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.
Another busy week is crossed off the list. So without further ado, let’s get right to the commentary …
And now we welcome the new year. Full of things that have never been.
– Rainer Maria Rilke
Credits and Debits
Credit: Did you see this? American tipping culture has spiraled out of control, with more consumers opposed to higher service charges and suggested tipping amounts, according to a recently published study that surveyed 11,945 American adults on tipping policies. The survey found that 72% of respondents opposed automatic service charges that appear on their bills. And 50% of those respondents strongly opposed the practice. Huh. I wonder why …
Debit: Then again, American tipping culture isn’t the only thing that is out of control. Consider China and its 1.4 billion citizens. Yes; that’s a lot of people. Even so, the entire population of China isn’t big enough to fill all of its empty houses. Thankfully, there’s an ancient Chinese proverb out there that can help explain this. At least I’m pretty sure there is. Behold, Exhibit A …
Source: APMI Partners
Debit: It’s a well-known fact that China has long relied on real-estate development as a “safe” investment to bolster economic growth. But that development was based on an artificial increase in the currency supply that was completely detached from actual economic activity for more than a decade. As a result, all of that conjured currency only served to create an excess supply, with millions of endless high-rise buildings left empty. Of course, China doesn’t have a monopoly on reckless government economic meddling. On this side of the Pacific, Canada’s Senate is still considering this proposal:
Debit: Meanwhile, south of the 49th parallel, the federal government in Washington DC has $7.6 trillion in maturing debt to rollover in 2024. Add in another $3 to $5 trillion in new debt issuance to finance deficit spending. That means the Fed has to sell $10 to $12 trillion in debt instruments over the next 12 months. Er, assuming there’s enough buyers, that is. Otherwise, the Fed is going to have to buy them. Yes; I know … the Fed has been buying unwanted Treasuries for quite a while. But just play along.
(h/t: GoldSilver.com)
Debit: For those not counting at home, the total budget deficit for the 2024 fiscal year, which began October 1, has already risen above $380 billion. The new total, which includes the months of October and November, puts the US on track for a total annual deficit of more than $2 trillion by the end of the fiscal year. That would be an increase of more than 25% over 2023 fiscal year, which was itself a 23% increase over 2022. Unfortunately, more than half of that spending ends up being malinvested, rather than being used to provide for the economic security, shelter, and free healthcare of all its citizens. Oh, wait …
(h/t: The Mises Institute)
Debit: Ironically, on a quarterly basis, US GDP has been running at a very robust 5%. But this is misleading because it now takes $4 of debt to generate $1 of economic growth. In a normal, healthy financial system, a single dollar of debt should generate more than a dollar of growth. And although that seems like an intractable problem, keep in mind that the Fed has plenty of experts on its staff who have been tasked with studying how similar nations that fell into the same trap managed to avoid a hyperinflationary outcome.
Debit: Of course, the US is in this position because, at nearly 135%, the US debt-to-GDP ratio is far above the mathematical threshold where additional debt becomes destructive to the economy. On the other hand, when you consider that the federal government spent – among other waste, fraud and abuse – $2.7 million to study Russian cats walking on a treadmill, $6 million to promote tourism in Egypt, $477,000 to study transgender monkeys, and $200 million to support scores of multi-million-dollar “struggling artists” in the music industry, then the income-to-debt ratio seems almost moot. I said “almost” …
Credit: On the bright side, despite all of the terrible economic news, the stock market is near all-time highs again. However, as market analyst Gregory Mannarino notes, that’s because “there is no connection or correlation whatsoever between the economy and the stock market; as they’re now totally detached from each other. Moreover, the gap between the economy and stock market is going to get even larger moving into 2024.” And if you’re okay with that, I’ll bet you also think this is a great deal too:
Debit: The US’s debt situation isn’t being helped by the United Arab Emirates (UAE), which has officially stopped trading oil in US dollars (USD), thereby putting yet another nail in the petrodollar’s coffin – and further increasing the risk of a major loss in USD purchasing power – and a declining American living standard – down the road. The UAE’s decision to switch away from using USDs – and by extension, US Treasuries – in the oil trade marks a broader pivot among the BRICS economic alliance to transition to the use of local currencies for oil transactions. Ya all hear what I’m sayin’? Hello? Anybody? Is this thing on???
Debit: By the way, the UAE announcement is more smoke from the fire that’s raging below the deck of the USS United States Dollar, as 30 more nations have applied to join the BRICS economic bloc. No, really. The entire world is now quickly coming to the realization that the US is dead broke. Tick tock.
Credit: We’ll close our final Black Coffee of 2023 with this prediction from Mr. Mannarino: “Come 2024, central banks are planning to vastly increase their purchases of assets and massively inflate global debt. So expect bond yields to drop in 2024, and more cash to make its way into the stock market. Also expect housing and real estate prices to go even higher. Expect that central bank issued notes will lose even more of their purchasing power – and expect that the world economy will deteriorate more rapidly than ever before.” Will he be right? Only time will tell. But either way, I’m not going to lose any sleep over it because I’ve got my wealth insurance. Just in case.
Last Week’s Poll Results
Do you think 2024 will be better or worse than 2023?
- Worse (61%)
- About the same (20%)
- Better (19%)
More than 1900 Len Penzo dot Com readers responded to this week’s poll and it turns out that 4 in 5 of you think that 2024 is going to be, at best, no better than 2023. And the great majority of you say it will be worse. I agree … I think this will be the year the fit hits the shan – at least with respect to the international monetary system.
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.
The Question of the Week
[poll id="517"]
By the Numbers
Are you a buy-and-hold investor? If so, you may be interested in this list of the ten best-performing S&P 500 stocks based on their returns since 1 January, 2018. Can you guess which company came out on top?
440% Eli Lilly and Co. (Symbol: LLY)
445% Quanta Services (PWR)
448% Fair Isaac (FICO)
469% Advanced Micro Devices (AMD)
491% Synopsis (SNPS)
498% KLA Corp. (KLAC)
507% Cadence (CDNS)
928% Tesla (TSLA)
1054% NVIDIA (NVDA)
1771% Enphase (ENPH)
Source: Zero Hedge
Useless News: Insurance Claim
A man went on a ski trip, and was knocked unconscious by the chair lift. He called his insurance company from the hospital, but it refused to cover his injury.
“Why is the injury not covered?” he asked.
“You got hit in the head by a chair lift,” the insurance rep said. “That makes you an idiot, and we consider that a pre- existing condition.”
(h/t: Terry)
Buy Me a Coffee! Thank You!
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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
Somebody calling himself Gil Wanchai, who supposedly works for a company called “High Speed Delivery Service,” had some really good news for me earlier this week:
I’m notifying you about a compensation payment of $2,811,041. Please contact us with your name and address to arrange delivery of your money.
Great! Please make sure it’s in 10s and 20s. (Sheesh. Do people really fall for this stuff?)
If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message. 🙂
Photo Credit: stock photo
Good morning Len, I hope the Penzo family had a great Christmas week! Thanks for another eye-opening Coffee, and for referencing the Mises Institute. I never heard of it before (T. Sowell is my go-to economics teacher), but plan to check out their videos later this week.
Wishing a safe, happy and healthy New Year to you and all the readers here, no matter WHAT 2024 brings! 🙂
Happy New Year, Lauren! I love Thomas Sowell; he is one of the wisest men out there. And all schools should use the Mises Institute as their primary source for macroeconomics.
Hope you all have an improving and wonderful 2024.
As a 68 year old Canadian, I just want to tell readers there will not be a universal basic income coming to Canada. There is a lot of election prep fearmongering going on (for us) and this program threat is occasionally dusted off to motivate bases or test the waters. In fact, most likely the pendulum will be swinging to the right next year, much like it did in New Zealand. People are really sick of Trudeau. Furthermore, the only universal program we really have is our single payer health system, administered by each Province but held to account by around 30% Federal funding. If provinces start privatising during their own right wing swings, the Fed funding will be withheld. If a Provincial Govt (elected by their citizens) decides to go more private, say private surgery clinics using Govt funds to partly pay their expenses, those governments would become extinct if not drawn and quartered first by their angry majority electors. When there is a universal program, say the GST rebate at tax time, it is simply taxed back (withheld) by income levels. I have never received one, just a yearly explanation (basic math) why I do not qualify for the rebate. Poor people do get a rebate which is a good thing. They are already poor, for God;s sake. A little extra cash goes right back into the economy and eases their condition with a one time cheque in the spring. Big deal, they were already taxed at time of goods purchase and just get some back.
If readers would like to look beyond the knee jerk reaction about UBIs, there was a real life experiment done here in the 1970s. Just type in UBI experiment Dauphin Manitoba 1970s. It actually had very positive outcomes and reduced overall spending as more young people stayed in school until graduation and health care costs decreased, etc. Of course it was very very controversial and would never survive. I’ve worked in Manitoba and it is full of independent hardworking settler types…..farmers, miners, etc etc. Think Minnesota, Wisconsin, with brutal prarrie winters thrown in. Bugs and cold. I worked there in the 70s, 7 days per week for 6 months straight, and was paid by piecework…. flying bush planes into remote settlements, (base pay and mileage). The harder we worked the more money we made. Manitoban’s are workers, but they are open to trying out change, even evaluating UBIs for their citizens. Their license plates are stamped Friendly Manitoba for a reason.
All the best for spring and longer days.
Happy New Year, Paul! My Dad always used to tell me the harder he worked, the “luckier” he got. He was right; it’s the same for me.
Hi Len,
I think 2024 is going to be the most interesting and eventful year we’ve had in a long time.
Regardless, here’s to a happy new year for everyone in 2024!
Sara
I agree, Sara. Happy New Year!
Darn. I was hoping your “by the numbers” would had the asset class performance numbers for 2023.
I didn’t have time to research/find the data prior to publishing, Steve-O. I promise I’ll have the numbers next week.
Me and the wife went out and enjoyed a nice restaurant meal this week to take a break from hosting family for Christmas. When we got the bill it had the usual tip recommendation at the bottom. The three choices were 20%, 25%, 28%. That’s right. 28%!!!!!! They got 18%.
Not surprising these days. Twas a time when a standard waitress/waiter tip was 10%. Doubters can scoff all they want but it’s true.
That’s crazy, CJ. I mean, really off the charts. I’ve seen 25% suggested, but never 28%.
To all my Black Coffee peeps, Happy New Year!
Happy New Year, Maddy!
Hi Len,
Considering the current circumstances with the exploding debt, are you still positive on Treasuries?
Short-term bills only, Jack (26 weeks or less) … not T-notes (2-yrs to 10 yrs) or T-bonds (20 yrs to 30 yrs). In fact, I’ve still got all of my cash savings squirreled away in laddered T-bills, and will continue to do so as long as they keep paying out at least 4% interest. All of the bills are currently paying in the vicinity of 5.4%.