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’ve got another busy weekend ahead of me, so let’s get right to this week’s commentary …
Credits and Debits
Debit: Did you see this? The nation’s largest drugstore chains – Rite Aid, CVS and Walgreens – will shutter more than 1500 stores by the end of 2024. Are people simply getting healthier, thereby reducing the need for pharmacies? Hardly. Instead, the companies cited lower earnings and rampant shoplifting for the closures. In fact, analysts estimate the chains have lost $87 billion to retail theft in 2022 and project that retail theft may cost stores over $115 billion by 2025. Or maybe there’s another explanation …
Credit: In other news, real GDP growth surged to 4.9% in the third quarter. Hooray! However, almost half of that growth came from bloated government spending financed with more debt and inventory accumulation. As economist Daniel Lacalle notes, “Consumption financed by soaring credit card debt and economic growth disguised by enormous government spending and record public debt are not indicators of a strong economy.” In fact, if you remove the smoke and mirrors by excluding public debt accumulation that artificially goosed the latest GDP figure, the US is now experiencing its worst year of growth since the 1930s. Yes, the Depression Era 1930s. That being said …
Debit: You’d be forgiven for thinking the S&P 500 Index is having a good year. After all, it closed at 3839 on December 30, 2022. After the Friday closing bell it now sits at 4358, for a year-to-date gain of 13.5%. But as Wall Street on Parade notes, as late as last week, “only three stocks represent a large chunk of those gains. Nvidia is up 194% year-to-date on Artificial Intelligence (AI) hype; Meta Platforms (Facebook) has gained 161%; and Tesla has put in a robust share price growth of 72% year-to-date.” As for the Dow, 1 out of every 3 stocks that make up that venerable index is down by double digits. No, really.
Debit: Then again, not everything is down. The cost of goods and services rose 0.4% for a second consecutive month in September, challenging the view that the Fed’s rate hikes are still bringing down inflation. Orange juice lovers can attest to this. Believe it or not, orange juice concentrate is traded on Wall Street alongside other commodities like pork bellies, cotton, cocoa and sugar – and its price continues to skyrocket. On Monday, OJ concentrate surged 10% and hit yet another all-time high. The price of OJ futures has soared 388% since March 2020 as weather and disease continue to crush citrus supply in Florida. See for yourself:
Debit: The continued inflation pressure is a leading reason why new data shows that consumers are tapping their savings to maintain living standards, with the saving rate dropping by 15% from the prior month. More to the point, discretionary income after accounting for inflation and taxes fell for the third straight month. “That’s not sustainable,” said James Knightley, chief economist at ING. “Savings are finite and are being exhausted at a rapid rate, with various estimates suggesting that excess savings could be exhausted in the first half of next year.”
Debit: If you’re looking for the primary culprit behind all of this inflation, be sure to cast an eye toward the usual suspect: the government. The Congressional Budget Office calculated that this year’s budget deficit would be 20% more than last year’s. For those not counting at home, that would be the stunning total of $1.7 trillion. That prompted Fed governor Christopher Waller to remark that – and stop us if you’ve heard this before – “It’s hard to believe that [current U.S. fiscal policy] is sustainable.” Uh, maybe that’s because it’s not, Kev.
Debit: Meanwhile, the US federal debt is approaching $34 trillion – and that’s not counting more than $200 trillion in unfunded liabilities for things such as Medicare, Social Security and veteran and federal employee pensions. In the meantime …
Debit: By the way, it’s not just US politicians that are guilty of overspending; it’s a common trait of almost every government around the world. Despite this, they’re very good at fooling an ignorant public by deflecting blame onto the producers in the private sector. As just one example, this week the Trade Minister of Turkey called for supermarkets to cut prices amid soaring inflation in that country. Instead, grocers around the world need to call for their spendthrift governments to stop debasing their currencies by conjuring it out of thin air as a means of “paying” for their profligate spending – oh … and meddling in their business affairs too …
Debit: Not surprisingly, bond yields continue their march upward. After all, the reduction in the value of bonds – and hence the corresponding rise in yields – is a feature of every debt death-spiral. As a result, the US will be paying more than $1 trillion in debt service costs in the next few months. But wait, it gets worse: $17 trillion more in low-interest rate debt is scheduled to mature next year – which means the federal government will have to double its current borrowing rate just to get enough face value to keep rolling it over. And this is before they spend a dime funding everything else. Frankly, it’s so obvious where the current debt-based monetary system is headed that even a parrot can see it. Well … at least this one:
Credit: Needless to say, macroeconomist Alasdair Macleod warned this week that America’s financial situation is continuing to get worse with each passing day. As evidence, he points out that, “gold is now rising along with US Treasury yields, indicating that the dollar is becoming destabilized by (runaway deficits), and a debt trap is being sprung on US Government finances.” Uh huh. On the other hand, there remains a large contingent out there who doesn’t seem to be too worried about that …
Credit: Speaking of runaway deficits, hedge fund manager Lawrence Lepard observed this week how “people went crazy over President Reagan’s deficit spending. In 1983, the federal deficit was $55 billion; this past year, it was $2 trillion. We’re going to have to start thinking about what comes after a trillion – it’s a quadrillion. That’s because it’s (now) exponential; that’s why the monetary system is doomed. I’m not trying to be a doomsayer or fear monger. It’s basic math.” Hey … you’re preaching to the choir, Larry. By the way, if you ever lose your tin foil hat, feel free to borrow one of mine. In the meantime, it always helps to stay calm …
Credit: On a bright note, physical precious metals are the ideal form of wealth insurance because their purchasing power remains stable regardless of whether government debt is measured in billions, trillions, quadrillions or quintillions. In other words: Gold and silver are the ultimate safe haven in any currency crisis. Consider it a welcome ray of light amidst an uncertain world that is seemingly getting gloomier and doomy-er with each passing day.
By the Numbers
A new report illustrates the stark reality that US housing prices have surged by 37% over the last five years while wages have lagged, increasing by just 22%. This reveals a 15 percentage point gap that’s putting the American Dream out of reach for many. With that in mind, here are the five states where the housing and wage gap is the worst – and the five where the wage gap is lowest:
50 Idaho (housing vs. wages growth gap: 45.6%)
49 Arizona (37.7%)
48 Utah (33.8%)
47 Florida (29.4%)
46 Tennessee (27.1%)
5 Alaska (7.6%)
4 Iowa (6.5%)
3 North Dakota (4.7%)
2 Louisiana (4.4%)
1 Illinois (3.6%)
The Question of the Week
Generally speaking, who do you think manages their personal finances better?
- Men (36%)
- Women (32%)
- I'm not sure (31%)
Total Voters: 1,958
Last Week’s Poll Results
What color is your primary vehicle?
- Something else (23%)
- Blue (18%)
- Silver (17%)
- White (16%)
- Black (15%)
- Red (11%)
More than 2100 Len Penzo dot Com readers responded to last week’s question and it turns out that almost 1 in 4 of you have a car that is not silver, white, red, black or blue. Man … that’s a lot of orange, green, yellow, brown, beige, purple and gold cars – which, collectively, make up just 3.3% of all cars on the road in 2023. For what it’s worth, the most popular car color is silver/grey (30%), followed close behind by white (26%).
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: Morris the Miser
Morris realized he needed to purchase a hearing aid, but he was unwilling to spend a lot of money. “How much do they cost?’ he asked the salesperson.
“That depends,” the salesman replied. “They run from $2 to $2200.”
“Then let’s see the $2 model,” said Morris.
So the salesperson went to the backroom. Soon after, he returned and put the device around Morris’ neck. “You just stick this button in your ear and run this little string down to your pocket,” the salesman instructed.
“Okay,” said Morris. “But how does the thing work?”
“For two bucks it doesn’t work,” the salesperson replied. “But when people see it on you, they’ll talk louder.”
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More Useless News
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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
Found this gem in my inbox last week from a nice lady named Marija, who represents a company called Brightech:
Hi Len, I recently stumbled upon your blog, and it’s fantastic! I want to feature you as one of Brightech’s Top Mom Bloggers.
Well, Marija … Although more than a few people out there consider me a mother, I’ll have to pass.
If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀
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Photo Credit: public domain