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 …
If wisdom were measured by the length of a beard, goats would be philosophers.
— Danish proverb
Credits and Debits
Debit: Did you see this? The UN agency dealing with global trade is demanding all central banks stop hiking interest rates and instead switch to price controls. Apparently, the UN bureaucrats who decided that price controls are a good idea failed both Econ 101 and world history, as there are plenty of examples proving that price caps are effective at one thing, and one thing only: creating shortages. But fools will be fools. Hey … speaking of the best laid plans of mice and men:
(h/t: quickmeme.com)
(h/t: @publordhodl)
Debit: Of course, nobody would be suggesting price controls if persistent inflation wasn’t weighing on the populace. Heck, things are getting so bad, even Americans who earn six figures are feeling the strain. In fact, in a recent survey, 45% of them admitted that they’re currently living paycheck to paycheck; that’s compared to 38% last year. Overall, 3 in 5 Americans of all income levels said they’re living paycheck to paycheck. Strange, isn’t it? It’s almost as if the “official” CPI of 8.3% is a lot lower than what everyone else is experiencing in the real world.
Credit: It’s no secret where the blame lies for the inflation predicament we currently find ourselves in. As economist Daniel Lacalle notes, it’s because the “government’s unconventional response to the pandemic ended up being the most conventional of them all: printing and destroying the purchasing power of the currency. A policy implemented for centuries with the same disastrous effects – only to be dusted off by a new group of bureaucrats that promised that this time would be different.” Imagine that.
Debit: By the way, Lacalle also points out that, “the problem is that US policymakers never learn because they benefit from inflation and currency depreciation, as it’s a form of taxation and wealth transfer from the productive to the politically connected. And the results are always the same: (Americans) suffer the loss of the US dollar’s purchasing power and the collapse of their investments, while the rest of the world sees their real wages vanish and their currencies become worthless. Cheap money is expensive. Always.” Well … except for those who are closest to the printing press. For them, it’s essentially free.
Debit: In other news, the end of the third quarter saw the stock market wipe out all of its gains from 2021. Then again, when the markets are dependent on currency printing to maintain their lofty valuations, nobody should be surprised to see equities fall during periods when central banks are withdrawing liquidity and shrinking their balance sheets. Oh, I know what you’re thinking: But, Len, correlation doesn’t imply causation! M’kay. Except in this case … it really does:
He’s not sayin’. He’s just sayin’.
Debit: Meanwhile, as stocks continue to melt down – albeit in a remarkably controlled fashion – you may find it interesting to know that the S&P500 has dropped 15% or more nine times post-World War I, including during the third quarter of 2022. The only other time that the following quarter posted negative returns was during the first quarter of 2009. Yes; that would be during the Great Financial Crisis. Coincidence?
Debit: Apparently, Americans can’t even afford to rent stuff any more, let alone buy. Last week Rent-a-Center stock plunged 20% in a single day after the floor fell out of the rent-to-own store chain’s adjusted earnings forecast for the third quarter. Thankfully, these extremely talented guys were smart enough to buy this table with money they diligently saved over time …
Debit: In other news, the Fed has initiated a “major pilot program” for an environmental, social & governance (ESG) compliant monetary network that effectively acts as a parallel system to that of the Chinese Communist Party’s (CCP) infamous social credit scoring system. At least that’s how the Ron Paul Institute describes it. Although you’ll still get vacuous counter-arguments from the usual dissenters. Oh, look! Here’s one now:
Credit: Unfortunately, as the Ron Paul Institute explains, ESG finance “acts as a trojan horse for the continuing centralization of the American financial system, preventing outsiders from challenging the regime-connected insiders on Wall St. and in Washington, under the guise of acting to manifest a healthier planet. In other words: Pro-ESG institutions attack free market principles by deception, preferring the CCP-style ‘stakeholder capitalism’ that allows a small group of technocratic elites to make broad decisions about society.” Indeed. And we all know what happens when decisions are made by the so-called “elite” …
(h/t: r/wallstreetsilver u/economicninja)
Credit: So how does one explain falling stock markets in the face of skyrocketing inflation? Well … macro analyst Bill Holter explains it this way: “Currency destruction is inflation, and debt destruction is deflation. Once debt crumbles, and is therefore destroyed, it morphs over to the currencies themselves being destroyed because they’re debt based.” Holter says this is why we’re destined to experience the worst of both worlds; a world where the cost of goods go up because the currencies we use to purchase them are debauched, while the value of our assets simultaneously decline because the debt used to buy them will be defaulting.
Credit: Sadly, macroeconomist Alasdair Macleod said this week that, “the majority of investors still aren’t aware of the danger that interest rates pose to their financial assets. And even some wealthier, more prescient investors are only now beginning to worry.” People typically try to protect themselves by moving into cash, but Macleod warns that those who liquidate their portfolio will only end up with rapidly depreciating fiat currency that pays insufficient interest. Instead, Macleod says “physical gold – real money – is the only way to escape the calamity engulfing our current financial world.” Okay. Just don’t tell that to Ben Bernanke:
Credit: Despite appearances, Mr. Bernanke is no fool. The truth is, although they’ll never admit it, central bankers know that only gold and silver are money. That’s why central banks added 463 tons of gold to their reserves in 2021; that was 82% more than in 2020. Last year was also the 12th consecutive year of net gold purchases; during that time, central banks have bought 5692 tons of the yellow metal. So if they’re stocking up on gold to protect themselves from the inevitable destruction of their fraudulent fiat monetary system, don’t you think you should consider a little protection for yourself too?
By the Numbers
The third quarter ended last week, so let’s look at the year-to-date performance score card for some select assets:
17.2% US Dollar Index
15.8% Commodities (COMT)
5.7% Crude Oil
-8.2% (paper) Gold
-11.0% Ten-year US Treasuries (IEF)
-17.6% (paper) Silver
-20.9% Dow Industrials
-24.8% S&P 500
-30.0% Real Estate (IYR)
-32.4% Nasdaq Composite
-58.9% Bitcoin
Sources: MarketWatch; Yahoo!Finance
The Question of the Week
[poll id=”443″]
Last Week’s Poll Result
How do you dress up your favorite hot dog? (Choose all that apply.)
- Mustard (28%)
- Onions (17%)
- Ketchup (15%)
- Relish (14%)
- Chili (10%)
- Cheese (9%)
- Sauerkraut (8%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that – to no ones’s surprise – mustard is the most popular hot dog topping. If there was any surprise at all, I’d say it was that ketchup somehow managed to nose out relish in popularity. At least with Len Penzo dot Com readers.
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: The Forbidden Island
A Frenchman, an Englishman, and a New Yorker launched an expedition and discovered an uncharted island.
Unfortunately, the island was home to a tribe of cannibals. Soon enough the three men were ambushed and overrun. They were then tied up and taken to see the tribe’s chief.
“You were forbidden from setting foot on this island!” the chief said. “We’re going to eat you and use your skins to build a canoe. However, we’re not without compassion — we’ll let you choose how you’re going to die.”
The Englishman said, “Give me a gun.” So the cannibal chief handed him a gun. The Englishman then raised the gun to his head and yelled, “God save the Queen!” before blowing his brains out.
The Frenchman and the New Yorker watched as the cannibals proceeded to skin the dead Englishman.
Inspired by the Englishman’s bravery, the Frenchman then said, “Give me a sword.” So his wish was granted and he yelled “Viva la France!” before impaling himself.
The cannibals then skinned the Frenchman.
Finally, it was the New Yorker’s turn. “Gimme a fork!” he demanded. The cannibal chief complied, and the New Yorker then jabbed himself over and over with the fork until he was covered with thousands of blood-oozing holes.
Puzzled at the spectacle he just witnessed, the cannibal chief asked the New Yorker, “So … any last words?”
“Yeah!” said the New Yorker. “There goes your God damned canoe!”
(h/t: resistedliving)
More Useless News
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1. West Virginia (2.51 pages/visit) (!)
2. Kentucky (2.18)
3. Montana (2.12)
4. New Hampshire (2.07)
5. Wyoming (2.05)
46. Oregon (1.59)
47. Virginia (1.49)
48. Alaska (1.47)
49. North Dakota (1.40)
50. South Carolina (1.21)
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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 article explaining why putting ketchup on a hot dog is definitely not poor etiquette, Char left this comment:
I take a lot of flak for putting mayo on hot dogs.
To be frank, it’s a free country. So continue to mustard up your dogs with whatever toppings you relish.
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: public domain
Hi Len,
You did again! Another great cup of joe!
Jeez. I never could understand why anyone would be dumb enough to rent to own ANYTHING. Don’t people realize they end up paying $5,000 for that $1,500 big screen TV? What a rip off!
Have a great weekend everybody! 🙂
Sara
Last year my son worked as a repo man for a rent-to-own company that rented wheels (tire rims). The clientele was mostly people living paycheck to paycheck who resided in low-income neighborhoods and apartment complexes who put every last penny they owned into their tricked-out vehicles, including renting a set of $15,000 rims for a few hundred a month (after putting $2500 down).
Most of those rim-renters defaulted within six months and lost several grand in the process. Sad, really. But very profitable for the rent-to-own company.
“Spiders draw just enough silk out of their bowels to catch those half-dozen flies they need to feed themselves and their loved ones; but the rich make silk and silk and silk. Nothing can stop them. Their houses are stuffed with it. Their banks are stuffed with it, and it’s not out of their bowels they make it, but out of the bowels and lungs and eyeballs of others.”
– Thornton Wilder, The Eighth Day
From “Wolf Street” this morning:
AD
Oct 9, 2022 at 12:51 am
Just saw in my Google News feed the following Wall Street Journal article: “Fed’s Inflation Fight Has Some Economists Fearing an Unnecessarily Deep Downturn”
Economists are advising no more than a 0.5% increase at the next Fed meeting.
Reply
Wolf Richter
Oct 9, 2022 at 12:59 am
Hahaha, yes, it’s everywhere. They don’t care about inflation because they’re wealthy enough to where inflation doesn’t matter. But they’re losing their shirts with these falling asset prices, and they want the Fed to stop, and to heck with inflation…
… I call these people: “hedge fund gurus, bond kings, stock-fund apostles, and other crybabies on Wall Street.”
Great quote, Dave.
The US is bankrupt! The debt to GDP ratio is banana republic material and the debt is getting harder and harder to service. Almost game over.
I think you’re right.
Foreign governments have been buying dollars, and treasury notes for decades to keep the dollar strong. They can really use it to sell their products to the US. I was reading the other day that China is considering dumping its US Dollars to shore up the Yuan. A weaker Yuan costs them more for their imported oil and supplies.
Hello, even more inflation, higher national debt, and the ever crumbling of the dollar.
The key to breaking the buck is gold; right now the West is using paper-based derivatives to keep the dollar over-valued relative to the yellow metal. But that game is quickly coming to an end (ironically, due to dwindling physical silver supplies.
When physical silver can no longer be supplied at its similarly-suppressed spot price, the gold (and silver) prices will find their true value – and financial power will shift from the US to nations that actually produce things.
I see smart people gathered here, or at least smarter than me, lol! In general, I have a problem and I’m looking for a good place where I can do online homework help. Can you advise something?
Nope. But thanks for stopping by and taking the time to comment!
You might want to check out Wyzant
The market is so volatile right now. Up 600 points one day and then down 600 the next. Scary for buy and hold investors but I’m sure the day traders are loving this.
Thanks for another good roundup, Len.
I could never be a day trader. Way too much stress for me. Heck … these days I’m sure buy-and-hold investing is stressful for people without wealth insurance.
Anybody else notice gas prices are climbing higher again? I saw pictures of gas signs showing $7 in California.
I paid $5.69 for regular in Oregon the other day.
Climbing higher recently, and lots higher than before Biden got into office but still affordable here in Georgia. I think I paid $3.30 on last fill up.
I can attest to premium being over $7 at my neighborhood gas station, Nicole.
Thanks for another informative (if scary) cup of Joe, Len. Anyone else out there think the Amish may have had the right idea all along, and will be the ones left standing when the dust settles?
Lauren, I’m “anyone else” (f anybody) and I agree with you!
I agree too! The Amish will be just fine no matter what happens to the dollar or the US.
They’ll be better off than most of us, but the ones around me in upstate New York? They “cheat” alot and have become part of the local economy. They routinely ask their “English” neighbors for a ride to Walmart, where they buy all kinds of stuff. They also go to their neighbor’s houses to make calls on the neighbor’s cell phone.
Very interesting! Thanks for that insight, Gee. 🙂
Hey! Doesn’t that Allisdair guy know that silver is money too? Only saying gold is money is very annoying to us silver stackers.
Easy, Madison! I’ve read enough of Alasdair’s stuff to know that he recognizes that silver is money too – he just usually refers to gold (probably to keep the writing more concise).
Len, I hate to ask this because the fear is gripping me but have you checked to see how inflation has affected the price of fruitcakes?
Nope. Here’s why …
“Reality is like a fruitcake; pretty enough to look at but with all sorts of nasty things lurking just beneath the surface.” – A. Lee Martinez
“We are worried that people will just burn what they can get their hands on,” Roger Sedin, head of the air quality unit at the Swedish Environmental Protection Agency, said.” (talking about Europe’s lack of fuel for heating their houses, this coming winter.)
https://www.zerohedge.com/markets/back-old-days-europeans-panic-buy-firewood-and-stoves
What goes around, comes around.
During the French Revolution, the serfs, suffering from the cold, burned most of the harpsichords belonging to the aristocracy.
Jamie Dimon announced that a Recession is looming in the next 6 to 9 months. I felt like hurling and saying words that wouldn’t embarrass Mr. Dave. I resisted temptation but it may be why I woke up with the joints swollen on only one finger. ha
Taking into consideration the policies of the bank he chairs, and his own personal role in the mortgage fiasco, I hold him responsible for a large part of what happened, and what is coming. If Congress had questioned Alayne Fleischmann, they could have forced Eric Holder to do his job, and Jamie Dimon could have removed as CEO of Chase, and possibly gone to jail.
Kiplinger’s even had an interview with her years ago, and she detailed his involvement.