Black Coffee: Time to Pedal Harder

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.

Another busy week is crossed off the list. So without further ado, let’s get right to the commentary …

The bicycle of life has two wheels: the past that you have passed, and the future that you are moving towards. The present is where you need to pedal to keep yourself stable, happy, and successful.

– Srinivas Mishra

Credits and Debits

Credit: Did you see this? We continue to be flooded with overwhelming evidence that electric vehicles (EVs) are a market loser. In fact, the failing EV market has been such a calamity that the CEO of Hertz, Stephen Scherr, was booted out of his job last week as a result of his vast purchase of an EV fleet that consumers steadfastly refused to rent. Hopefully the Hertz board of directors will ensure the next CEO they hire is a critical thinker; someone who is willing to question the status quo and mindless herd mentality before making important decisions. Perhaps like one of these guys:

Debit: Then again, market mistakes like EVs would be quickly corrected in a free market, as the lack of demand would limit the quantity coming off the assembly line – if not make them all but extinct. However, reckless government spending in the form of EV subsidies have enabled an entire industry to expand to a level that it otherwise wouldn’t have reached. It’s actually a great strategy – but only if you’re building these vehicles:

Debit: As it is, the amount borrowed by the US government as a percentage of GDP is now an astounding 6% – that’s more than twice as much as the 3.7% average during the previous five decades. Not surprisingly, government spending continues to be the main driver of the economy; it now makes up 23% of GDP, which is up from 19% the year before. That being said, the currency printing required to “pay” for that government spending is also the primary driver of inflation, which seems to be affecting almost everything. Unfortunately, wages have been unable to keep up ; as a result, living standards are dropping …

Debit: Speaking of reckless government spending, this week Congress passed in the wee hours of the morning another $1.2 trillion omnibus bill filled with a little pork for everyone. Never mind that the federal government is already raising the national debt by $1 trillion every 100 days and pushing America even closer to financial ruin. Needless to say, the US will soon be increasing the debt any $1 trillion every month. – which means, going forward, taxpayers are going to have to pedal a little bit harder …

Credit: Meanwhile, macro analyst Jim Rickards is warning that, “If the economy falls in line with the hard data, loan losses will soar – especially in credit cards and auto loans – causing financial institution stock prices to crash. And the popping of the artificial intelligence (AI) bubble will act as a force multiplier taking all stocks down with it.” To be fair, that’s not hyperbole, as the so-called “Buffett Indicator” which is used to measure flag excessive stock market valuations, is not only at a two-year high, but it’s also significantly higher than it was at just prior to the bursting of the Dot Com bubble at the turn of this century. Now for another reality check:

Debit: By the way, Rickards also says that “the Fed may cut rates in September but it will be too late – the recession will already be here. Bank loan losses will overwhelm any slight gain in credit spreads. The result will be an across-the-board tightening of monetary conditions, but the Fed won’t be able to ride to the rescue. So-called QE is ‘sterilized’ currency in the form of excess reserves on the Fed balance sheet; it does not increase lending or spending in the real economy. Stocks will plunge with no likely means of support.” Unless …

Credit: If you ask financial analyst Gregory Mannarino, he says the Fed and other “central banks are playing a terrible game; they’re on a deliberate mission to destroy the world economy only to (introduce) a new (monetary) system of maximum control.” Yep. The question is: What is that new system going to look like?

Debit: Indeed, with our fraudulent debt-based monetary system now teetering as a result of its inevitable end game, nobody should be surprised that the global bank messaging network known as SWIFT is planning a new platform within the next 24 months that will connect central bank digital currencies (CBDCs) to the existing finance system. Let’s hope the entire system unravels before this CBDC integration project can be completed. Just make sure you’ve hedge yourself beforehand with a legitimate long-term store of value – with the emphasis on “legitimate” – as there are plenty of imposters to be found these days.

Debit: The fact is, the US is in the final stage of a currency crisis, where the US dollars (USDs) that are used to value both labor and tangible wealth is losing its relationship to anything real. As a result of this, almost everyone in the middle class will see their lifestyle degrade accordingly. And that will happen whether a CBDC designed to “save” the current corrupt debt-based monetary system is implemented or not. Then again, for many Americans, their lifestyle has already degraded to alarming levels …

Credit: In the meantime, macro analyst Jan Nieuwenhuijs notes with US federal debt at 122% of GDP and rates at 5%, “the resulting interest expenses are unsustainable, which feeds back into the debt load – the essence of a debt spiral. One of the few solutions is to set interest rates lower than CPI and let the debt inflate away.” Of course, inflating the debt away is a dubious prerogative reserved for sovereign spendthrift nations – which is why they’re ultimately not concerned about borrowing rates. Come to think of it, businesses know you can always find people among the general public who really don’t worry about interest rates either:

Credit: Mr. Nieuwenhuijs also points out that prior to the start of the Ukraine war, the price of gold in US dollars (USDs) was “more or less stuck to the 10-year US TIPS interest rate.” However since then, gold has been less sensitive to those inflation-adjusted yields and follows its own path. This belies a newfound wane in the faith and confidence of government finances and the dwindling long-term purchasing power of the fiat USD. In other words: Gold’s reputation as the ultimate monetary safe haven is in the process of reasserting itself. Er … including places you wouldn’t expect:

Credit: Here’s the bottom line: The Fed is backed into a corner where they can no longer allow assets to depreciate, lest everything implodes under the weight of the debt. As a result, unrestrained currency printing and the persistent inflation that comes with it is now a matter of national security – at least for the current Big Government paradigm. As for the rest of us – the citizenry on Main Street – the only way out of this financially-repressive predicament is a new monetary system based upon sound, debt-free money. Just remember, as history will attest, those without wealth insurance will be unable to avoid what’s coming.

By the Numbers

Owning a home isn’t always what it’s cracked up to be. A new survey designed to shed light on the true cost of homeownership was released this month. Here were some of the key findings:

50% Percentage of homeowners who say they couldn’t afford to spend $3000 on an emergency home repair without tapping a credit card.

19% Share of those surveyed who admitted that they couldn’t even afford a $500 emergency repair without going into credit card debt.

42% Percentage of homeowners say they’ve skipped a home repair or maintenance because they didn’t have the money.

20% Share of surveyed homeowners who say they ancillary home expenses have driven them deeper into debt.

36% Percentage of homeowners who say their home has negatively affected their finances.

23% Share of those surveyed who said homeownership has negatively impacted their mental health.

46% Percentage of homeowners who believe they overpaid for their home.

58% Share of homeowners who admit they have buyer’s remorse.

Source: Real Estate Witch

The Question of the Week

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Last Week’s Poll Results

Have you ever been audited by the tax man?

• No (89%)
• Yes (11%)

More than 2100 Len Penzo dot Com readers responded to this week’s poll and it turns out that that nearly one in ten of you have been audited by the tax man at some point in your life. Believe it or not, an American taxpayer’s odds of being audited by the IRS in any given year is just 3 in 1000.

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.

Useless News: The Good Samaritan

(h/t: RD Blakeslee)

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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 recent article highlighting 9 Crazy Tax Deductions the IRS Actually Accepted, the ubiquitous Me left this comment:

It’s good to know that I’m not the only one deducting $5000 in body oil every year.

Yeah … just remember: It’s oil fun and games until somebody gets audited.

If you enjoyed this, please forward it to your friends and family. I’m Len Penzo and I approved this message. 🙂

Photo Credit: stock photo