sins.” Then again, this look at the staggering collapse of office space utilization suggests that those consequences may not be too far away:
Debit: For a prime example of those harsh economic consequences, one can simply follow what is now going on in Turkey, where the annual inflation rate surged to 36% last month, thanks to a currency crisis engineered by government-mandated interest rate-cutting policies. As a result, real rates are plummeting – thereby decimating Turkish bond investors’ purchasing power – while staples such as fuel and food take an ever-increasing share of household budgets. In response, the inept government there has increased the minimum wage 50% which, of course, only adds more fuel to the inflationary fire.
Debit: Needless to say, some economists are predicting that inflation in Turkey will reach 50% by March unless interest rates are raised; sadly, the inept Turkish government has insisted they won’t be. As a result, the only thing keeping Turkey from a total economic collapse – and wiping out its middle class citizens who haven’t protected their savings with physical gold or silver – is the rapidly dwindling amount of foreign currency reserves left in its central bank vault. Meanwhile, here at home:
Debit: Keep in mind that Turkey’s runaway inflation is occurring despite a respectable debt-to-GDP ratio of just under 40%. Now compare that to the US, which currently owns the seventh largest debt-to-GDP ratio in the world, at 134%. Of course, the only thing keeping the US dollar from the same fate as the Turkish lira is its current role as the primary global reserve currency. But
if when that changes, you can rest assured that Americans will endure the same tragic financial fate as the Turks.
By the Numbers
Back in the days when the gold standard was still used to conduct global trade, any country that reached a global debt-to-GDP ratio of more than 90% was generally regarded to be a banana republic on the road to hyperinflation. However, today’s fraudulent floating fiat-dollar system has temporarily managed to delay that fate for many – but not all – of the nations with the ten highest debt-to-GDP ratios in 2022. (Red numbers denote nations that are currently experiencing hyperinflation, according to the International Monetary Fund):
134% United States
The Question of the Week
Last Week’s Poll Result
When was the last time you traveled on a commercial airplane?
- More than two years ago (43%)
- Within the last year (31%)
- Within the last two years (13%)
- Within the last month (12%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that 5 in 9 of them haven’t been on a commercial airliner in more than a year. I guess that shouldn’t be too surprising, considering that air traffic is still down substantially since before the pandemic.
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: Love and Marriage
One day after 54 years of marriage, an old guy said to his wife: “Fifty-four years ago we had a cheap apartment, an old car, slept on a sofa and watched black & white TV on a 10-inch flickering screen – but I got to sleep with you, a hot 20-year-old girl. Now, we have a $900,000 house, a $72,000 car, A California King Sized bed and theatre TV with surround sound, But I’m sleeping with a 74-year-old woman.”
Upon hearing that, the old guy’s very-logical wife said: “Go out and find a hot 20-year-old girl and I’ll see to it that you are once again living in a cheap apartment, driving an old car, sleeping on a sofa, and watching TV on a cheap set from WalMart.”
One thing about older women: They really know how to solve an old guy’s problems!
(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. Maine (2.21 pages/visit)
2. Connecticut (2.12)
3. West Virginia (2.09)
4. Nebraska (2.04)
5. New Hampshire (2.03)
46. Oklahoma (1.67)
47. Idaho (1.66)
48. Oregon (1.65)
49. Mississippi (1.51)
50. Wyoming (1.36)
Whether you happen to enjoy what you’re reading (like my good friends in Maine, for the second month in a row!) — or not (ahem, Wyoming; also for the second month in a row!) — please don’t forget to:
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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
Kevin had this to say after finding my article highlighting a hack for annoying DVDs with “unskippable” trailers and ads:
It’s disgusting how the entire world is slowly limiting people’s freedom. Soon they’ll decide when the DVD player lets you watch your movie.
I hear ya … it’s going to be war if they take away my Raisinettes.
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
Sara King says
The system is messed up to be sure. But that picture of the guy standing in front of the garage where Apple started is a nice reminder that capitalism is still the greatest economic system out there. The problem is when it gets weakened by too many regulations and hijacked by corrupt lobbyists and politicians!
Have a great weekend!
Len Penzo says
It is amazing that something so big can start from a guy working out of his garage.
We’re witnessing an implosion in slow motion. The only way to protect yourself is to get rid of all your debt, have a little gold or silver on you, and be as self sufficient as you possibly can.
Been my plan for at least 20 years now Robert. Buying gold and silver for that long, and developing the homestead we have now that provides most of our food, all of our power/water/heat/etc.
Sam I Am says
I think the “slow motion” part is almost over. After a long climb the rollercoaster cars are at the top of the track. I hope you have your barf bag ready.
Len Penzo says
Once inflation begins to spiral out of control, there may be a short window of time where we can use that inflation to actually retire debt. (Think: mortgage payments.)
Won’t higher interest rates be the best thing at this point because it will force the market back down so stocks will have more sensible valuations across the board? Right now these markets are insanely expensive.
When Paul Volker (Fed chairman) raised interest rates in early 80’s, the national debt was around 1 trillion bucks. Today, it’s 28 times that.
Raising rates affects the amount the govt has to pay to borrow money. A govt that is already spending 50% over tax revenue. Only a few percent raise would consume ALL the tax revenue, and the odds of getting more are slim.
Bottom line: they are stuck. Raise rates, bankrupt the govt or print money and keep the system afloat a while more, but increase inflation. Which is the more likely choice.
All the talk of raising rates is just for show. The real plan is inflation, probably massive inflation.
Len Penzo says
I’m with Andy.
RD Blakeslee says
Nice to see West Virginia holding readership’s middle ground or higher quite often.
That’s representative of WV in many ways, contrary to its stereotype.
Joe Manchin is my new favorite Senator.
I liked Joe Manchin before he was in the Senate. I wish he had run for President.
It would be nice to vote FOR somebody for the first time in decades, instead of voting AGAINST the available alternatives.
Manchin is what used to be called a Blue Dog Democrat (right or center-right politically). They used to be fairly common in Congress, but now you have an almost better chance of seeing bigfoot.
Len Penzo says
I think WV has consistently been in the top five more than any other state over the years, Dave.
I may go back and check when I get some free time.
Where’s that Bitcoin shill that used to come here almost every week? Bitcoin about to fall below $40,000. It’s down 40% in 8 weeks.
The lack of workers is in the economy is most obvious at fast food joints and even some sit down places. Many of them are now working on limited hours and based on wait times I’ve experienced it seems like all of them are very understaffed.
Len Penzo says
Yes … For a while, even my local Denny’s (which are supposed to be open 24/7/365) started closing at midnight due to lack of staff.
The Fed isn’t the only thing about to topple the economy. The ongoing irresponsible behavior of big banks is putting the banking system at risk of collapse, and the country with it.
The obligations of the government are far more than just the national debt. You have all the unfunded Social Security, Medicare, and pension benefits. Add to that, all the corporations that declare bankruptcy to shed their pension obligations, and the tax payor picks up their much reduced benefit.
Finally, I listened to Stacking Benjamins. I may own gold but I’m not buying any from Len. I heard what he said about touching his gold bars.
Len Penzo says
Glad to hear you tuned in to the Stacking Benjamins podcast! Hope you enjoyed the show!
You can catch me on most of the Friday “Roundtable” episodes.
I am currently undergoing a period of deflation.
I’ve lost over 8 lbs. so far this year.
RD Blakeslee says
Better not touch Len’s fruitcake, either.
lol thank you for the laugh Mr. Dave.
Len Penzo says
Eat more fruitcake.
If politicians eat fruitcake, are they cannibals?
Len Penzo says
I know you, Bill. That was a rhetorical question.