Black Coffee: Haves & Have-Nots

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 …

Let us all be happy, and live within our means — even if we have to borrow the money to do it.

— Charles Farrar Browne

If you think nobody cares if you’re alive, try missing a couple of car payments.

— Earl Wilson

Credits and Debits

Debit: Did you see this? There is a growing identity-theft trend in the US although the cause may surprise you. It turns out that the number of parents who are stealing their children’s identities to access debt is on an upswing and, sadly, that parental theft is destroying their kids’ credit scores in the process. Needless to say, children in this position face a unique dilemma: Report their parents for committing a crime, or be held responsible for their parent’s fraudulent spending. The good news is the economy is as strong as ever. Oh, wait …

Debit: As if young people didn’t have enough trouble, the National Association of Realtors’ national median-price index for deals that closed in September fell for the third month in a row and is down 4.7% from its peak last year, which occurred in June 2022. This makes 2023 the first year since the 2008 Housing Bust that the seasonal peak in June was below the peak in the prior year. And it’s not much better in commercial real estate. Okay … actually, CRE is a total disaster:

Debit: On a related note, I see higher mortgage rates are causing homebuyers to back out of deals at the highest rate in nearly a year. Roughly 53,000 US home purchase agreements fell through in September – that’s equal to 16.3% of homes that went under contract that month. That’s the highest percentage of canceled contracts since October 2022 when mortgage rates surpassed 7% for the first time in two decades. The share is also up from 15.2% a month earlier and 15.8% a year earlier. You know what all this means – plenty of adult kids living at home will have to endure living with their corny parents for a little while longer:

Debit: Speaking of interest rates, the rapid rise in US yields to 5% portends the federal government’s annual interest-rate bill rising to $1.7 trillion annually – that’s equivalent to the entire annual GDP of Australia. Now for the punchline: According to Bloomberg macro strategist Simon White, “Independent monetary policy becomes increasingly difficult when the equivalent of 6% of US GDP is being diverted towards interest payments each year. The Fed has little or no say over any of this – as such, monetary policy will become increasingly overwhelmed in such an environment.” Uh huh. But that won’t stop the Fed from printing the USD to oblivion anyway.

Credit: Of course, most people will pull out their violins to show their sympathy for the government’s high debt-service costs. In fact, NFL linebacker Arik Armstead – who earns $17 million annually – recently shared one of his paychecks to complain about the taxes taken out of it. It turns out that for each pay period, Armstead earns $393,055. However, after taxes, that number shrinks to $194,085. For those not counting at home, that’s 49.3% of his paycheck confiscated by the government. In fact, the government thievery has gotten so bad that even gold bugs are suddenly scurrying to hide their valuables …

Credit: Then again, gold bugs aren’t the only ones who understand the value of the yellow metal – central banks do too. This is evidenced by the expansion of their bullion reserves by 337 tons in the three months through September. That follows an increase of 175 tons in the second quarter, which was bigger than the council’s previous estimate of 103 tons.

Credit: Needless to say, silver is a precious metal too. In fact, humans were using it as money before gold. Now consider this: Roughly 850 million troy ounces of silver is being mined every year. That means global annual silver production is valued at just $20 billion. at its current approximate spot price of $23. For comparison purposes, Amazon has a market cap valuation of $1.4 trillion. So is silver undervalued? You bet it is. Right now, the gold-silver ratio is 87, despite the fact that eight times more silver comes out of the ground than gold, and the historic gold-silver ratio is 15 to 1. At the latter ratio, silver should be more than $100 per ounce.

Debit: Hey … here’s something to think about: I already noted that $20 billion buys a year’s worth of silver production. Meanwhile, the National Debt increased $1 trillion over the previous three months – which is 50 years of global silver production at the current mining rate. That’s right; the US just borrowed 50 year’s worth of silver production during the past three months. So I guess the real question is: Is that more an indictment against the federal government’s debt addiction – or the ridiculously low valuation of silver when priced in fiat US dollars? Oh … and while we’re at it, here’s one more question: What was this lady thinking????

Credit: In the meantime, the debt continues to grow. Now here’s a reality check: Debt servicing costs must always be paid – and when a debt burden becomes so large that the annual interest expense can only be paid with additional borrowing, then it’s game over. That applies to households and sovereign nations alike – and the US is fast approaching that point. As macro analyst Matthew Piepenburg observed this week, America has been “captured by a financial system and an unelected fourth branch of government which has backed it into a corner with no exit.” And may I add: a completely clueless fourth branch at that. Ugly too …

Debit: As a a structural component of the world wide monetary and credit systems, Treasury and debt growth are logarithmic, non-discretionary, and mathematically inescapable. As such, their collapse is baked into the cake. It’s a system that was created and continues to be maintained by statist ideologues who know that their system has been operating as a Ponzi scheme since the USD’s anchor to gold was broken in 1971. Despite this lunacy, both the central bank and the Big Government politicians they support will ride their dying horse to the bitter end. But global actors finally seem to recognize this – and are acting accordingly. See for yourself:

Credit: Unfortunately, normalcy bias will still lead to the destruction of most middle-class wealth. That’s because the USD is not money; it’s an IOU. And there is no longer enough collateral to back all of the financial promises out there. Something has to give – and it will. We are already seeing many market examples where the return of capital is becoming more important than return on capital. Thankfully, as Mr. Piepenburg reminds us, “history-wise, math-competent and financially-informed investors (blessed) by critical-thinking have always protected their sanity and wealth with a healthy allocation of gold.” Amen to that.

By the Numbers

While consumers in some states are adding to their debt at an alarming rate, others are contributing less to the nationwide debt increase. To determine the states with the largest and smallest household debt increases over the past three months, WalletHub compared the 50 states based on data from TransUnion and the Fed. Here are the five states whose households increased their debt last quarter the least – and the most:

50 West Virginia (3Q increase: $375)

49 Mississippi ($383)

48 Oklahoma ($419)

47 Kentucky ($426)

46 Arkansas ($427)

5 Washington ($922)

4 Utah ($932)

3 Colorado ($978)

2 California ($988)

1 Hawaii ($1093)

Source: WalletHub

The Question of the Week

[poll id=”500″]

Last Week’s Poll Result

Generally speaking, who do you think manages their personal finances better?

• Men (36%)
• I’m not sure (34%)
• Women (30%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that a small plurality believes that, generally, men manage their personal finances better than women. My experience is actually the opposite – but frankly, who really knows? I strongly suspect there is very little correlation between gender and personal finance management.

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: Free Time

One evening, after the honeymoon, Dick was working on his Harley in the garage. His new wife was standing there by the bench watching him.

After a long period of silence she finally said, “Honey, I’ve just been thinking, now that we’re married, maybe it’s time you quit spending so much of your time out here in your garage. You probably should consider selling your Harley and all that welding equipment; they take up so much of your time. And that gun collection and fishing gear, they just take up so much space. And you know the boat is such an ongoing expense; and you hardly use it. I also think you should lose all those stupid model airplanes and your home brewing equipment … And what’s the use of that vintage hot rod?”

Dick got a horrified look on his face.

She noticed and said, “Darling, what’s wrong?”

He replied, “You were starting to sound like my ex-wife.”

“Ex-wife!?” she shouted, “You never told me you were married before!”

Dick replied, “I wasn’t.”

(h/t: billhilly)

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. Alaska (2.67 pages/visit) (!)
2. Montana (2.32)
3. Indiana (2.21)
4. Kentucky (2.19)
5. Kansas (2.17)

46. Nebraska (1.60)
47. Wyoming (1.57)
48. Rhode Island (1.50)
49. Virginia (1.40)
50. Delaware (1.30)

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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 rebuttal to a controversial article about being poor on another website, rather than explaining why she disagreed with my commentary, Kathy decided to write this:

Are you an idiot, or just talking about something you know nothing about?

Kathy, I’d give you a clever answer — but I refuse to have a battle of wits with an unarmed individual.

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.