Black Coffee: The Long Slow Grind Continues

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 …

If you control the food, you control a nation. If you control the energy, you control a region. If you control the money, you control the world.

— Henry Kissinger

The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.

— Vladimir Lenin

Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state.

— William F. Rickenbacker

Credits and Debits

Debit: Did you see this? Almost 60% of video streaming subscribers in the US have three or more subscriptions – but for many people that’s a luxury that may be getting tougher to afford. For example, Disney just announced that they’re raising prices on both Disney+ and Hulu, while Netflix recently implemented its second price increase in less than two years. And although 67% of consumers say they would cut back on their subscriptions when money gets tight, it remains to be seen if they will actually do so. Obviously, the streaming services don’t seem to be bothered by such threats.

Debit: Meanwhile, a new survey of millennials who bought a home on or after January 2021 found that 31% of them paid more than the asking price, with the median homebuyer paying $65,000 over list. Now get this: Another 36% bought their home sight-unseen. No, really. Not surprisingly, 80% of respondents said they ended up compromising on their priorities, while 72% admitted they have regrets about buying. As someone who foolishly bought near the top of the Southern California housing bubble way back in 1990, I know exactly how they feel. Live and learn.

Credit: Speaking of rueful homebuyers, according to the latest National Association of Realtors’ (NAR) housing-affordability index, this past June was the most expensive time to buy a US home in more than 30 years, as record-high home prices collided with a surge in mortgage rates. The index is based on family income, mortgage rates and existing single-family home sale prices. The good news is local realtors are still insisting that it’s never been a better time to buy. (I know … but just trust ’em.)

Debit: Unfortunately, despite the slowing home sales, prices continue to hover in the stratosphere; so it’s not surprising that the median US rent is climbing at the fastest pace in three decades, having surpassed $2000 per month for the first time ever. In fact, rents are now above where they were prior to the pandemic in most major cities. Look … I realize that San Diego is a beautiful place with perfect weather, but with the median renter there paying $3304 a month, it’s not that beautiful. Whether it’s higher wages or lower rents … something is going to have to give. And it will. Eventually.

Debit: If you’re wondering why living costs are unhinged, consider this: Since the US was founded it took 227 years to print its first $6 trillion. Then the US government recently printed another $6+ trillion – in a few short months – thereby increasing the money supply by a whopping 41%, which is why the National Debt is now pushing $31 trillion. And it’s growing at an accelerating pace too. To put that in perspective, if you earned $1 per second, it would take 966,484 years to pay it off. But don’t panic: Congress just passed the $742 billion “Inflation Reduction Act” – which we’re told is going to fix the problem. Somehow.

Debit: Even the geniuses at the Fed can see that almost every economic signal in the US is beyond awful. Consumer confidence has never been worse, while the yield curve becomes ever more inverted, with the 10-year minus 2-year Treasury yield at its most negative since 1981 – with no signs of slowing down – which is hard to believe considering the downturns of 2000, and 2007 were both economic super storms. The trouble is, the Fed is trapped; it can either destroy the dollar to save the stock, bond and housing markets – or it can save the dollar by crushing the economy. And I thought these people had problems …

Debit: Of course, Paul Volcker ended high inflation in the 1970s and early 1980s by raising interest rates so that at the peak in June 1981 they were 9.4% above the inflation rate. Compare that to how today’s Fed is trying to “fight” inflation. As the following chart shows, the Fed’s current rate hiking campaign is so far below the current CPI, it isn’t putting up any fight at all.

Credit: On a related note, macro analyst Daniel Oliver warned that continuing inflation is not only impacting everyday Americans, but it’s also threatening the US dollars’ (USD) exorbitant privilege of being the global reserve currency. He notes that, “Private and public actors hold USDs – as opposed to pesos or lira – because of the expectation that the dollar’s purchasing power is relatively stable. However, the higher and more volatile and more divergent commodity prices become, the more the market will seek alternative vehicles to store purchasing power.” As they should, because when inflation is 18%, purchasing power is being halved every four years.

Debit: By the way, Oliver points out the folly of “those who argue that the dollar will remain strong because there’s no (alternative).” He then goes on to warn that it’s likely “the USD will fail not against the euro, yen, or yuan – but against commodities.” How so? Well … as nations decide to reduce their rapidly-depreciating USD holdings in favor of better stores of value such as gold and commodities, Oliver says it’s easy to see how “Malaysia may become willing to trade its chickens for Indian wheat, but not for dollars from a place like Egypt, which can no longer bid on Indian wheat.” Especially when they know the Fed and ECB are no longer defending their currencies …

Credit: As macro analyst Nick Giambruno warns, we are now at the point where there is no stopping the dollar’s ever-increasing loss of purchasing power within the confines of our current debt-based monetary system because “Raising interest rates high enough to dent inflation would bankrupt the US government. In other words: It’s game over.” Yep. The only question now is when the powers that be pull the rug and reset the current debt-based monetary system. In the meantime, Russia is working on the creation of a new international gold standard that would almost certainly result in a sharp devaluation of the US dollar relative to gold. Until then …

Credit: Frankly, the only way to fix the mess we’re in is with a new monetary system based on real wealth, rather than debt. Such a system would ensure the dollar remains a long term store of wealth; and as an added bonus, it would curtail the expansion of strangling government bureaucracies. Heck … even Zimbabwe seems to be finally seeing the light. Their recent launch of one-ounce gold coins – made in a desperate effort to offer its citizens protection from rampant inflation that had been running at 250% annually – has been so successful that its central bank is going to issue additional legal tender gold coins in smaller denominations this fall. Imagine that.

Credit: Needless to say, the piper is going to get paid – and when he does, it’s going to deeply affect every middle- and lower-class American. The sad truth is a monetary-system reset will mean the end of America’s artificially-high standard of living, which has been propped up since 1971  only because the US dollar is the world’s reserve currency. With that in mind, you really should be urgently working to protect your wealth and retirement nest egg from the effects of an inevitable dollar devaluation. Especially when you consider that any major devaluation will almost certainly occur as a bolt from the blue over a single weekend.

Last Week’s Poll Result

What percentage of your investment portfolio is comprised of physical precious metals?

• 0% (59%)
• 1% to 9% (30%)
• 10% or more (11%)

More than 2000 Len Penzo dot Com readers answered last week’s poll question and it turns out that only 2 in 5 say they have at least 1% of their investment portfolio comprised of physical gold and/or silver. Believe it or not, that is more than double the number of Americans (14.7%) who currently keep at least some physical precious metals as part of their long-term savings.

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.

The Question of the Week

[poll id="436"]

By the Numbers

Gasoline prices have been falling, but they’re still ridiculously high. Not surprisingly, a recent survey from AAA found that 64% of Americans have made lifestyle changes in response to those higher gas prices. Here’s how:

2% Switch to an electric vehicle

5% Use public transportation more often

13% Drive a more fuel-efficient vehicle

16% Carpool

24% Save less

29% Postpone vacations

30% Delay major purchases

56% Reduce shopping or dining out

74% Combine errands

88% Drive less

Source: Charlie Bilello

Useless News: Now That I’m Older …

My goal for this year was to lose 10 pounds; I only have 14 to go.

Last night I ate salad for dinner; mostly croutons and tomatoes. Actually, it was just one big round crouton covered with tomato sauce. And cheese.

Fine … it was a pizza. OK? I ate a pizza! Are you happy now??!!

I don’t mean to brag, but I finished my 14-day diet food supply in 3 hours and 20 minutes. And I just did a week’s worth of cardio after walking into a spider web.

Did you know that a recent study has found women who carry a little extra weight live longer than men who mention it?

Kids today don’t know how easy they have it. When I was young, I had to walk nine feet through shag carpet to change the TV channel.

Remember back when we were kids and every time it was below zero outside they closed school? Yeah, Me neither.

Hey, I may not be that funny or athletic or good looking or smart or talented … I forgot where I was going with this.

I love approaching 90; I learn something new every day and forget five other things. Take last night, for example – a thief broke into my house and he started searching for my money. After a while I got up and searched with him. No luck.

But seriously, once you’re over the hill you begin to pick up speed. I’m at that age where my mind still thinks I’m 29, my humor suggests I’m 12, while my body keeps asking if I’m sure I’m not dead yet.

It’s weird being the same age as old people. When I was a kid I wanted to be older – this is not what I expected.

Believe it or not I see people around my age still mountain climbing; as for me, I feel good getting my leg through my underwear without losing my balance.

Here’s a tip I learned as I got older: If you can’t think of a word say, “I forgot the English word for it.” That way people will think you’re bilingual instead of an idiot.

You don’t realize how old you are until you sit on the floor and then try to get back up. The truth is we all get heavier as we get older, because there’s a lot more information in our heads.

That’s my story and I’m sticking to it.

(h/t: RD Blakeslee)

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 (3.00 pages/visit)
2. Nova Scotia (2.25)
3. Manitoba (2.07)
4. Newfoundland & Labrador (1.91)
5. British Columbia (1.84)

9. Saskatchewan (1.53)
10. Ontario (1.46)
11. Quebec (1.44)
12. Prince Edward Island (1.33)
13. Yukon (1.25)

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(The Best of) 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

For some reason, Louie felt an overwhelming need to deposit this question in the Len Penzo dot Com mailbox:

Hey, Len! How many calories are there in a booger?

You don’t really expect me to bite on that one, do you?

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