Black Coffee: The Love & Money Edition

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 …

Money can’t buy love, but it improves your bargaining position.

– Christopher Marlowe

Credits and Debits

Debit: Did you see this? Typically, when people are struggling financially, they rein in their spending. However, a new article in Bloomberg reports that younger Americans are now coping with their inability to buy a house and save for retirement by splurging on luxury goods. Why? Because they feel their financial futures are doomed no matter what. In fact, a new study finds that 35% of Gen Z and 43% of millennials admit they “doom spend” to cope with concern about the economy and the world at large. For all Americans, the figure is 27%. Now, if only we could get the resulting financial sugar highs to last longer.

Debit: Last week the Fed removed the following sentence from its monthly open-market committee statement: “The US banking system is sound and resilient.” Less than 24 hours later, Aozora Bank, the 16th largest in Japan by market value, saw its shares plunge by 20% after reporting a net loss of 191 million for the fiscal year. The reason? Toxic commercial real estate (CRE) loans on its books. That was followed days later by New York Community Bancorp being cut to “junk” status by Moody’s for being heavily invested in the CRE market. But I’m sure this is all much ado about nothing. As is this:

Credit: According to Justin Onuekwusi, who is the chief investment officer for St. James’s Place, “It’s clear that the link between commercial property and regional banks is a tail risk for 2024, and if any cracks emerge, they could be in the commercial, housing and bank sector.” Ya think? As Zero Hedge notes, “this is just another sign that the CRE/regional bank mess is very far from over and may even be gathering momentum.” For whatever that’s worth.

Debit: Of course, the struggling banking system is exactly why the Fed is going to have to eventually cut interest rates. The problem, you see, is that inflation is still stubbornly hanging around. Don’t believe us? Then ask yourself: Is your grocery bill still rising? Has the bank reduced your credit card rate? Are energy prices back to where they were four  years ago? Is the housing market still unaffordable for first-time homebuyers? In short: the Fed is snookered. And they know it. How sure are we about this? Well … we believe the Fed’s predicament is even more certain than this:

Credit: As for CRE’s woes, billionaire Barry Sternlicht warned yesterday that he sees more than $1 trillion of losses for office real estate, calling the properties “one asset class that never recovered” from the pandemic. “The office market has an existential crisis because workers haven’t gone back to their desks.” The billionaire money manager estimates that what was once a $3 trillion asset class, are now “probably worth $1.8 trillion, which means there’s $1.2 trillion of losses spread somewhere, and nobody knows exactly where it all is.” Then there’s this guy, who doesn’t quite seem to know where he is …

Debit: Curiously, the labor market is strong – if you believe the mainstream media’s interpretation of the latest US government labor report. Sadly, they dishonestly focused their attention only on the gamed headline number. If they bothered to dig a little deeper they’d have concluded that the economy is still adding jobs, but they’re overwhelmingly lower pay, with fewer hours, and either directly or indirectly paid by government. Yes, it’s essentially a case of lying by omission. On the other hand, that’s par for the course when it comes to deception these days …

Debit: As for those saying that the Fed can’t and won’t lower the rates because inflation is still too high and it could easily get worse, well … there’s a fly in that ointment too because 1) the annual interest on the debt now exceeds the entire Defense budget, and 2) the Fed’s temporary Bank Term Funding Program (BTFP) ends next month – which means banks will go bankrupt unless the Fed lowers rates and puts its currency printers into overdrive via QE. The question is: Will they continue to keep rates elevated in their fight against inflation – or will they finally back down? And speaking of fight or flight …

Debit: Unfortunately, for us, every dollar the Fed creates out of thin air steals value from every honestly-earned dollar in existence. And they’re going to be creating a lot of them, because the Treasury Department announced that they’ll increase the National Debt by a breathtaking $760 billion this quarter alone – and then another $202 billion next quarter. For those of you without a calculator, that’s almost $1 trillion added to the national debt in just six short months. Then again, considering the Treasury always underestimates its spending requirements, that figure will probably be closer to $1.5 trillion. Imagine that.

Debit: But wait, in addition to the $1 trillion in new debt being added to the ledger in the first two quarters of fiscal 2024, the federal government is also going to have to pay back $6 trillion of existing debt that is being rolled over. True, that $6 trillion doesn’t increase the National Debt – but since the old debt is going to be refinanced at a sharply-higher rates than when the bonds were initially issued with near-zero interest. And that added cost to service the debt will increase the National Debt. So the long-awaited debt spiral is now well underway. Sadly, the US government isn’t the only one addicted to credit:

Credit: Indeed, there’s a seemingly-coordinated push by the world’s central banks to increase their gold holdings – and macro analyst Wilem Middlekoop says that could mean a revaluation of the yellow metal is in the works. How big would the revaluation be? Based on the current supply of USD, and the percentage of gold to back the currency, estimates range from $10,000 to $100,000. That being said, any overnight gold revaluation – which, in reality, is a de facto devaluation of the USD – will be delayed by the US for as long as possible. Then again, for those holding a small percentage of the yellow metal in their portfolio as insurance, knowing exactly when that revaluation happens is a moot point.

By the Numbers

With Valentine’s Day just around the corner, here are the results of a new survey on American spending plans for the annual lovers’ holiday:

46% Americans who say inflation is affecting their Valentine’s Day plans.

30% People who think a Valentine’s Day gift is worth going into credit card debt for.

70% The share of survey respondents who think financial infidelity can be worse than cheating.

24% Americans who don’t expect their Valentine to spend any money on a gift this year.

34% Percentage of people who say they wouldn’t marry someone with bad credit.

$185.81 The expected amount spent per person (among those who say they will celebrate Valentine’s day in 2024).

2 Among those celebrating Valentine’s day this year, men expect to spend twice as much as women.

33% Survey respondents who think having separate accounts is the best way to avoid money problems in a relationship.

17% Percentage of US marriages whose couples met online.

60% Among those surveyed, the share who say that irresponsible spending is a bigger turnoff than bad breath.

Source: WalletHub

The Question of the Week

[poll id=”523″]

Last Week’s Poll Result

Do you believe it’s better to direct most of your spending toward experiences rather than material possessions?

• Yes (52%)
• I’m not sure (27%)
• No (21%)

More than 1800 Len Penzo dot Com readers answered last week’s question and it turns out that slightly more than half of you would rather spend cash on experiences rather than things. As for me, I’m torn … in fact, I’m not really sure I have a preference at all. How about you?

This week’s question was suggested by reader Kevin. If you have a question you’d like 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: Silly Rabbit

A lady opened her refrigerator and saw a rabbit sitting on one of the shelves.

“What are you doing in there?” she asked.

The rabbit replied, “This is a Westinghouse, isn’t it?”

“Yes,” said the lady.

“Well,” the rabbit said, “I’m westing.”

(h/t: Susan)

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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. Wyoming (3.00 pages/visit) (!)
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50. Vermont (1.15)

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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

The comments keep coming from those who read my recent article explaining why whirlpool tubs are for suckers. This week, Chung explained why he doesn’t care what I think:

Whirlpool tubs are simply sublime in soothing us from throbs.

Well, Chung … That’s certainly one way to put it.

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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