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 …
Credits and Debits
Debit: Did you see this? It’s no secret that, after Great Financial Crisis (GFC) of 2008, many millennials abandoned the homeownership dream in favor of tiny houses and camper vans. Yet, for the newest generation even those cheaper alternatives are becoming too expensive. As such, a new trend has emerged for Generation Z: “living” out of sedans, showering at gyms, cooking meals in parking lots – all while trying to earn a living through random gig jobs from town to town. Ironically, many people celebrate this form of living – which used to be called “being homeless.” As for how we got here, well …
Debit: Unfortunately for those Gen Zers living out of their Honda Elements, the rate at which car owners are behind on their payments hit an annualized rate of 7.7% – that’s the highest level since 2010 when the economy was still the in the throes of the GFC. Hmmm …. I wonder why.
Debit: Needless to say, there are many people who believe the rising auto loan delinquency rate is due to an increasing number of households hitting the proverbial brick wall, financially speaking. Then again, it doesn’t help if people are truly stupid enough to buy a 2023 Sierra Denali pick-up truck with $3000 monthly payments – for 8 long years. No, really. For those without a calculator, that’s $288,000 over the life of the loan – for a car that will arguably be worth less than $28,000 after the last payment is made.
Debit: By the way, it’s not just the car market that’s showing signs of stress. There is a real fear that regional banks are on the verge of another crisis due to a plunge in commercial real estate (CRE) prices. According to the New York Times, those falling prices are due to more people working from home, coupled with a “maturity wall” of $1.5 trillion worth of loans that need to be rolled over between now and the end of next year – presumably at much higher interest rates. However, higher rates and lower CRE prices are a toxic cocktail that will tempt landlords to bail on their loans and return their keys to the banks. Oh, and speaking of toxic cocktails …
Credit: Despite many problems plaguing the US economy, the mood on Wall Street is – naturally – highly optimistic. So much so that, over the past 12 months, the S&P 500 is up approximately 20%; a remarkable run that has propelled the index above 5000 for the first time in history. Meanwhile, the Nasdaq is also approaching its all-time high. On the other hand, we’ve seen this game before – and with different results, depending on whether the nation involved is fortunate enough to have the world’s reserve currency. Or not …
Debit: At the same time, a personal finance survey released last month found that 56% of US adults say they don’t have enough cash or money in their savings account to cover a $1000 emergency. The good news is: Many big screen TVs are cheaper than that – but only if there’s a really good Super Bowl clearance sale out there. Am I right, San Francisco 49er fans?
Debit: The truth is a thriving stock market does not equate to widespread economic well-being on Main Street. After all, with many Americans grappling with financial hardships at a time when the stock market is surging 20% in a single year, the disconnect between Wall Street’s gains and the public’s struggles is more apparent than ever. Then again, the general public isn’t the only one getting the shaft …
Credit: Of course, many Americans who are clearly struggling to make ends meet continue to be perplexed by the government’s economic data. And this week brought more of the same, as the Bureau of Economic Analysis reported that annualized US GDP for the fourth quarter came in at 3.3%, which blew away estimates of 2.0% and brought growth for all of 2023 to 2.5%. That, in turn, leads to the arguably dubious claims from financial officials that almost always seem to follow.
Credit: However, macro analyst Peter St. Onge isn’t impressed with the latest GDP figures – and he says we shouldn’t be either. “So what’s the problem?” he asks? “Debt. Your grandkids bought it all – and then some. To see why, in the past 12 months the federal deficit increased by $1.3 trillion. Yet we only got half that in GDP – about $600 billion. In other words: everything else shrank. It’s even worse for that brave and stunning Q4; there we got just $300 billion in extra GDP for – wait for it – $834 billion of new federal debt.” But not to worry … the Fed has got this:
Debit: Unfortunately, as St. Onge points out, the GDP illusion is especially misleading thanks to incompetent “economists” and the mainstream media, who both pretend that GDP is identical to wealth and prosperity. “That’s (true) when it’s private firms or individuals producing more to sell more,” he explains, “because more stuff is being produced. But it’s actually the opposite with government spending. It’s not measuring wealth; it’s measuring dissipation of wealth at best – and destruction of wealth at worst.” What’s truly frustrating is that everybody knows this – including the people charged with the entire financial system. Just don’t expect them to fix it anytime soon.
Credit: As for those who believe any consequences are still far in the future, macro analyst Peter Schiff – who correctly predicted the Great Financial Crisis of 2008 – warned this week that “this is not a long-term problem anymore; it’s a short-term problem that could blow up any minute. It’s this generation that’s going to pay the piper. And it’s happening right now.” Although not everyone agrees with that …
Credit: By the way, this week Mr. Schiff also passed along some advice for the current Fed Chairman: “Jerome Powell shouldn’t be worried because we’re on an unsustainable path; he should be worried that we’ve already arrived at an unsustainable destination.” I know; he’s a broken clock who has made this claim many times before. However, what’s truly important is whether or not you’ve protected your nest egg in the event that his assessment is finally correct.
By the Numbers
Here are the results of the latest consumer survey highlighting their thoughts about the state of the American economy:
91% Americans who say they’re actively preparing for a potential recession.
48% Survey respondents who say they would lose everything in a recession.
46% Share of those surveyed who save they’re preparing for a recession by saving more.
45% Americans who say they are worried about their job security in 2024.
65% Share of those surveyed who think artificial intelligence could cost them their position.
32% Americans who expect a housing market crash this year.
59% Percentage of Americans who don’t think their income will keep pace with rising prices in 2024.
60% of Respondents who think the economy in 2024 will be worse than last year.
56% Share of those surveyed who say they struggle to afford basic expenses.
65% Americans who say they live paycheck to paycheck.
Source: RealEstateWitch
The Question of the Week
[poll id="524"]
Last Week’s Poll Result
Are you expecting an income tax refund this year?
- No (51%)
- Yes (34%)
- I’m not sure (14%)
More than 1900 Len Penzo dot Com readers answered last week’s poll question and it turns out that slightly more than one third of you are definitely expecting an income tax refund this year. Believe it or not, according to the IRS, about 81% of all filers get a refund.
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.
Useless News: Traffic Stop
A blonde was speeding in a 35 mile per hour zone when a local police officer pulled her over and walked up to the car. The officer also happened to be a blonde and she asked for the blonde driver’s license.
The driver searched frantically in her purse for a while and finally said to the blonde policewoman, “What does a driver’s license look like?”
Irritated, the blonde cop said, “You dummy! It’s got your picture on it!”
So the blonde driver frantically searched her purse again until she found a small, rectangular mirror at the very bottom. She held the mirror up to her face and, thinking she had found her driver’s license, handed it to the blonde policewoman.
The blonde cop looked in the mirror, handed it back to the driver and said, “You’re free to go. And, just for the record … if I had known you were a police officer too, we could have avoided all of this.”
(h/t: Salamander)
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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 (2.25 pages/visit)
2. Quebec (2.05)
3. Saskatchewan (1.94)
4. New Brunswick (1.87)
5. Alberta (1.78)
9. Prince Edward Island (1.60)
10. Saskatchewan (1.56)
11. Manitoba (1.52)
12. Nunavut (1.50)
13. Ontario (1.29)
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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 me at: Len@LenPenzo.com
After reading a recent Len Penzo dot Com post that shared some clever ways to save money on pet care, Deb left an important tip of her own:
I would add: Never feed your small dog any fatty people food.
Good point, Deb. And don’t feed them fatty people either.
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
Thanks Len.
My wife is blonde,,,,well getting grey, so I just had to send on the useless news snip. Should be fun.
Re: Inflation….It is all just scary says someone who bought a house in the late 70s and watched a mortgage rate climb from 7% to 18% when my 5 year term expired. (Canada does not have long terms which I feel is more realistic for all parties). Then, got laid off and had to work away for years to make ends meet. Worked 3 month contracts in Yukon, 7 days per week. After 100 straight days of 10-12 hours per I was ready to explode, but you just sucked it up and did what had to be done to survive. Nevertheless, what I am continually reminded of when I read these articles is that my 40ish something children have never ever experienced tough economic times beyond simple budgeting constraints. I look around and see that many people think this is a normal condition. Our recent prosperity, 90s onwards, has been the aberration. $7 lattes? Look in a Starbucks window and see how many kids are there sipping overpriced nonsense, glued to their phones. $80K pickups for 96 months? Really? Criminal. It isn’t normal.
Some hedge with gold and other PM. Our family has land and full freezers. Our woodsheds display there will be no heating bills for the next 5 years. Regardless of how and where people live, common sense dictates preps have to be made. It is a life skill, and even then might not be enough. But to not have preps means the only recourse for bad times is to ask family for help, or whine about ‘Government’. The first step, small step, is to at least build up an emergency fund and top off the cupboards.
It is an interesting dichotomy, isn’t it, Paul? People with $1000+ iPhones regularly buying $6 coffees at Starbucks and yet too poor to afford rent or buy a home. That being said, I also understand that our financial and monetary systems are both broken. The latter is unrepairable, while the former is so out of whack it now takes more than five times the median household income to afford a starter home – before the USD was decoupled from gold that number should be closer to two times; three tops.
Great advice on being prepared. There are many ways to do it, but there is no way to ever be completely prepared. The important thing is that we do the best we can and hope we can weather whatever storm ultimately comes our way.
Hi Len,
The unraveling continues! We haven’t seen nothing yet. So I keep stacking silver every month – when I can find it!
Have a great weekend everybody.
Sara
Thanks, Sara! 🙂
Another good cuppa, Len and Paul your comment nailed it. I, too, have worked multiple jobs when necessary, as has my husband.
Prepare for YOUR family’s needs, become educated (read Len’s blog & other reliable sites), be willing to work hard if you need to and imo, try to find truth, which seems harder to find by the day. In other words, get ahead of things BEFORE they go sideways!
Y’all have a good week and THINK SPRING!! 🙂
Amen, Lauren! I was taught by my parents that if one job isn’t bringing in enough, then go out and get a second job. You do what you have to! As for the news, the truth is almost non-existent these days. More like a very opinionated version of the “truth”.
Hi, Lauren! That ol’ groundhog promised us an early spring but – it doesn’t seem like that is the case in most of the US anyway! Even here is SoCal we are having a cold (for us) winter – daytime temps consistently in high 50s low 60s. Brrrrrrrrr!!!
Some of those survey results are almost too crazy to believe. If 65% of all Americans are living paycheck to paycheck, the nation is in VERY bad shape. I hope the number is less than that. That’s almost 2 out of every 3 people!
That is an astounding number, Hubbard. I’ll bet it’s pretty close though. I think many people are living paycheck to paycheck because they’re “living large” and trying to keep up appearances with the Joneses – buying the biggest house payment they can afford, with two new cars in the driveway, the annual vacation (or two) to exotic locales, $1500 iPhones, etc.
I sure hope the guy that destroyed that TV was hosting that super bowl party. It’s just a game, people.
I know, right?
Hi Len! I wonder if that negative tip thing would work? ha ha! If it does, I would do the negative tip and then pay my server her tip in cash. Win win!!!!!!! 😉
I don’t think it would work, Maddie … um, but let me know if it does. 😉
Thanks Len. Since I live full time now in my RV, at an RV park, I have seen first hand the financial struggles of some. There is a significant percentage of not just younger folks, but older folks just getting by. Try to help your neighbors with advice and demonstrate reasonable quality of living. The days of excessive getting ahead of the neighbors living repercussions may arrive before the November election. I am going to try the negative e-tip and cash swap idea.
I get the feeling that although everything seems financially calm on the surface for most people, a lot of people are one adverse event away that could completely turn their finances upside down. Same for the US financial and monetary system. Hope I’m wrong, but my gut says I’m right. We’ll see.
Nice round-up. The moral of this story is simple. You can’t print food, medical supplies, other commodities and productive jobs.
This three card monte game has been working for many years – but time is growing short. I have 7 ounces of gold not counting the family jewelry. Hope it’s enough.
That’s seven more ounces than 99% of all Americans have. The “right” amount of gold to own is different for everybody. I wrote about this here:
https://lenpenzo.com/blog/id23998-economic-collapse-101-how-much-gold-and-silver-should-people-own-3.html
Psst Len, I’ve seen you use WTF more than once. It doesn’t mean Where’s The Food.
No; it doesn’t.
Alot of economic doom and gloom, but I’m looking for a home and except for some economically dodgy area, prices are still sky high. For every person living in their Honda Element, there is another in a half million dollar home….. I sold a home a year and a half ago, figuring it was the top of the market, and it is worth even more now!
Nobody knows when the music will stop, Frank. I remember buying at the top, three months before the SoCal housing market crash of 1990. It was a very old (and very small) starter home in a less-than-perfect neighborhood, but my original plan was to move up to a bigger, newer home in a nicer neighborhood after a few years. Unfortunately, the crash ensured that I was upside down on my mortgage for seven long years. Not fun.