Black Coffee: Breakfast for Dinner

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 …

Sometimes I’ve believed as many as six impossible things before breakfast.

– Lewis Carroll

Credits and Debits

Debit: Did you see this? Between December and January, the median sales price of a US home – that is, the midpoint of all home sales – climbed from $413,000 to $420,700. However, the January median was lower on a year-over-year (YoY) basis – and that marks the fifth-straight YoY decline. Interestingly, the average price of a US home soared from $493,400 to $534,300, which signals more high-end homes are selling than those on the lower end. Confused? Well … you’re not alone. Maybe we should ask an expert like, maybe, the billionaire CEO of JP Morgan. What say you, Jaime Dimon?

Debit: Okay … here’s what we can say about the latest housing data: The median household US income is roughly $74,000, which means the median US home price is almost six times annual household income. In a properly functioning monetary system, that figure should be somewhere between just two and three – for a single earner, not a dual-income household. That being said, if you ask almost any realtor, they’ll tell you it’s a great time to buy a home! I know this because realtors put this commercial out in mid 2007; never mind that the great housing crash began shortly thereafter …

Debit: By the way, it’s no secret that wealth distribution in America has become increasingly concentrated since 1990. In fact, the share of wealth held by the richest 0.1% is currently at its peak, with households in the highest rung holding a minimum of $38 million in wealth. Overall, a relatively minuscule 131,000 households fall into this elite wealth bracket. But there’s hope for us mere mortals on Main St. who are just trying to make ends meet – thanks to one one high-society member who was kind of enough to suggest a possible avenue for building wealth during these tough times …

Debit: Meanwhile, in yet another example of how the current US financial predicament is all but hopeless, I see that the Congressional Budget Office is now projecting that Medicare and interest on the national debt will exceed $1.6 trillion – each. For those of you who have trouble with math, that’s $3.2 trillion in total. Keep in mind that total US revenues is currently $4 trillion – although that figure would be significantly lower in a recession. Which has yet to manifest itself … or has it? I guess it all depends on who you talk to …

Credit: Speaking of hopeless financial predicaments, last week the US Treasury tried to auction off more IOUs in the form of 20-year Treasury bonds to cover its runaway spending appetite. So how did it go? Well … as macro-analyst Matthew Piepenburg observed, “It was embarrassing. Foreign bidders for Uncle Sam’s 20-year bond was under 60% (compared to 74% in November). This means that US banks were forced to fill the gap by purchasing almost 22% of Uncle Sam’s increasingly unloved bar-tab.” In other words: The alcoholic bar owner is three sheets to the wind, but he’s still forcing his bartender to keep the cocktails coming.

Debit: Of course, an elementary economic principle is that when bonds prices begin to fall, their yields – which move inversely to price– start to rise. As a result, the interest rates of those bonds also rise, which in turn makes it even more expensive for the issuing authority to repay those IOUs … as any credit card holder who has run into financial trouble has learned the hard way:

Debit: But let’s get back to Mr. Piepenburg and the latest Treasury bond auction. He warns that the failed auction “is an open sign that the bond market is cracking. Increasingly, the only source for more USDs to support those ugly bonds is with money conjured out of thin air. This is inherently inflationary – and the end-game” for the USD monetary supremacy. That’s very true, of course. Although, to be fair, that doesn’t mean we shouldn’t stop living our best life, as man’s best friend demonstrates to us every day …

Debit: Needless to say, inflation is already a major problem. And with baseball’s spring season here, we’re reminded that, despite the conventional wisdom, athletes really are just regular people who suffer from the same problems the rest of us plebes do. For example, consider the plight of superstar Bryce Harper; in March, 2019, he signed the largest baseball contract in history; $330 million over 13 years. At the time, that made him the highest paid player in the grand old game. But inflation has whittled away his purchasing power – so much so that he is now only the 21st highest paid MLB player. Poor baby.

Debit: Who wants to bet that Mr. Harper is unaware that, after the US officially abandoned the gold standard in 1971, inflation took off like a rocket. In fact, by 1980 inflation was so bad the government felt the need to make significant changes in the way it calculated the CPI in a laughably brazen attempt to fool the public into thinking inflation was actually under control. Needless to say … it’s not working. At least it’s not for those who shop for groceries, buys fuel, and pays rent and/or utility bills on a regular basis.

Debit: Now for an even bigger reality check: In 1910, the average American worker earned $574 annually – that was equivalent to 28 oz of gold at the time. Today, the median worker makes $59,000 – that’s 29 oz of gold annually. Pretty good, right? Well … it is until you realize in 1910 Americans didn’t have federal, state and payroll taxes deducted from their wages. As a result, real incomes have steadily fallen for the past 114 years. Not coincidentally, the federal government has become a behemoth over the same time frame. Too bad most of those bureaucrats are as competent as these guys:

Credit: Not coincidentally, while the CPI measured in US dollars has been skyrocketing since 1971, the CPI measured in gold is lower today than it was in – wait for it – 1800! Yes; that’s 225 years ago. And as macro analyst Alan Hibbard points out, “If we had continued to honor the gold standard – and not created a central bank that could print unlimited currency – we would have enjoyed the continued prosperity that comes from lower consumer prices.” It also would have resulted in Americans – and their spendthrift government – remaining a society primarily composed of prudent savers, rather than shopping-addicted debtors.

Credit: The good news is that you can insure your long-term savings by putting yourself and your family on a gold standard – even if your country chooses not to use one, while simultaneously doing its best to convince others that the yellow metal is little more than a pet rock. You can do that by gradually converting any excess discretionary USDs you are holding into physical gold coins and bullion. Then sit back, relax and sleep well knowing that your wealth will be protected from any future loss of faith in the so-called “Almighty Dollar.”

Last Week’s Poll Results

What are the best ways to hold precious metal? (maximum two choices)

• Hidden safely at home (45%)
• Held in a private domestic vault (21%)
• Kept in a bank safe deposit box (19%)
• Buried in the ground (10%)
• Held in a private foreign vault (5%)

More than 2000 Len Penzo dot Com readers responded to last week’s question and it turns out that 4 in 9 people believe that one of the two best ways to store their precious metals is by keeping them hidden safely at home. On the other hand – and somewhat surprisingly – just 1 in 10 say going the pirate route and burying their treasure was one of the best options.

Last week’s question was suggested by reader Rick. 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="526"]

By the Numbers

According to the latest data from the Bureau of Labor Statistics (BLS), there were 1.7 million fewer jobs available in October 2023 than in October 2022. In fact, only one state actually showed an increase in available jobs during that period. Can you guess which one it was? Here are the ten states with the smallest percentage difference in job openings:

-7.7% Massachusetts

-7.4% South Dakota

-7.3% Alaska

-6.8% South Carolina

-6.7% Illinois

-6.4% Maine

-6.3% Ohio

-6.0% Minnesota

-4.8% Mississippi

+0.9% Florida

Source: Wealth of Geeks

Useless News: The Dirty Bird

A man bought a parrot, only to have it constantly insult him. He tried everything to make the parrot stop, but nothing worked. So the frustrated man put the parrot in the freezer.

At first, the parrot’s insults kept coming even faster and more furious than before. But then, after a few minutes, they suddenly stopped.

After enjoying the silence for a couple of minutes, the man began thinking that he might have killed the parrot. So he opened the freezer and took the shivering bird out.

The grateful parrot then looked at the man and stammered, “S-s-sorry for being r-r-rude. Please f-f-forgive me.”

Then, after another moment, the parrot softly asked, “D-d-do you mind telling me w-w-what the turkey did?”

(h/t: Charlie)

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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 my article on the ethics of keeping found money, Chester summarized his own thoughts on the matter:

The government finds no remorse in stealing from taxpayers. Politicians find no remorse stealing from their constituents … And considering the government has stolen almost $75,000 from me during my lifetime, I say ‘finders keepers.’

Only $75,000, Chester? If that’s true, please send me your accountant’s phone number.

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: public domain