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 a wonderful week. And with that, let’s get right to this week’s commentary, shall we?
A million dollars isn’t what it used to be.
– Howard Hughes (1947)
A billion dollars ain’t what it used to be.
– Bunker Hunt (1980)
A trillion dollars ain’t what it used to be.
– Edmund C. Moy (2013)
Credits and Debits
Debit: Did you see this? A recent survey of Americans with investable assets of at least $1 million found that one-third of them are worried that they may outlive their retirement savings because they’re unsure about the future. Ironically, the same survey found that 84% of those same wealthy people say they have a long-term financial plan that factors in both rising and falling economic cycles, compared to 51% of the general population. Huh. If true, at least half of those worried millionaires need a better long-term financial plan. Then again, a million in the bank isn’t that impressive these days. And speaking of unimpressive …
Debit: Remember when we were promised that those new IRS auditors we’re paying for – (eventually) all 80,000+ of them – wouldn’t go after anybody with incomes below $400,000? Heh. Well … somebody forgot to tell the IRS. The government announced this month that the IRS is not going to limit audits to taxpayers with incomes over $400,000 after all. That’s right; everybody is fair game, regardless of income – so pucker up, bend over and grab your cheeks. Let’s hope the suckers who actually fell for that bullshit promise not only get it good and hard, but are also first in line – well … assuming they still have a job:
Debit: If increased prospects of the taxman knocking on your front door in the coming years doesn’t brighten your day, there’s also this: Cocoa hit a 44-year high this week amid concerns about global cocoa production. Stay tuned. It’s very possible that if prices get any higher the federal government may have to cancel Halloween. Oh … and on a related note:
Debit: Then again, cocoa isn’t the only product plagued by rising prices, as anybody who doesn’t have a personal shopper – or drives a car – already knows. Prices at the pump are at a record high for this time of year, surpassing prior seasonal highs in 2022, 2012, and 2008. In fact, at least a dozen states now have gas prices averaging $4 a gallon or higher, including Colorado, North Dakota, and California. We can attest that local pump prices here in the Golden State are now less than a dime away from regular gasoline crossing the $6 benchmark – and diesel crossing $7. Hmm. I wonder why …
Debit: Of course, rising consumer prices is a big reason why real median household income after taxes fell 8.8% to $64,240 over the past year. And during the same period, the poverty rate after taxes increased 59% to 12.4%. In other words: The lower half of the income spectrum in the US is being systematically eviscerated. The good news is, a “Nobel Prize winning economist” insists that inflation has been vanquished – which tells you exactly what kind of credibility the Nobel Prize has these days.
Debit: Needless to say, falling real income is especially bad news for first-time homebuyers as mortgage rates have exceeded 7% for the sixth straight week – and there’s no relief in sight. On Friday, Bankrate noted that the average rate on a 30-year fixed mortgage in the US increased to 7.75% – that’s the highest average 30-year home loan rate since November 2000. Meh. Yes, it makes us wondering how the housing market continues to hold up. Then again, those who are truly industrious know that housing affordability becomes moot when you have a profitable side hustle like, say, writing a book:
Debit: Meanwhile, the banking system is teetering again too. Remember that three of the four largest bank failures in US history occurred in March. Now, Republic Bank is wobbling too. Last quarter the bank held $6 billion in assets across 35 branches in Pennsylvania and New Jersey. But get this: More than half of its deposits are uninsured, with its 100 largest depositors holding 16% of its assets. Yes, that makes it extremely vulnerable to a bank run. Maybe that’s why Republic Bank’s stock has fallen 96% in the past year and was delisted from NASDAQ last week. But no worries, folks! I hear the Fed is racing to the rescue:
Credit: According to macroeconomist Alasdair Macleod, the emergence of a gold-backed currency is not far away, which will ultimately impact the credibility of all fiat currencies worldwide. As Macleod warns, “Chalk and cheese, oil and water, diamonds and dust: whatever metaphor you choose, a mixture of gold standards and fiat currencies will not last long.” Well … you would certainly think something would have to give, as consumers and sovereign nations would have the power to vote for their preferred monetary system with their wallets. Until then, the masses can keep putting everything on the credit cards.
Debit: By the way, Macleod also points out that, despite plenty of naysayer claims, it would be “very easy for Russia to reintroduce a gold standard for the rouble, but the consequences for the global fiat currency system are nothing short of lethal.” Very true. After all, there is only so much credit any reasonable producer of real things can be expected to extend before they cut it off – especially when they’re being paid in US dollars (USDs) and other fiat currencies that can be printed out of thin air. If you don’t believe me, maybe you’ll believe billionaire businessman Frank Giustra:
Debit: In the meantime, Americans can only watch the fiat USD continue to unravel. As macro analyst Peter Schiff notes, as the world moves away from fiat, “the dollar is going to fall very fast, and prices are going to rise much faster than they have been until everything spirals out of control. This will pressure the Fed to cap interest rates by printing even more USDs to buy more bonds (until) it ends in a currency crisis.” Don’t tell that to the Magic Money Tree crowd; these ivory-tower “intellectuals” still insist it’s possible to solve a debt problem by going even deeper into debt.
Credit: If you’re wondering how the coming USD currency crisis will affect most Americans, – well … aside from lower living standards and their annihilated nest eggs – Schiff says once the USD loses its global reserve currency status, the US will have no choice but to rebuild its economy from the bottom up, and Americans will have to start “saving and producing” again. He’s absolutely correct. The good news is prudent Americans who insure their wealth with physical precious metals beforehand will not only preserve their hard-earned nest eggs, they’ll also have a financial leg up on everyone else during the inevitable US economic boom that follows.
By the Numbers
Small businesses power the US economy and paying billions of dollars per year in federal and state taxes. Of course, when it comes to state taxes, it makes a difference which state you live in. Here’s a closer look at the impact of state taxes on American small businesses:
99.9% … of all American companies are small businesses.
16% … of small business owners say taxes are their biggest problem in running their company.
58% … of small businesses in Oregon that survive five years after opening; that’s the highest survival rate in the US.
3 In addition to Oregon, the number of states with a five-year business survival rate of at least 55%. (West Virginia, Montana, Minnesota)
40% … of small businesses in Washington that survive five years after opening; that’s the worst survival rate in the US.
4 In addition to Washington, the number of states with a five-year business survival rate of 45% or less. (Kansas, Georgia, Missouri, Connecticut)
The Question of the Week
What rate are you currently being paid on your cash savings?
- 3.0% to 5.0% (51%)
- 1.0% to 2.9% (23%)
- More than 5.0% (15%)
- Less than 1.0% (11%)
Total Voters: 1,961
Last Week’s Poll Results
Which of these traits would you rather have?
- Photographic memory (39%)
- Eat without getting fat (33%)
- Never get tired (28%)
More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that a fairly large plurality would rather have a photographic memory than the ability to eat without getting fat, or work and play all day without getting tired. As for me, I’d much rather have the ability to eat all day without having to worry about becoming a giant tub ‘o lard.
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.
Useless News: Shaken, Not Stirred
A lady walked into a bar and said, “Barkeep, gimme a martooni!” So the bartender fixed her a martini.
The lady quickly downed her drink, then immediately raised her glass and said, “Barkeep, gimme another martooni!”
So the bartender fixed her another drink – and once again, the lady gulped it down and immediately asked for another.
The same exchange continued for a few more rounds. But after her fifth drink, the lady just sat at the bar, not saying anything.
Finally, after a few minutes the bartender walked over to her and asked, “Would you like another?”
The woman replied, “Barkeep, I’d have another martooni if I could … but I’ve suddenly come down with a terrible case of heartburn.”
“Okay, let’s get a few things straight,” said the bartender. “Number 1: It’s called a martini, not a martooni. Number 2: I’m a bartender, not a barkeep. And Number 3: You’re not suffering from heartburn – your boob is in the ash tray.”
More Useless News
Here are the top five articles viewed by my 46,927 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- My Personal Journey to Financial Freedom
- Why I Run My Household Like a Business (and You Should Too)
- 5 Ways to Save Money on Groceries This Week
- 5 Frugal Tips for Family Fun During the Fall Season
- Expensive 401k Mistakes People Make Every Day
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(The Best of) Letters, I Get Letters
Sometimes I get the strangest email questions, like this one from Mr. Wonderful:
You got change for a hundy?
You actually have a $100 bill in your wallet? Strange. If you’re so wonderful, then why aren’t you married?
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