Black Coffee: The Great Unwashed

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.

Well … another busy week is behind us. So with that in mind, let’s get this party started …

The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets.

— Robert Kiyosaki

Credits and Debits

Debit: Did you see this? When it comes to having financial security in retirement, Shark Tank star Kevin O’Leary recommended this week that we should have at least a $5 million nest egg to ensure we don’t outlive our savings. Huh. Then again, I guess that’s easy for him to say; O’Leary’s net worth is in the neighborhood of $400 million. At the same time, Fidelity says the average baby boomer 401(k) balance is $212,600, while the average retiree IRA account is $201,600. So if they don’t want to be eating cat food for dinner, they better pick up the pace. Meanwhile, back here in the real world …

Debit: Hey … here’s an interesting bit of trivia: According to David Stockman, who is a former Director of the Office of Management & Budget, “since money-printing went into permanent high gear after the Dotcom crash in 2000, the top 1% of households have gained $20 million each in inflation-adjusted net worth.” Interesting. We’re just wondering: How does that compare to your situation? Oh … and while you’re thinking about that:

Credit: The Fed has been doing its best to shrink the money supply in an effort to tame inflation after trillions of dollars were conjured out of thin air and unleashed by the central bank during the pandemic. In fact, money supply has been contracting without interruption since turning negative in November 2022 for the first time in 28 years. Despite that, for some reason this week the Fed signaled to the rest of the world that it plans on reducing rates in the near future. And that sent stocks, bonds, housing and even gold sharply higher, thereby adding fuel to the “everything bubble” the Fed has been trying to deflate – not to mention inflation. No, really. If you’re confused, rest assured that you’re not alone …

Credit: Last week, economist Ryan McMaken pointed out that, “If the Fed reverses course now, and embraces a flood of new money, prices will only spiral upward. It didn’t have to be this way, but ordinary people are now paying the price for a decade of easy money cheered by Wall St. and the profligates in DC. The only way toward a more stable long-term path is to stop (printing) money – that means a falling money supply and popping economic bubbles. But it also lays the groundwork for a real economy built by saving and investment, rather than artificially-low interest rates and easy money.” Amen to that.

Credit: For his part, macro analyst Brandon Smith says that while inflation is bad now, it still doesn’t compare to the erosion of purchasing power during the 1970s. Back then, he says, “The country was truly on the edge of disaster. Then, in the early 1980s, under Paul Volcker’s leadership the Fed jacked interest rates up to over 20%. This stopped the inflation crisis but triggered a deflationary plunge that would sit like a giant boulder on the chest of the American consumer and small business owners for years to come. In other words, as bad as the situation is now, we haven’t seen anything yet.” The truth hurts, I guess. And on that note: Merry Christmas to you too …

Debit: Unfortunately, there is one big difference between today and the 1970s: A massive national debt that is now expanding at an exponential pace – the US added $1 trillion to the National Debt in just the last quarter. At that pace, the National Debt will top $40 trillion before the end of next year. For that reason alone, this time there is no way out. After 50 years, the current debt-based fiat monetary system is just about out of time and will need to be reset.

Credit: In the meantime, Mr. Stockman says what “the US economy desperately needs is far less speculation on Wall Street and far more productive investment on Main Street – when, in fact, the opposite has been happening during the past two decades. However, as long as the Fed is in (bed) with the hedge funds and speculators of Wall Street, it will continue to flood the financial markets with the cheap debt and artificial liquidity which is the mother’s milk of speculative excess.” With clowns to the left of us and jokers to the right, I guess we shouldn’t expect anything else.

Credit: On a related note, macro analyst Peter Schiff is asking, “What happens in the next recession? Where are these deficits going to go? And how are we going to finance them? It’s not just the interest; it’s the principle. We have to repay over the next year one-third of that $34 trillion national debt. That means the people who own the bonds can ask for their money back. You know, so, and if nobody else wants to loan us the money, then where is it going to come from? Well, there’s only one source: the Fed, and that’s massive inflation.” In other words: When it comes to higher prices, we ain’t seen nothin’ yet. Hard as it may be to believe.

Credit: When it comes to America’s runaway debt, macro analyst Alasdair Macleod points out it’s the reason why, “increasingly, foreigners holding dollars are looking for opportunities to sell, and they’re likely to conclude that the dollar and US Treasuries no longer represent safety.” And who can blame them when everybody knows what’s coming up around the bend …

Credit: Indeed, central banks are in the midst of a torrid gold purchasing pace, buying a staggering 337 tonnes of gold last quarter alone – that brings the average over the past 15 months to an equally-astounding 328 tonnes per quarter. In fact, since the Russia-Ukraine war, central banks have been buying more than 2.5 times the prior quarterly average of the preceding decade. You know … it’s almost as if they know something is afoot with the current debt-based monetary system. And if they’re buying, shouldn’t you be thinking about buying some too? Oh, wait … you probably are:

Credit: By the way, with all that central-bank – er, and Costco customer – buying in mind, if you inflation-adjust gold for the 1980 peak then of $850, today it would be $3200. And if you price gold off the dramatic expansion in central bank balance sheets over the past 15 years relative to historical relationships, you get a price that would be somewhere north of $10,000. That being said, gold is wealth insurance – not an investment. The purpose of owning it isn’t to get rich – it’s to preserve your net worth in the event of a monetary system meltdown. Hey … I’m not sayin’. I’m just sayin’.

Last Week’s Poll Result

Which of these are responsible for most of your net worth? (pick two)

• Stocks (41%)
• Home equity (24%)
• Something else (14%)
• Other real estate (11%)
• Business profits (7%)
• Inheritance (3%)

More than 1900 Len Penzo dot Com readers answered last week’s poll question and it turns out that 1 in 10 of you credit the bulk of your net worth to business profits and/or an inheritance as one of the two biggest sources of your net worth.

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.

The Question of the Week

[poll id="515"]

By the Numbers

Here are the top 10 concert tours and performers in the US for 2023, based on median ticket price:

$288 Garth Brooks

$309 Suga

$329 Morgan Wallen

$358 Harry Styles

$391 Bruno Mars

$406 Usher

$473 Drake

$502 U2

$958 Taylor Swift

$1011 Adele

Source: Gametime.co

Useless News: Santa Claus Wisdom

(h/t: @IL0veNostalgia)

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More Useless News

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

1. Yukon (2.50 pages/visit)
2. Saskatchewan (2.06)
3. British Columbia (2.02)
4. Quebec (1.89)
5. Alberta (1.82)

9. Prince Edward Island (1.63)
10. Manitoba (1.61)
11. Nunavut (1.50)
12. Newfoundland & Labrador (1.40)
13. New Brunswick (1.22)

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(The Best of) 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 me at: Len@LenPenzo.com

After reading my article highlighting 36 amazing uses for plastic grocery bags, Anke decided to drop this note in the Len Penzo dot Com complaint box:

This is a disgusting post. Plastic bags are an environmental plaque [sic]!

Uh huh. But would you change your mind if I told you plastic bags are also considered a suffocation hazard?

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.

Photo Credit: stock photo