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’ve got another busy weekend ahead of me, so let’s get right to this week’s commentary …
Those who don’t learn history are doomed to repeat it.
— George Santayana
What has been will be again, what has been done will be done again; there is nothing new under the sun.
– Ecclesiastes 1:9 (NIV)
Credits and Debits
Debit: Did you see this? The oil price topped $115 per barrel this week. Not surprisingly, the latest data for the Fed’s favorite inflation indicator – the PCE – was also released and it shows that the consumer is tapped out and that inflation is continuing to worsen; the worst in more than four decades, as a matter of fact. Can you say, “stagflation”?
Credit: Needless to say, Sprott’s lead strategist, John Hathaway, says, “People are trying to get in front of each other, talking about all the rate hikes and where 10-year Treasury bonds are going to go in 2022. But inflation is problematic and maybe more problematic than most investors would like to think, which leads to the thought that the medicine to cure inflation from the Fed’s point of view could also kill the stock market.” Which means inflation it will be. Well … if the Fed gets its way. (And it will.)
Debit: In case you haven’t noticed, the stock market is already wobbling. In fact, last Thursday, the Nasdaq experienced an intraday reversal of more than 5% for the first time since 2008. And here’s some interesting trivia to amaze your friends with: The last 21 times Nasdaq had an intraday reversal of 5% or more, they all happened during brutal bear markets of 2009-10 and the dot com bubble crash. No, really. See for yourself:
Debit: Hey … it’s not just stocks who ended February on a sour note. The US Treasury market’s two-month performance through February is its third worst start to a year – ever.
Debit: No matter what you think about the war in Ukraine, the recent move to cut off Russia from the SWIFT international payment system is now playing – if you’ll pardon the pun – Russian Roulette with the US dollar’s status as the global reserve currency. For those of you counting at home, this was the very first time the world’s premier reserve currency was weaponized against one of the G-20 economies.
Credit: Of course, I’m not the only one who thinks the US is playing with a loaded revolver. This week macro analyst Matthew Piepenburg warned that, “kicking Russia out of the SWIFT system would simply give Russia more reason to find other markets and currencies to trade in – such as Chinese yuan, or even gold, of which Russia and China have been quietly stockpiling. Such a move would destabilize the USD and, hence, just about everything else.” Very true. Although I don’t think anybody has anything to worry about until we see signs that Fed Chair Jerome Powell is starting to crack. Oh, wait …
Credit: Speaking of Russia, journalist and former Russian intelligence agent Daniel Estulin says, the US is now in the same precarious position that the Soviet Union was in 1991, several months before it disintegrated – and he warns that America is going to suffer a similar fate. Estulin says “40% of my countrymen lost everything” and that the US can expect unimaginable economic upheaval that will be twice as bad as the Great Depression, with future generations infinitely worse off than (older) generations. Well … there goes the American Dream. Brother, can ya spare a dollar?
Debit: Not surprisingly, Estulin notes the problems aren’t limited to the US. Rather, the entire world is in turmoil because it “revolves around the rapidly dying financial system and what he calls a coming global bankruptcy. We are looking at $3 quadrillion of global debt and the end of the (current) economic model. We are at a critical stage for humanity because infinite growth is coming to an end.” Yes. But until then …
Credit: Indeed, as macro analyst Alasdair Macleod points out, “It is generally assumed that a central bank that can issue its currency in unlimited quantities can never go bust, and that’s why it is the currency that fails, and not the institution. Consequently, commercial banks come and go but – like ol’ man river – central banks just keep rolling along because any respectable central bank has always shied away from overtly inflationary financing of its government’s deficits.” True. But that all changed in 2000 when the Bank of Japan (BoJ) introduced quantitative easing (QE).
Debit: By the way, the combined balance sheets of the Fed, ECB, BOJ and People’s Bank of China ballooned six-fold, from $5 trillion in 2007 to $31 trillion today. Unfortunately, QE is a powerful financial narcotic that quickly makes stock, bond and housing markets dependent on future monetary injections to avoid an economically catastrophic crash – essentially turning them into dysfunctional addicts that kill legitimate price discovery.
Debit: Macleod believes that “the long-held supposition that central banks are the (ultimate) safety net during economic or financial crises is set to be challenged by their fragile condition. There is, therefore, a heightened risk of policy failure – and currency failure.” Which means it may not be too long before the world begins directly trading oil for gold again. Let’s hope things don’t get so bad that gold (and silver) become the only currencies that are accepted at the local level too, if only temporarily.
By the Numbers
In terms of overall affordability, here are five best – and worst – states to retire to in 2022. Anybody notice any commonalities among the worst and least affordable states?
50 New York
49 New Jersey
48 Vermont
47 Illinois
46 Washington
5 Nevada
4 Florida
3 South Carolina
2 Tennessee
1 Alabama
Source: Wallet Hub
Last Week’s Poll Results
Has the winter where you live been cooler or warmer than usual?
- About the same (40%)
- Cooler (34%)
- Warmer (26%)
More than 2200 Len Penzo dot Com readers responded to last week’s question and it turns out that 3 in 4 of you are experiencing a normal, or cooler than average, winter. Well … there’s another nail in the “global warming” coffin. Perhaps that’s why the “green energy” advocates changed the term to “climate change” several years ago.
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="414"]
Useless News: Job Interview
(h/t: FC)
More Useless News
(h/t: RD Blakeslee)
Even More Useless News
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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 piece on why you should never buy a timeshare, R added his two cents to the conversation:
It’s exactly the same as phoning a hotel and letting them put charges on your credit card in case you ever decide to go there. That’s stupid.
It’s amazing how many people end up selling their soul to high-pressure timeshare salesmen when all they really wanted was a free set of steak knives.
If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀
I’m Len Penzo and I approved this message.
Photo Credit: (flags) public domain; (cartoon) Investing.com
Re question of the week: As is so often true, my situation is so atypical that the question doesn’t apply to me. So, rather than the price of gasoline affecting how much I drive, I drive so few miles anymore that the price of gasoline is not important for me. So, I couldn’t answer the question; it’s premise doesn’t fit me.
Yet another advantage of being a nonagenarian, Dave!
“…the West has made the mistake of proving to Russia (and all other national central banks) the ultimate uselessness of currency reserves and the benefits of gold.” – Zero Hedge, this morning
Yes. Unfortunately, I fear the last people to figure this out will be Americans, who will continue to have complete faith in “the Almighty Dollar” – and therefore no need to insure their wealth – until it is sharply devalued. Of course, then it will be too late.
Hi Len,
Things are just getting worse, aren’t they? It’s obvious we can’t rely on any pensions or even social security to fund our retirement anymore, which is why a few years ago I started setting aside my own long term savings by buying a little physical silver every month.
Sara
It would be comforting if these pension funds began adding gold to their portfolios – even if it was just a few percent of their total assets. There is nothing stopping them; however, I suspect if they did so en masse, there wouldn’t be enough available to cover all of them. So, in this case, victory will go to the swift.
I feel sorry for people who have to commute 20 or 30 miles to work each 5 days a week. That’s a couple gallons of gas a day for most cars. No way to avoid it if you can’t work from home.
Yep. As currencies die, food, fuel and rent expenses begin to take up an exorbitant percentage of lower and lower-middle-class incomes. Eventually, they consume all of it.
To answer your question, the most affordable states to retire to are all below the Mason Dixon line and the lest affordable ones are above it. Coincidence?
Good observation. I can think of other commonalities too.
The trouble with rising oil is that it is an input cost to almost everything else we pay for. It’s not just gas prices that are effected.
Exactly.
My friends in California say they are paying almost $6 a gallon. Cray-cray-crazy!!!
Thanks to the latest “green” carbon taxes here, California gas is the most expensive in the nation – higher than even Hawaii’s!
According to Gas Buddy, in California the average price is now $5.28 per gallon; in Hawaii it is $4.65.
Yes, this is the clown state I live in.
It is also more proof that the biggest gasoline profiteer isn’t the oil companies, or the refiners, or the retailers — it’s the government.
A head of one of the dairy associations revealed they have plenty of milk but a shortage of workers, and tractor trailer drivers. Federal regulations limit the number of hours a day a driver can be on the road. We are short 88k tractor trailer drivers. Stop the supplements, and send these people to school to learn a trade.
It’s garbage to think the USA will kick Russia to the curb. Biden is refusing to stop buying Russian oil. They’d rather give him the money to keep doing this than develop their own energy sources. Stupidity reigns supreme!
Add to that the fact that Putin let it be known in the previous administration that he has hypersonic missiles and implied that he will use them.
NATO is refusing to provide air support to the Ukraine. We’re all broke, and the government knows it.
Now, politics are entering the arts. Russian artists are condemning the invasion. They are being kicked to the curb because they won’t personally condemn Putin. Do these idiots not realize that it would bring retaliation against their relatives still in Russia?
Americans need to stop buying unnecessary junk, and start buying food, and necessities. Stock pile some metals, and coinage. Start buying what’s made in the USA, take care of it like we’re in the depression, and bring back manufacturing. The government isn’t going to do it.
If the USD loses its status as the premier world reserve currency, the manufacturing will come back to these shores out of necessity, as imports will become too expensive. And people will learn the importance of saving because credit is going to be scarce and/or very expensive.
Len, go gas up. Biden bowed to political pressure, and banned Russian Oil imports.
My son filled his tank with premium yesterday – the bill was $120.
Len,
I applied for a job. The interviewer asked me what was my worst fault.
I said, “My worst fault is I am totally honest, and straight to the point.”.
They said they didn’t think that was a fault.
I said, “I don’t care what you think.”.
Age discrimination is real. It has to be why I didn’t get the job.
Reapply under a different name. Tell the interviewer the other guy was your cousin.
All the states that are most affordable are taker states.
https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700
There are too many reasons to mention here why that assertion is not only specious, but flat out wrong. I’d rather not reinvent the wheel by writing them all here, so I’ll refer you to two good articles that tackle your claim from different angles:
https://thehill.com/opinion/finance/502321-no-blue-states-do-not-bailout-red-states
https://stream.org/behind-the-misleading-statement-that-blue-states-subsidize-red-states/
The fact is, the least affordable states are among those with with the highest state and local taxes relative to household income; it’s no coincidence that these states are also fiscal messes with extremely large government bureaucracies. Illinois ranks dead last, followed by New York (49th), New Jersey at (42nd), Washington at (37th) and Vermont (33rd).
Meanwhile, the most affordable states are among the most fiscally-sound and lowest-taxed states; not coincidentally, they have relatively small government bureaucracies. Nevada ranks 4th, followed by Florida (6th), Tennessee (10th). South Carolina (14th) and Alabama (15th).
If your grocery store has gas pumps, and you get money off for each 100 points, build up your points. This week was a one time use coupon for 4X the gas points on over 200 gift cards. I had to go to Big Lots. I got a $50 card for there, and it’s 200 points. I will buy some Christmas, and birthday gifts from the clearance store of a certain chain. I got a $150 card for there., and that’s 600 points. I already had 180 points from surveys. One more survey next week, and it’s a dollar off a gallon on a fill up. I use regular, and will get it for $2.25 a gallon.