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.
Well … another busy week is behind us. So with that in mind, let’s get this party started …
You have to run as fast as you can just to stay where you are. If you want to get anywhere, you’ll have to run much faster.
– Lewis Carroll
Credits and Debits
Debit: Did you see this? The 30-year fixed mortgage rate has jumped almost 2% this year. In fact, 30 year mortgages are now 5.25%, which is the highest rate since 2009. Not coincidentally, housing affordability is at its lowest point since 2007 – which was the year before the housing bubble imploded. Imagine that.
Credit: Perhaps not coincidentally, Redfin reports that home sellers are now lowering their asking prices. In fact, approximately 12% of all US home sales saw a price drop during the four weeks ending April 3 – for those of you counting at home, that’s a 9% increase compared to the same period a year ago; as a result, the rate of sellers rushing to drop their asking prices is accelerating. In fact, one intrepid citizen was able to document the first panicked throng of stampeding house flippers rushing to put their latest investments up for sale in an attempt to avoid becoming one of the housing bubble’s biggest bag holders:
Debit: Meanwhile, headline CPI rose 1.2% in March to a shocking 8.5% year-over-year – that’s the fastest pace since December 1981. For those counting at home, that’s the FIFTH consecutive month that inflation has hit a fresh 40-year high, as continuing surges in gasoline, food and rent costs more than offset moderating used car prices. Then again, if the government was using the CPI methodology it used back in the early 1980s, the CPI would be north of 17%, making it the worst inflation of all time. Thankfully, this isn’t a problem for those who don’t have to pay utility bills and rent. Or eat.
Credit: Speaking of inflation, macroeconomist Jim Rickards notes, “Taxation is one way that governments take money from citizens to pay off government debt – but taxes are unpopular. Inflation works much better; it reduces your real income since the dollars you earn are worth less. And it reduces the government’s debt because the money the government owes is easier to repay for the same reason – the dollars are worth less. So inflation works the same as a tax increase except that you can’t see it and Congress doesn’t have to lift a finger.” Unfortunately, those “tax” increases have been relentless over the past year. See for yourself:
Credit: As for the impact of those “taxes,” macro analyst Franklin Sanders notes that, Americans are now getting 11 months’ pay for 12 months’ work – and that’s assuming you buy the official 8.5% inflation rate as measured by the CPI. (You don’t want to know how much less you’re earning if we use the true 17% rate.) The impetus behind the government’s tacit monetary inflation policy is quite clear when you realize that 80% of all the US dollars now in circulation have been created since January 2020. This, folks, is the reason for all of the inflation we are currently experiencing. Not Putin; not supply chains; or anything else.
Credit: Of course, now that inflation is raging, the Fed has officially embarked on its plan to significantly raise interest rates. But as macro analyst Matthew Piepenburg observes, “that is the equivalent of the Titanic’s captain ordering more lifeboats after the ship has already sunk.” Well … that’s assuming we can take the Fed at its word …
Credit: Frankly, all of the inflation we’ve been experiencing for the past 18 months is just another symptom of our dying debt-based monetary system. At the same time, macro analyst Alasdair Macleod observes that while “the West desperately tries to sanction Russia into economic submission, it is only succeeding in driving up its own energy, commodity and food prices.” Er … in case you haven’t already noticed.
Credit: By the way, Macleod also notes that, unlike the West’s decision to inflate away the purchasing power of its fiat currencies, China and Russia are now implementing a sound money strategy, with Russia linking its rouble to commodities via a moving gold peg. As a result, he concludes that: “We’ll look back and realize this marked the change from a dollar-based global economy underwritten by financial assets to commodity-backed currencies.” Indeed, it did. Sadly, although this will eventually result in historic financial and economic changes for the entire world, most people remain oblivious to how they’ll ultimately be affected …
Credit: Thankfully, the mainstream media is finally beginning to pay attention. This week, the Hill reported that, “In two simple announcements – tying the rouble to gold for domestic credit institutions and insisting that payments for energy only be accepted in roubles – (Russia) is calling for an end to the fiat dollar era that has ruled the world (since) 1971, when the dollar took over the global reserve asset role from gold.” Remember, just a few short years ago, anyone who even hinted that the fiat monetary system’s demise was possible was accused of being a doom-and-gloom tin-foil-hat nut job. (Ask me how I know.)
Credit: If you’re wondering what some of the first impacts of the new system will be, Sprott market analyst, Paul Wong suggests that, “Long-term structural shifts have been put into motion that will likely have significant positive implications for gold’s role in well-diversified multi-asset portfolios” due to the inflationary effects of deglobalization meeting head-on with commodity scarcity, volatility and supply security fears, as well as foreigners’ concerns over the safety and validity of their US dollar reserves. And by extension, one should also expect silver to benefit as well – only in a more exaggerated fashion.
Credit: Not every asset will benefit; David Stockman – who was at one time the US Director of the Office of Management and Budget – believes as the current system continues to wither away, the stock market will eventually take it on the chin because “the Fed has painted itself into a hellacious corner. So the Fed has no choice but to (hit) the brakes much harder than the market is expecting because they’re going to have one difficult time bringing inflation under control – and the consequences will be mind-boggling.” Okay … but somebody better tell that to the Fed – because as of right now, the Fed funds rate is still under 1%.
Debit: So … what kind of bear market is Stockman anticipating? Well … he says that, “If you go to the start of the dot-com bubble collapse, the NASDAQ dropped 30% in the first 15 days. And after that bone-rattling drop, people said ‘the worst has happened; buy the dip because you’re going to make a lot of money.’ And over the next two years, they kept buying the dip, but the NASDAQ went from 4600 to 800 – so all that dip buying resulted in was massive pain; an 80% decline. I think we’re going to go through the same thing again.” Now, Stockman may be just another doom-and-gloom tin-foil-hat nut job who is very, very wrong. But … what if he’s not?
The Question of the Week
Last Week’s Poll Result
How much cash do you currently have in your wallet?
- More than $100 (33%)
- $21 to $50 (22%)
- $1 to $20 (19%)
- $51 to $100 (18%)
- $0 (9%)
More than 2100 Len Penzo dot Com readers answered last week’s poll question and it turns out that slightly more than half of you had at least $51 in your wallet when you answered the question. As for yours truly, it was one of the rare times that I had more than $100 in my wallet – $162 to be exact. That’s probably enough to last me the next six months.
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.
By the Numbers
If you’re thinking of becoming a nurse, here are some interesting salary figures to consider:
4% Increase in the average annual US nurse’s salary in 2021 compared to 2020.
$80,100 The average salary of registered nurses in the US.
$120,560 The average salary of registered nurses in California; that’s the highest in the nation.
$104,830 The average salary of registered nurses in Hawaii; that’s the second highest in the nation.
$39 The average hourly pay for US registered nurses.
$55 The average hourly pay for US nurse practitioners.
$120 The average hourly rate for travel nurses.
39% The increase in travel nurse pay in 2021 compared to 2020.
Useless News: Good News and Bad News
An attorney went to visit his client in the county jail, where the man was awaiting trial for capital murder.
“I have some good news and some bad news,” said the lawyer. “Which one do you want first?”
The accused gave a nervous sigh before instructing his lawyer, “Give it to me straight. Let’s hear the bad news.”
“Well,” the attorney replied, “Unfortunately, there was blood all over the crime scene, and the DNA tests prove that some of it was yours.”
Devastated at the damning evidence before him, the accused then asked his lawyer, “Okay … so what’s the good news?”
The lawyer said, “Your cholesterol is only 105.”
(h/t: Just the Facts)
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 (3.33 pages/visit) (!)
2. Quebec (2.05)
3. Nova Scotia (1.81)
4. Manitoba (1.77)
5. Alberta (1.70)
9. Yukon (1.38)
10. Saskatchewan (1.31)
11. British Columbia (1.30)
12. Ontario (1.28)
13. Prince Edward Island (1.25)
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 Prince Edward Island tundra) — 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 me at: Len@LenPenzo.com
Oops. I did it again. After stopping by to read some of my blog’s content, Marcia dropped some, er, let’s call it constructive criticism, into the Len Penzo dot Com Complaint Box. Here’s an excerpt:
You’re like those chicks who sit around, criticizing another woman who’s walking across the street and minding her own business, just because she is better dressed, more polished, and looks more confident than you feel.
Well … I can only assume that you managed to stumble across one of the few photos of me that I was brave enough to publish here.
If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀
Photo Credit: stock photo
RD Blakeslee says
It’s not just financial news that’s grossly inadequate in the U.S. traditional media – it’s well nigh everything.
Sources I have found to be better: The British press (counter intuitive, I know) the Judicial Watch organization and counter-culture blogs, such as this one. But there is no substitute for reasoned skepticism and parsing – biases are universal.
Len Penzo says
I agree with you, Dave. Nothing today should be taken at face value; both the mainstream media and the government have squandered all of their credibility during the last five or six years.
They squandered all their credibility long before that. It was decades ago. You’re being generous.
Len Penzo says
I know. 😀
My auntie is an RN. They do make great money and it is well deserved too!
Happy Easter everybody!
Len Penzo says
Happy Easter, Madison!
If Stockman *** is *** right and the markets fall 80%, all of those people who say they are “buy and hold” investors are going to be tested. If the market takes 25 years to recover like it did after the 1929 crash, or 10 years to recover like Nasdaq after the dotcom bubble a lot of people are going to figure out too late that buy and hold is not always a winning strategy.
Just saw a new video with Michael Pento (who is usually a bull) and he says we are headed for worst bear market in a long time.
Len Penzo says
Yeah … it’s easy to say you are a “buy and hold” investor in a bull market, especially when most people today have never experienced a sustained bear market. The next bear market is also going to change a lot of people’s love affair with index investing too.
You can’t print food, medical supplies, other commodities and productive jobs. This three card monte game has been working for many years but not this time. The Fed is slowly figuring out that there is no printing our way out of this one.
Len Penzo says
You’re right – but that won’t stop the Fed from trying.
Want to reduce the deficits (which would reduce the need for money printing)? Then Congress should bring back the 90% top marginal rate. If they did the middle class would never feel it. But Congress won’t because there are only about 5 people in all of government who would get behind that policy.
Len Penzo says
That won’t fix anything. You could confiscate 100% of every American billionaire’s net worth and it wouldn’t be enough to fund the government for even a single year.
The federal government has a spending problem – not a revenue problem. The first thing that should happen is an 80% reduction of the federal government’s $1.5 trillion budget spent to support its federal agencies. Not only would very few people even notice (aside from the useless bureaucrats who would lose their jobs), but the private sector would thrive.
There were so many loopholes, and tax breaks that almost nobody ever paid the 90% rate.
Len Penzo says
Lauren P. says
“…80% of all the US dollars now in circulation have been created since January 2020.” That is beyond depressing, and it’s appalling that the current admin would blames inflation on a bunch of other crap. Even MORE appalling that many folks and much of the media parrots that as truth! On a more hopeful note, happy Easter to you and your family, Len! 😃
Len Penzo says
Happy Easter, Lauren!
The media used to challenge the government on everything; it was an important adversarial relationship that acted as the public’s check on their representatives.
Unfortunately, that dynamic began changing at the end of the 20th century – for at least the last five or six years the mainstream media and government have been on the same team. And they don’t even try to hide it anymore.