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 a wonderful week. And with that, let’s get right to this week’s commentary, shall we?
Losing, cheating, and mediocrity are easy. Stay away from easy.
— Scott Alexander
On the plains of hesitation bleach the bones of countless millions who, at the dawn of decision, sat down to wait – and waiting died.
— George W. Cecil
Credits and Debits
Debit: Did you see this? A new survey by CNBC found that 61% of adults between 18 and 34 say they’re not saving for retirement – even though 34% have a side hustle outside of a traditional job to earn more money. That strongly suggests that more than 3 in 5 young Americans now need two jobs to maintain their current standard of living. Unfortunately, we can’t be 16 forever …
Debit: In other news, the recent mainstream media narrative that ‘prices are coming down’ got smashed last week with the release of the government’s latest batch of gamed inflation numbers. In fact, both producer prices and the cost of services soared last month, with the core producer price index (PPI) reaching a new record high; it’s up 17.4% since January 2021. Which, in the real world, means it’s actually up by at least twice that amount. That’s reality. And so is this:
Debit: Speaking of gamed data, new figures released this week revealed that new housing starts are once again at their post-pandemic lows. Even so, there is a record gap between what the government tells us about construction employment (they say its booming) and actual construction activity (based on permits and actual new homes being completed). This prompted Zero Hedge to ask, “Did builders all suddenly get massively less productive? Or is the BLS just making shit up as usual?” The respective answers, of course, are “no” and “yes.” Heck, … maybe they’re just bad at math. Regardless, housing prices are higher than ever, which begs this question:
Debit: Then again, the housing market has nothing on cocoa, where futures contracts now command $6000 per ton – that’s triple the price cocoa was fetching in 2023 and a new all-time high. Anybody who has bought chocolate recently is aware of this – and more pain is on the way for consumers as commodities analysts say the cost of cocoa could reach as high as $10,000 per ton due to a severe cocoa shortage in West Africa that will be felt across supermarkets worldwide. That being said, as vices go, chocolate is still cheaper than smoking. For now. Oh, and shares of the latest stock market darling: AI-chip manufacturer, Nvidia (NVDA):
(h/t: @thekarlkaufman)
Debit: Of course, the latest PPI data finally has the typical mainstream media economic cheerleaders questioning the so-called “soft landing” narrative. However, the Fed is insisting all is well. “Let’s not get amped up when you get one month of (inflation data) that was higher than what you expected,” Fed President Austan Goolsbee said this week. “It is totally clear that inflation is coming down.” Never mind that this is one of the same guys who insisted two years ago that inflation was … what’s that word again? Oh, yeah: “transitory.”
Credit: By the way, the PPI is a leading indicator for the CPI because inflation hits producer prices first and those increases are then passed on to the consumer. Unfortunately for the Fed, that means their policy noose continues to tighten. As macro analyst Peter Schiff points out, despite claims to the contrary, “the Fed has no intention of continuing its inflation fight – in fact, it has already surrendered.” However, that won’t become apparent until the Fed refuses to raise rates as inflation begins its second sustained wave upward. In the meantime …
Credit: By the way, Schiff says despite record high consumer borrowing, government spending, and a growing currency supply, the Fed won’t raise interest rates to arrest inflation because doing so would completely devastate the economy – which would, in turn, make the government’s budget deficit problem even more problematic. The good news is, the situation could be a lot worse. And if you don’t believe it, just ask anybody who works at Ikea:
Debit: Now for the punchline: bank credit is contracting for the first time since right before the Great Financial Crisis in 2008 – and for only the second time in the last five decades. So what does that mean? Well … in short, companies are borrowing less; most likely due to higher interest rates. As a result, businesses are less likely to press ahead with spending projects, which ultimately hinders economic growth.
Debit: The bottom line is this: America’s middle class is no longer able to maintain its standard of living because their wages have lost significant purchasing power; all thanks to runaway government spending – and the counterfeiting required to pay for it. That, in turn, has diluted the value of the US dollar. So in essence, the US government has surreptitiously robbed its citizens’ bank accounts. Heck, the government thievery is so bad, even Abraham Lincoln seems to have finally had enough …
Credit: This week, commentator Jim Quinn observed that, “We all know life is never easy, but it can be easier if you make enough right decisions along the way. No matter how much you make, if you spend less than that amount, you’ll get ahead in life financially. (However), my kids are all hard working, have decent jobs, have no debt, and still have no pathway to owning a home without being strangled by debt. Even rent for modest apartments is now a huge burden.” Indeed, nothing is more frustrating than not getting rewarded for making a correct decision. Then again, suffering the consequences for a wrong decision ain’t so great either …
Credit: Unfortunately, as Mr. Quinn concludes, “Life is now hard for everyone, not only the stupid; we aren’t in the 1980s anymore. I see what my kids and honest hard working people across the land are up against at this point in history, and I know hard decisions today are not likely to lead to an easy life unless we (endure) a catastrophic financial collapse.” Sadly, he’s correct. The good news is you can make a tough financial period a little bit easier by protecting your nest egg by holding a little physical gold in your portfolio.
Last Week’s Poll Results
Do you have enough savings set aside to cover a $10,000 emergency?
- Yes (92%)
- No (8%)
More than 1900 Len Penzo dot Com readers responded to last week’s question and I’m happy to report that, contrary to the vast majority, more than 90% of you attest to having the ability to cover an unexpected $10,000 outlay by tapping your savings. Fantastic!
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="525"]
By the Numbers
Here are the current top ten highest paid athletes in the world, based on their earnings in 2023, both on and off the field. Can you guess who tops the list?
$89,100,000 Kevin Durant (basketball)
$95,100,000 Roger Federer (tennis)
$100,400,000 Stephen Curry (basketball)
$106,000,000 Phil Mickelson (golf)
$107,000,000 Dustin Johnson (golf)
$110,000,000 Canelo Alvarez (boxing)
$119,500,000 LeBron James (basketball)
$120,000,000 Kylian Mbappe (soccer)
$130,000,000 Lionel Messi (soccer)
$136,000,000 Cristiano Ronaldo (soccer)
Source: Forbes
Useless News: Dr. Geezer
An elderly physician, Doctor Geezer, became very bored in retirement and decided to re-open a medical clinic. So he put a sign up that said: “Dr. Geezer’s clinic: Get your treatment for $500 – if not cured, get back $1000!”
Doctor Young, who was positive that this old geezer didn’t know beans about medicine, thought this would be a great opportunity to get $1000. So he went to Dr. Geezer’s clinic.
Dr. Young: “Dr. Geezer, I have lost all taste in my mouth. Can you please help me?”
Dr. Geezer: “Nurse! Please bring the medicine from Box 22 and put three drops in Dr. Young’s mouth.”
Dr. Young: “Aaagh! This is gasoline!”
Dr.Geezer: “Congratulations! You’ve got your taste back. That will be $500.”
Obviously, this annoyed Dr. Young immensely. So after a couple of days figuring how to recover his money, the young doctor returned to Dr. Geezer’s clinic.
Dr. Young: “I have lost my memory; I can’t remember anything.”
Dr. Geezer: “Nurse! Please bring the medicine from Box 22 and put three drops in the patient’s mouth.”
Dr. Young: “Oh, no you don’t — that’s gasoline!”
Dr. Geezer: “Congratulations! You’ve got your memory back. That will be $500.”
Having now lost $1000, a very angry Dr. Young left the clinic, only to come back after several more days of plotting how to get his money back.
Dr. Young: “My eyesight has become weak. I can hardly see anything!”
Dr. Geezer: “Unfortunately, I don’t have any medicine for that. So here’s your $1000 back.” The old doctor then handed his patient a $10 bill.
Dr. Young: “Hey! This is only $10!”
Dr. Geezer: “Congratulations! You got your vision back! That will be $500.”
As for the moral of story … Just because you’re young doesn’t mean that you can outsmart an old geezer.
(h/t: Kevin)
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More Useless News
Here are the top five articles viewed by my 48,111 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):
- My Teenage Son, the Cell Phone, and a Bill for $1055.20
- How to Save Money by Living Like You’re Broke
- What’s the Difference Between Currency and Money?
- A Guide to Retirement Budgeting on a Fixed Income
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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 my article highlighting the 42 reasons why I’d never give you a loan, Blondie left this comment:
I had a good friend who was going through a divorce and was on the verge of losing her house. I lent her $1000 on the spot and she paid me back with interest. That is very rare.
Obviously, your friend wasn’t a banker, Blondie — they only know how to collect interest.
If you enjoyed this, please forward it to your friends and family. 😊
I’m Len Penzo and I approved this message.
Photo Credit: public domain
Hi Len,
As usual, you served up another great cuppa to start my Saturday morning! 🙂
I love Ikea! I’m not one of those annoying customers, I promise. I do like their meatballs. Sometimes I go there JUST for the meatballs!
Have a great weekend everybody!
Sara
Ikea’s Swedish meatballs are the best! Their furniture, not so much.
Hi, Sara! You’re in good company. My daughter makes two or three trips a year to Ikea just for their meatballs. I’ve never tried them, but she says they are delicious.
I’m not surprised the top three paid athletes are soccer players. It is the most popular sport in the world after all.
I’m surprised 2 golfers made the list.
Me too, Cowpoke. The LIV tour is throwing out (away?) cash right and left to lure the best golfers to their pro tour and give it legitimacy.
That it is … although the rest of the world calls it football, which seems far more appropriate than what we call our version of American football.
Maybe I’m the only one, but i’m being affected mentally by inflation.
I’m one of those people who have always spent less than I make and I am used to getting by on a dime, so this is nothing new to me.
I’m relatively young and so I’ve only been a member of the workforce for the last 10 years. At first, it felt like putting an emphasis on good education and working hard really made a difference for me. But over the last couple of years this has seemingly changed.
Thanks to inflation, working hard doesn’t make a difference for me anymore. Stagnant wages and sliding from one crisis to another have crushed my dreams – being able to afford a house, or even a nice car.
This has left me feeling indifferent and resigned to the fact that the situation will never change. Hope I’m wrong.
I know what you mean. I got a promotion last year and was was glad to live a little more comfortably. But prices keep going up and I’m just back in the same position. Yea, it sucks.
Hey, and best of luck during tough times.
The ‘myths’ of success have to be adjusted by circumstance and events. It isn’t a recipe. The package is never ‘as advertised’. In my own tough yeas, ages 22-40, I had already bought an old beater house to raise a family in, but then inflation, 18% interest rates, and job loss struck. Worked for cash on the side, worked away from home, raised rabbits for meat, chickens for eggs, had a large garden for produce and the freezer, wood for heat, hunted, and just worked more. Lots of Italian immigrants in that neighbourhood, and that is how they lived their entire lives despite being quite well off. I did my undergrad by correspondence, back before computers. Did my course work at 5:00am in my shop office, then went to work. The drill was only one day off per week. The weekend day of worse weather was my school day for assignments. It sounds really crappy but that lifestyle was still better than most of what the rest of the world endures. For sure.
You do what you have to do to get ahead. It helps if you like to work, otherwise, when life doesn’t work out the way it is supposed to (which is usual as far as I can see….unless your family is wealthy and they pass it around) you will feel defeated and shortchanged. Some give up.
And if you suffer a divorce you get to do it all over again starting at the 1/2 way point. 🙂
The situation does change over time, but you have to be the change agent to make it so. I retired at 57, and in hindsight enjoyed the struggles. Didn’t like killing rabbits though. Hated it. My grandma wouldn’t have thought twice about it but she had 5 kids to feed in the Great Depression. In Minnesota.
This is nothing compared to that. My Dad went to war at age 18. My Mom did the same as an army nurse. They were both overseas for a couple of years. My father in law had his home attacked by German bombers and had to live away….never finished school. This is nothing compared to that.
I live in west coast logging country. 100 years ago they hauled logs with steam powered locomotives. Shay locis were the caddys. When a logger got killed on the job they put him behind a stump and brought him down on the last run of the day. My friend’s relative was one of those guys, and when they went to get his body at quitting time they discovered he was still breathing….still alive. He lived to be a bit of a celebrity around here. Now, my neighbour is a logger. He drives an air conditioned loader and earns well over $100 K per year. They both smoke, buy booze, and says he will never own a home because he won’t pay a monthly $2800 mortgage. Instead he rents from another logger who has two houses. They are the same age and both come from logging families….the bluest of blue collar work. I figure the only difference is attitude.
Hang in there, Vince. I know it seems hopeless, but this too shall pass. Root for a return to an honest monetary system that incorporates physical gold specie into circulation. After a painful transition, single incomes will be able to comfortably support a family once again.
I had to laugh at the Temu tweet. I’ve bought stuff from them in the past. The company is shady but the stuff they sell is legit. The prices are cheap because most of the stuff is off-brand. It’s no different than buying cheaper store-brand mac & cheese rather than the more expensive national brand mac & cheese. Taste and quality may be slightly different, but they are pretty close. Just be aware that you get what you paid for, so don’t go buying parachutes from Temu.
I bought something from Temu once. I had no idea regarding its reputation (or I probably would have been too wary to place an order). For what it’s worth, I got what I ordered with no issues. Never used them again; probably never will.
“61% of adults between 18 and 34 say they’re not saving for retirement”
What ever happened to paying yourself first?
Indeed, Erick. You’d be amazed how many people don’t even know what that means.