Black Coffee: The Miracle Worker

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 …

Ingenuity, plus courage, plus work, equals miracles.

– Bob Richards

Credits and Debits

Debit: Did you see this? New car prices in January were down 3.5% compared with the same month one year ago; still, the average new car sells for an eye-raising $47,401. It turns out that prices have been trending downward since last September because inventories have climbed 49% over the same period. Wake us up when car insurance premiums, which have risen more than 25% in the past year, start falling. Oh … and while you’re at it, wake us up when housing prices begin falling appreciably too  …

Debit: Despite the falling prices, US car buyers now need an annual income of $100,000 to comfortably purchase car. The trouble is, the average income of an American household is far less than that. As a result, a new study has found that more than 60% of American households say they can’t afford to purchase a new car, including cheaper models like the Toyota Corolla and Nissan Versa. Apparently, that’s because they’re not this guy:

Debit: On a related note, the average American now has an all-time high credit card balance of $6501 – that’s up from $5910 in 2022. In fact, more consumers are finding themselves dependent on credit these days, leading to another concerning trend: A new survey by Bankrate found that nearly half of all cardholders (49%) are now caught in the cycle of carrying balances from one month to the next. Yes; that is disturbing news. Then again, Bankrate also found that 99% of all Americans are also guilty of this:

Debit: In other news … If anybody knows the state of America’s manufacturing base, can you let us know? The two biggest monthly surveys for February were released this week, and while the one conducted by S&P Global says US manufacturing expanded at the strongest pace since June 2022, the competing ISM survey insists it has been contracting for the last 15 months. Heh. As usual nothing seems to be adding up – which means these guys should probably get a job with the federal government. Or maybe we can all just agree to disagree …

Credit: Meanwhile, down in South America, Argentina’s Javier Milei has achieved the country’s first monthly budget surplus since 2012. How did he do it? Well … despite what many people seem to believe, the key to fiscal discipline isn’t rocket science. Milei simply froze the government budget, while simultaneously cutting the funding of many government agencies by more than 50%. Easy peasy! Even so, while generating a budget surplus is a significant achievement, it’ll be a miracle if Milei can just as quickly end the hyperinflation that was unleashed after decades of unrestrained government spending. And on a related note …

Debit: Back in America, the Fed not only announced that it is going to begin slowing the pace at which it shrinks its balance sheet, it also hinted an ‘Operation Reverse-Twist’ is coming, which will lower short-term yields and steepen the yield curve. In essence, they’ll be running the printers even faster – via quantitative easing (QE) – than they are now. Why? Two reasons: 1) the reverse repo account that the US Treasury has been tapping since 2022 will be completely drained this month, and 2) the Fed’s BTFP facility for struggling banks is set to expire next week. In other words: trouble is definitely brewing.

Debit: What the Fed seems to be ignoring is the fact that there is no “long term” because the long-end doesn’t matter anymore; the USD is in its endgame. This will become more apparent some time after the reverse repo account balance is near or at zero. Why? Because that account has been masking the full effects of the Fed’s quantitative tightening (QT) program that has been in effect the past several years, as banks will be incentivized to raise rates and restrict lending. If that sounds confusing, you’re not alone. But you can rest assured that we’ve got an army of highly-paid officials at the Fed who have everything under control. Or not.

Debit: Speaking of the National Debt, anyone with any shred of common sense should be able to look at what’s going on and realize that very little of it is getting paid back. In fact, those dreaded interest payments are only there to sustain the illusion for as long as possible. This is easy to see once you realize that almost one-third of all US Treasury bonds – approximately $10 trillion worth – come due this year. The good news is, the stock market is stronger than ever …

Debit: For what it’s worth, the US Treasury’s portfolio is heavily weighted to the short end. As a result, there is $10 Trillion of existing debt due to be refinanced in 2024, plus an estimated $3 trillion in new borrowing – which means the US needs somebody to extend $13 trillion in credit to the federal government this year. Of course, there’s no way that’ll happen, as China prefers gold over American IOUs these days – so the Fed will be forced to buy those IOUs via naked debt monetization. And that, in turn, will most likely lead to a crack-up boom – assuming we’re not in the early phases of one already – followed by a once-unthinkable US debt and currency crisis.

Debit: So … just how dire IS America’s financial situation? Well … though the first eight years of this century, the federal government’s deficits hovered around $220 billion per year. By the time the pandemic appeared, those deficits climbed to $1 trillion per year. Three years later, the US is burning through $1 trillion ever 100 days. This is what the business end of an exponential debt curve looks like. And so anybody with a pulse should be able to deduce that there is very little time left before the entire system goes tits up. In the meantime, market absurdities will continue …

Debit: Believe it or not, if we extrapolate the current trend, the US National Debt will reach $100 trillion no later than 2036 – but probably much sooner. Oh … and that doesn’t included unfunded liabilities, which are already pushing $200 trillion. With that in mind – and we’re just thinking out loud here – but it makes us wonder if the entire federal government disappeared tomorrow, what would happen in the short term? And would we eventually be better off? Regardless, there’s still time to buy wealth insurance. Just make sure that, when you do, you buy the real thing – not some unproven imitator …

Credit: While adding $1 trillion in new debt every 100 days is impressive for all the wrong reasons, as one comment board poster observed, “It’ll be a trillion a month soon, then a trillion a week, then we’ll be wiping our ass with trillion dollar bills.” The USD is certainly on that trajectory. Will it remain on that trajectory until its demise? The history of fiat currencies strongly suggests that it’s quite possible. With that in mind, prudent individuals should strongly consider protecting their nest egg and financial future with a little wealth insurance in the form of physical gold.

By the Numbers

A new study used Indeed’s resume search function to find the most common words featured in resumes that were updated in the last six months. Here are the ten most common words, along with the number of times those words came up in a resume search:

206,471 Fast-paced

208,143 Exceptional

218,960 Leader

237,227 Proficient

247,572 Motivated

286,627 Trained

298,985 Social

329,685 Bilingual

470,113 Organized

514,287 Responsible

Source: QRFY.com

The Question of the Week

[poll id=”527″]

Last Week’s Poll Result

Are you planting or expanding a food garden this year?

• No (52%)
• Yes (48%)

More than 1700 Len Penzo dot Com readers answered last week’s question and it turns out that slightly more than half of you are not going to have a vegetable garden this year. Even so, that comports pretty closely with a survey by GardenPals that found 52% of Americans grow at least some food on their property each year.

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: Quicky Divorce

Two newlyweds quickly realized their marriage wasn’t working and so they filed for a divorce.

On the day of the hearing, the judge asked the husband what the problem was. The man replied, “In the five short weeks that we’ve been together, we haven’t been able to agree on a single thing. Not one!”

The judge nodded his head somberly. He then turned to the man’s wife. “Okay, ma’am,” the judge said. “Now it’s your turn. Do you have anything else you’d like to add?”

“I certainly do, your honor,” she answered. “It’s been six weeks, not five.”

(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:

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3. South Carolina (2.13)
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5. Indiana (2.07)

46. Oregon (1.61)
47. Hawaii (1.57)
48. Missouri (1.52)
49. Arkansas (1.51)
50. Wyoming (1.50)

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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 out to me at: Len@LenPenzo.com

After reviewing my article highlighting tips to consider before hiring a concrete contractor, Mrs. Wilson wrote:

You rock, Len!

Heh. I see what you did there, Mrs. Wilson … but thanks for the sediments.

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.