Black Coffee: Cocktails & Dreams

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 …

Debts are like children – begot with pleasure, but brought forth with pain.

– Moliere

One tequila, two tequila, three tequila, floor.

– George Carlin

Credits and Debits

Credit: Did you see this? It looks like consumers are finally waking up, as the electric vehicle (EV) craze has finally peaked. In fact, growth in gasoline-powered cars is once again far higher than electrics, convincingly flipping a dubious trend that began last year. One analyst summed it up this way: consumers are realizing that EVs make for a “good second car, provided you’re driving (locally), can charge it at home overnight, and you don’t suddenly have to go out of town. It’s a toy, sometimes a fun one, but not a real car. For that, you need gas.” Uh huh. The batteries also only operate reliably in warm-weather locations. And speaking of new cars …

Debit: Cocoa prices are at the highest level since 1978, as the outlook of poor crop harvests across West Africa has been a major bullish factor pushing prices higher this year. Now for the punchline: The world’s largest chocolate makers – Hershey Co. and Nestle – have yet to feel the full impacts of soaring prices because cocoa is bought well in advance. This means consumers will see a further increase in the prices of their favorite candy bars in 2024. Um, and apparently cocktails too …

Credit: Speaking of high prices, the markets believed that the Fed could successfully return price inflation to 2% and keep it there. But macro analyst Peter Schiff says such beliefs are “a fantasy that’s just not going to happen – and the markets haven’t come to terms with that.” Okay … just don’t tell that to guys like this:

Debit: For those of you not counting at home – or don’t shop for food, buy fuel, or pay rent – more than 90% of the items tracked in the Consumer Price Index (CPI) are more expensive than they were in February 2020, with most price increases landing north of 20% and some, like fuel and margarine, approaching 55%, while food prices are nearly 25% higher. In other words: Even if inflation finally returns to a far-more manageable level of 2% in 2024, the damage is done. Prices will not be returning to the pre-inflationary levels of 2020, and American living standards have fallen. Oh … and another thing:

Debit: In other news, the Office of Management and Budget estimates that the 2024 fiscal deficit will be $1.8 trillion. Needless to say, the OMB is notorious for underestimating expenses and over-estimating revenues. For example, they estimated the 2023 debt servicing costs would be $663 billion; it was $980 billion – or off by about half. For fiscal 2024 they’re estimating that the fiscal deficit will be $2 trillion. In other words: It won’t be a penny less than $3 trillion. And yet, these bureaucrats continue to be promoted. If only there was bit more pomp and circumstance … (h/t: AGXIIK via TF Metals Report).

Credit: Of course, as Jim Quinn opined this week, “The ‘Haves,’ who control the financial markets, media, and politicians, are ecstatic with the current paradigm, as the stock market hits new highs every day, while average Americans go deeper into debt to keep up with the Joneses, put some food on the table, and pay the rent or buy a home. The US is nothing more than a sophisticated technological looting operation at this point, as we await the Great Taking to be initiated by the oligarchs.” Well … we’ll see about that. In the meantime:

Credit: Meanwhile, Walmart is the latest major retailer to offer a variety of gold products in its online store. This comes several months after Costco began selling 1-troy-ounce gold bars. Costco’s and Walmart’s gold rush comes as gold prices have soared 14% since early October to a new record high of $2088. Not surprisingly, the yellow metal always sells out shortly after hitting the shelves. Probably because those buyers understand this …

Credit: As for those who may be wondering what’s up with the budding gold mania, Jo Harmendjian, portfolio manager at Tiberius Group AG, says the yellow metal “is the answer for many things at the moment – whether it’s inflation carrying on, rate cuts or the uncertainty with very costly wars going on.” Er … or the ever-expanding debt and a growing lack of faith in the current financial and monetary system.

Debit: Oh … and it’s not just the tin-foil hat crowd that is worried about the financial system. According to a report from the Office of Financial Research (OFR) – a federal agency whose mandate is to keep federal regulators apprised of the true condition of the US banking system – the financial system is not only primed for another crisis, but its condition is “fragile and uncertain.” This is in complete disagreement with the Fed, which claimed last month that the system is fine. Let’s hope so … otherwise the Fed is going to have a very tough choice ahead.

Debit: In fact, in a recent OFR brief by Peyton Young and Tom Doolittle, the pair warn that, “Many of the conditions that precipitated the 2023 banking crisis persist. Fair-value losses in bank securities portfolios are still large, deposits continue to decline, bank equities are underperforming, and the higher interest rates that catalyzed the banking crisis in the first place have not abated and may even increase further.” Imagine that.

Credit: We suspect those warnings by the OFR are among the many reasons why Walmart and Costco are jumping on the gold bandwagon – and they’re not alone. Bills filed in the Oklahoma and Missouri legislatures for consideration in 2024 would eliminate state capital gains taxes on the sale of gold and silver. Currently, 42 states do not charge sales tax on gold and silver bullion. However, aside from nine US states that currently have no income tax, Oklahoma and Missouri would be the only ones that exempt bullion sales from capital gains taxes. And on a related note …

Credit: Thankfully, constitutional tender expert Professor William Greene said when people in multiple states actually start using gold and silver instead of Federal Reserve Notes, “it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.” From his lips to God’s ears. Until then, you may want to consider a little wealth insurance – unless you feel comfortable entrusting your nest egg’s purchasing power to the current group of people who are responsible for running our monetary system.

By the Numbers

Now that 2023 is behind us, here is a performance summary of select asset returns for last year:

43.4% NASDAQ Composite

24.2% S&P 500

15.1% Russell 2000

13.7% Dow Industrials

13.3% Gold

8.2% GDX (gold miners index)

6.3% GDXJ (junior gold miners index)

0.6% UST (10-yr T-note)

0.0% Silver

-0.8% USB (30-yr T-bond)

-10.6% Oil (WTIC)

Source: Yahoo!Finance

The Question of the Week

[poll id="518"]

Last Week’s Poll Results

On a scale of 1 (terrible) to 5 (great), how would you rate 2023?

• 3 (33%)
• 4 (25%)
• 2 (23%)
• 1 (10%)
• 5 (9%)

More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that you’re evenly divided when it comes to 2023 in review. One-third of you think it was better than average, one-third said it was worse than average, and the remaining third basically said “meh.”

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: You Can’t Make This Up

One word in the English language that can be a noun, verb, adjective, adverb, or preposition. Read until the end … you’ll laugh.

This word in English has more meanings than any other two-letter word: “up.”

It is listed in the dictionary as an [adv.], [prep.], [adj.], [n] or [v].

It’s easy to understand UP, meaning toward the sky or at the top of the list, but when we awaken in the morning, why do we wake UP?

At a meeting, why does a topic come UP? Why do we speak UP, and why are the officers UP for election and why is it UP to the secretary to write UP a report? We call UP our friends, brighten UP a room, polish UP the silver, warm UP the leftovers and clean UP the kitchen. We lock UP the house and fix UP the old car.

At other times, this little word has a real special meaning. People stir UP trouble, line UP for tickets, work UP an appetite, and think UP excuses.

To be dressed is one thing, but to be dressed UP is special.

And this UP is confusing: A drain must be opened UP, because it is stopped UP.

We open UP a store in the morning, but we close it UP at night. We seem to be pretty mixed UP about UP!

To be knowledgeable about the proper uses of UP, look UP the word UP in the dictionary. In a desk-sized dictionary, it takes UP almost ¼ of the page and can add UP to about thirty definitions.

If you are UP to it, you might try building UP a list of the many ways UP is used. It will take UP a lot of your time, but if you don’t give UP, you may wind UP with a hundred or more.

When it threatens to rain, we say it is clouding UP. When the sun comes out, we say it is clearing UP. When it rains, the earth soaks it UP. When it does not rain for a while, things dry UP.

One could go on and on, but I’ll wrap it up, for now. My time is UP!

Oh … one more thing: What is the first thing you do in the morning and the last thing you do at night? U P!

Did that one crack you UP?

Don’t screw UP. Send this on to everyone you look UP in your address book. Or not … it’s UP to you.

Now I’ll shut UP!

(h/t: RD Blakeslee)

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More Useless News

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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 out to me at: Len@LenPenzo.com

After reading a Len Penzo dot Com oldie-but-goodie explaining why the Coke Rewards program isn’t worth participating in, Joe Smith left this comment:

I think this is the dumbest article I have ever read.

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Photo Credit: public domain