Black Coffee: Winners and Losers

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 …

Losing an illusion makes you wiser than finding a truth.

– Ludwig Borne

The key to winning is poise under stress.

– Paul Brown

Credits and Debits

Debit: Did you see this? Last week, the government boasted that a net 336,000 new jobs were created in September – that was twice the expected total. Hooray! But once you cut through the propaganda, the reality becomes far more concerning, as 1.127 million new part-time jobs were created – but the number of full-time workers collapsed by 885,000. That was the biggest monthly drop in full-time positions since April 2020 when the economy was shut down. At the same time, the total number of part-time workers in the economy is at its highest level since April. Winning! Oh … and speaking of winning:

Debit: Needless to say, with the job situation deteriorating, it shouldn’t be a surprise that delinquencies on auto loans, credit cards, and consumer loans have reached a ten-year high. As interest rates rise, experts predict further financial strain for many consumers. Until then, there’s always credit cards; that is, until consumers finally hit their credit limit …

Debit: Meanwhile, the government’s frivolous spending continues. For example, three years after the pandemic kicked off, 60% of federal employee respondents are still working completely remote, and 33% work in a hybrid situation. That means just 7% of federal workers are in the office full-time. Despite this, bureaucrats have spent $3.3 billion on new furniture since 2020, including $237,960 for solar powered picnic tables, $120,000 for Ethan Allen leather recliners, and $26 million for new conference room furniture, despite most meetings being moved to Zoom. Then again, frivolous spending isn’t just a government problem …

Debit: Of course, wasteful spending has its consequences. In fact, the US GDP to debt ratio is now 118%. While anything over 90% used to be considered a banana republic debt ratio, even the latest Congressional Budget Office (CBO) numbers – which are always ridiculously tempered to minimize concern – projects that figure will climb to 195% no later than 2053. Most likely, that really means the debt ratio will cross 200% by the end of this decade. Er … assuming the US dollar (USD) doesn’t lose global reserve status beforehand.

Debit: By the way, interest payments are the biggest line item in the US government budget. How big is it? Well … the US Treasury says it shelled out $808 billion in interest on its debt securities for the fiscal year that ended last month, while the Department of Defense’s military programs cost $695 billion over the same period. Meh. Thankfully the US will simply issue more bonds to cover the bill. Of course, they’ll also be picking up the tab for any Treasuries that the market refuses to purchase – thereby monetizing the debt. The trouble is, the pool of buyers willing to fund America’s insatiable debt appetite continues to dwindle.

Debit: Rising interest rates and Treasury bond yields show no signs of slowing down. At the same time, the Federal debt has been doubling roughly every eight years since at lease 2001. If that pace continues – and it almost certainly will – the National Debt will cross $40 trillion in 2025 at the very latest – and $45 trillion by 2027. Don’t believe it? Keep in mind that the US added $900 billion to the National debt in the second quarter of this year alone. Thankfully, you can be sure all of the other expenditures – and your tax dollars – are being spent wisely …

Credit: America’s high debt ratio, fueled by its $33 trillion – and rapidly growing – National Debt is just one reason why billionaire investor Ray Dalio says the nation’s fiscal situation is “risky.” In fact, last week he warned that the toxic cocktail of high debt, rising interest rates and soaring bond yields portends that, “We’re going to have a debt crisis. How fast it transpires, is going to be a function of that supply-demand issue, so I’m watching that very closely.” You do that, Ray. Then again, here’s a real-life analogy of what the system is eventually in for …

Debit: Indeed, bank credit is now contracting; the last time this happened is just prior to the Great Financial Crisis of 2008. This is a significant economic development; unfortunately, nobody seems to be paying attention. And if that’s not quite true, then we are at the point where most people know we can’t pay back the debt, but they don’t want to believe it.

Credit: Here’s the rub … if interest rates and US Treasury (UST) bond yields continue to rise, macro analyst Jesse Felder says that, “At some point, the Fed may step in and intervene in the Treasury market – but that likely wouldn’t come without serious consequences for inflation.” Ya think?

Credit: As macro analyst Matthew Piepenburg notes, “One doesn’t need to be a doom-and-gloomer to interpret bond signals, basic math, history, or openly obvious energy and precious metal flows with common sense. If so, one sees the writing on the wall: nations are going broke, currencies are losing faith, and sovereign bonds are falling like rocks.” Hmm. If so, it may be a good time for me to buy one of these. You know … just in case:

Credit: One observer who clearly sees what’s going on is author and commentator John Howard Kunstler. This week he observed that our fraudulent fiat-currency “game is drawing to a close. Reality is finally asserting its rugged old self to say that our country is as broke as broke can be and there has to be a painful adjustment. It will be presented as a Hobson’s choice: You can have no money – or you can have plenty of money that’s worthless. What’s it gonna be?” Yes; it’s a very tough choice – but I’ll bet this lady can help …

Credit: The eponymous founder of Graddhy Trading reminds us that gold and silver are the counterweight against the world’s fraudulent debt-based fiat monetary system. Despite this, he says “the gold volatility during the ending Weimar era was absolutely nuts. This time, regardless (of whether) it turns into an inflationary or deflationary endgame, the volatility in the precious metals is going to be absolutely insane. We haven’t seen anything yet.” As such, he says precious metals holders who lack conviction and/or buy for investment purposes will be severely tested by the swings in price. For them, he says, “It’s going to be hard; very hard.” Indeed. Conviction is the key.

By the Numbers

When it comes to Americans working from home, some states have more remote workers than others. Here are the states with the least – and most – number of public and private employees who work remotely at least one day a week:

50 Mississippi (11.9%)

49 Louisiana (13.7%)

48 Wyoming (15.5%)

47 Arkansas (15.6%)

46 North Dakota (15.9%)

5 Washington (34.8%)

4 Utah (36.0%)

3 Massachusetts (36.4%)

2 Maryland (37.0%)

1 Colorado (37.3%)

Source: SelectSoftwareReviews.com

The Question of the Week

[poll id=”496″]

Last Week’s Poll Result

How big was the home you grew up in?

• 1000 sq. ft. to 2000 sq. ft. (60%)
• More than 2000 sq. ft. (22%)
• Less than 1000 sq. ft. (18%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that of you grew up in a home that was between 1000 and 2000 square feet. This makes sense as the median size of a US home in 1980 was 1595 square feet – a full 500 square feet smaller than the median home size today.

This week’s question was suggested by reader Frank. 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: Just Desserts

At a party, a young wife admonished her husband, “That’s the fourth time you’ve gone back for ice cream and cake. Doesn’t it embarrass you?”

“Why should it?” answered her spouse. “I keep telling them it’s for you.”

(h/t: Selma G.)

Buy Me a Coffee!

For the best reading experience, I present all of my fresh Black Coffee posts without ads. If you enjoyed this week’s column, buy me a coffee! (Dunkin’ Donuts; not Starbucks.) Thank you so much!

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More Useless News

Here are the top — and bottom — five states in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

1. Arizona (2.27 pages/visit)
2. New Jersey (2.22)
3. North Dakota (2.18)
4. New Mexico (2.17)
5. Oklahoma (2.15)

46. Ohio (1.44)
47. Vermont (1.41)
48. West Virginia (1.33)
49. Kansas (1.32)
50. Colorado (1.28)

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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 last week’s article on money leaks, Woody left this comment:

Two dollars a day for lunch? Surely that’s a typo.

Um … Did somebody send you pictures of me at the last company picnic?

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.