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 …
In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.
– Alan Greenspan
The American people have a love-hate relationship with inflation: They hate inflation but love everything that causes it.
– William E. Simon
Credits and Debits
Credit: Did you see this? Nvidia, Microsoft, Apple, and Alphabet alone added over $1.4 trillion in value in the month of May, more than all other S&P 500 stocks combined. Nvidia, boosted by AI demand, accounted for half of this gain. While AI advancements, like the launch of ChatGPT, have fueled significant growth, there are concerns that the surge may echo the unsustainable profit levels seen in previous market bubbles. On the other hand, it looks like AI is working to solve that problem all by itself. Or not:
Debit: Then again, if the business barometer known as the Chicago purchasing managers’ index (PMI) is any indication, the good times for these companies may be coming to an end – if only temporarily. That’s because it fell in May to 35.4 – that happens to be the sixth consecutive monthly decline and the lowest level since the pandemic in May 2020. Curiously, the Chicago PMI has been in contraction for 19 of the past 20 months – and yet the economy is supposedly still not in a recession. Makes sense.
Debit: Meanwhile, back on Main Street, a new survey reveals that 32% of retirees lack confidence in their ability to live comfortably in retirement. Inflation was the most common reason for that lack of confidence. Additionally, more than one-half of retirees who responded said they were worried they would need to make significant spending cuts to compensate for rising prices. Imagine that. Then again, happy are those who can set aside our everyday travails and focus on the things that truly make life worth living.
Debit: On a related note, the Senior Citizens League is estimating that the average retired worker’s monthly Social Security (SS) benefit will be $1967 next year. That would be a 2.7% cost-of-living allowance (COLA) resulting in the average retiree receiving an extra $51 per month – that’s a whopping $612 for all of 2025. Paltry COLAs like that are why there are many retirees out there whose biggest regret is not saving a dime in their working years for retirement. Although I’m quite sure there is a subset that will say it’s only their second biggest regret in life – at least among those who didn’t waste two hours of their life watching Gotti.
Debit: Retirees aren’t the only ones who are struggling; the high cost of housing is negatively affecting younger people’s financial situation too. But relief may be on the horizon. Financial analyst Peter Boockvar looked at the Case Shiller Index to see where it would be if it remained on trend since its inception in 1987 and what he found was that the index is currently 85% above the long-term trend line. Compare that to 2007, which was just prior to the last housing market crash, when it was 50% above the trend line. See for yourself:
Credit: Fortunately, one offering that isn’t being affected by inflation is Costco’s long-running $1.50 hot dog special – which includes a quarter-pound all-beef hot dog and a 20 oz. soda. We know this because Costco officials recently confirmed it. This prompted one commenter to remark that inflation is so bad that, despite living “34 miles away from the local Costco, it would be cheaper for me and my wife to drive there and have a hotdog for lunch than it would to eat lunch at McDonalds that is 0.25 miles away.” Uh huh. And that’s true even in the face of ridiculously-higher gas prices – which we all know is due to corporate greed. Or so we’re told …
Debit: Keep in mind that the longer that high inflation persists in the economy, food takes up an increasing portion of middle- and lower-class household budgets. As Adam Fergusson notes in his book, When Money Dies (affiliate link), prior to the Weimar hyperinflation event, German households spent roughly 30% of their income on food. However, at the peak of the currency crisis, those same households were using 92% of their income to keep their bellies full. We just hope it was because they were eating better stuff than this:
Debit: Weimar illustrates just how quickly prices can get out of hand when inflation is allowed to smolder over long a period: In June 1914, a loaf of bread there was 13 cents – but by 1919 the price had doubled. In 1920, the price quadrupled to $1.20. By June 2022 it had nearly tripled again to $3.50. Over the next six months, the price rose another 20-fold, before ending the year at $1200. Wide spread rioting broke out in October 2023 when it took $3 billion to buy a loaf of bread. Two weeks later Weimar’s monetary system finally collapsed for good with the price at $100 billion. The question is: Is the US headed toward the same fate. Well … at least one billionaire seems to think so. In the meantime …
Debit: Speaking of collapse, this week the FDIC warned that the number of banks on their Problem Bank List increased from 52 in fourth quarter 2023 to 63 in first quarter 2024. For those not keeping track at home, the number of problem banks represented 1.4% of all US banks which, to be fair, the FDIC assures us is the “normal range for non-crisis periods of 1 to 2% of all banks.” Whew! We feel much better now.
(h/t: @dominach)
Credit: Of course, most seniors wouldn’t be so interested in their coming SS increases if our monetary system was based on gold, as opposed to debt. With that in mind, Louisiana became the sixth state this year to enact a sound money law that makes gold and silver coin, specie, or bullion legal tender; five other states did so in 2023. In the meantime, the National Debt is on the verge of crossing $35 trillion. Sheesh. Talk about a smelly dome of debt! Come to think of it, I remember another smelly mountain from long ago — but unlike the loathsome pile being created in Washington, this one actually benefited society:
Credit: So how did we get away from sound money? Well … prior to 1971, the US dollar (USD) could be redeemed for America’s gold holdings in Fort Knox – at least it could for foreign nations. But prior to 1933, the USD was truly “as good as gold” – real money – because those same paper USDs could be converted into the yellow metal by Americans at any public bank as well. And the free market restrained both banks and the federal government from issuing USDs far in excess of their gold holdings. Unfortunately, since 1971 the USD has only been backed by faith. As a result, Congress’ spending yoke was eliminated and the debt began increasing exponentially. So here we are:
Credit: Unfortunately, as economist Frank Shostak points out, today’s fiat USD “opens the scope for fraud” because the government can and does “bypass free-market discipline by making it legal for overissued banks not to redeem (USDs) for gold. Opportunities for large profits are (thereby) created that set incentives to pursue an unrestrained expansion of the (currency) supply, raising the likelihood of setting off a galloping rise in the prices of goods and services that can lead to the breakdown of the market economy.” Got gold? If not, maybe you should at least consider it.
Last Week’s Poll Result
Should all prices be rounded to the nearest nickel?
- No (52%)
- Yes (42%)
- I’m not sure (6%)
More than 1800 Len Penzo dot Com readers answered last week’s question and it turns out that slightly more than half of you would prefer to keep measuring prices to the nearest penny. This makes no sense to me, as you can’t buy anything for a nickel these days. But I do understand old habits die hard. Believe it or not, in the 19th century, the US measured prices to the nearest half-penny. And, yes, there was a half-cent coin for this very reason.
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.
The Question of the Week
[poll id=”539″]
By the Numbers
When it comes to thievery, some cars are more popular than others. With that in mind, here were the ten most stolen cars in the US last year, based on the number of reported thefts:
15,749 Kia Sportage
15,852 Ford F150
16,209 Kia Forte
19,858 Honda Civic
20,895 Honda Accord
21,001 Kia Soul
23,721 Chevrolet Silverado 1500
30,204 Kia Optima
42,813 Hyundai Sonata
48,445 Hyundai Elantra
Source: NICB
Useless News: Cheap Yardage
Walking up to a department store’s fabric counter, a pretty girl asked, “I want to buy this material for a new dress. How much does it cost?”
The male clerk behind the counter smirked and said, “That material is on special today: It’s just one kiss per yard!”
“That’s fine,” replied the girl. “I’ll take seven yards.”
So, with expectation and anticipation written all over his face, the clerk hurriedly measured out and wrapped the cloth, and then held it out teasingly. The girl grabbed the package and pointed to a little old man standing nearby. “My Grandpa will pay the bill,” she said.
(h/t: Sharon)
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More Useless News
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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 reading a Len Penzo dot Com article explaining how to save money by managing your own investment portfolio, Eve left this curious comment:
What a stuff of unambiguity and valuable experience regarding unexpected feelings!
Thank you, Eve … I think.
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.
If you ask me, AI has a lot of promise, but it has a long way to go. There are still a lot of bugs that need to be worked out. People also have to remember that it spouts out the biases of its developers as those Google AI graphic requests showed us a couple of months ago.
No doubt … there’s a long way to go before AI is perfected, Cowpoke.
Ha ha! “Pounds of money”. Good one Len! Ever since I’ve been stacking silver, I know exactly what that means. That stuff is heavy!
That it is, Madison. That is also why gold is a bit more convenient for long-term savings. Silver is better for barter.
“I’m Len Penzo and I approved this message.”
I’m lenpenzo.com’s “Grandfather” and I also approve this message
Thanks, Grandfather! You know … I barely knew either of my grandfathers, as one passed away before I was born and the other passed away when I was four years old.
It is a pleasure having you as my blog’s grandfather!
As you know, Len, I was blessed: https://lenpenzo.com/blog/id49743-grandfather-says-remembering-grandfathers-grandfather.html
…And my paternal grandfather died age 92: https://lenpenzo.com/blog/id52377-grandfather-says-the-story-of-dan-and-ralph.html
I am Mr. Dave’s cousin Cletus, and I approve this message. lol
Looks like some Gold price increases have been relying on China and ilk as per yesterday’s news.
“GOLD PRICES sank in all major currencies on Friday, dropping $80 an ounce in 6 hours and falling faster than global stock markets, bond prices, Bitcoin and copper after stronger-than-expected US jobs data worsened the steep plunge in the precious metal already made on news that the People’s Bank of China didn’t buy any bullion for its official reserves last month.”
I am not writing this to punch at gold buyers. I could care less what others invest in as long as it is legal and does not negatively affect society. People should invest in their future security and good on them for allocating some money for PMs. This allocation means folks are thinking and planning, and taking some responsibility for their own security. But the big boys run the market, like always and in all things.
And to that end I wanted to share my take on bread. About 20 years ago I started to bake our own bread. It can be an onerous chore but there is a method to make it less so. My method is to choose baking days based on the weather forecast whenever possible. To do that you need some bread in the freezer for flexibility, then if rain is forecast or whatever, make that day the baking day. If it is a work day you can let it rise all day and put in in the oven after work while you cleanup. The other thing is not to load up on the chore. I have some large stainless mixing bowls and do just 3 loaves worth at one time and can then do all kneading and mixing in just one bowl. There is little mess. Easy cleanup. Plus, if you make a wee larger batch you can set some dough aside for fresh ‘bacon butties’, ready in the first 22 minutes of the bake cycle. Let the readers look up bacon butties. I have no bread recipe to follow anymore because it is no more difficult to make than brushing your teeth. If you have company it is a treat for any meal.
Once you get on to baking bread, you can do it with your eyes closed. I set up a batch in twenty minutes, then bugger off and do whatever for the next 6-8 hours. Throw it in the oven for 34 minutes at 400F and then fend off the family to keep them from it. That is where the butties come in. Butties are ready in 20 minutes on the same bake and everyone goes for them.
Watch the waistline. Be careful because it tastes so good. What we save is $750-$1000 per year off net income, for a product with no chemicals or additives. My French neighbour will only use fresh yeast but the big Costco packs are just as good as is their flour.
I occasionally bake my own bread too, Paul. I also make my own pizza dough every Friday.
Let me know if you have a good recipe for baking hard rolls (hard crust but soft on the inside). When I was a kid I could find hard rolls in any Italian bakery … but those bakeries are all gone now – and so are the hard rolls!
Note to self – don’t buy a Kia unless you want your car stolen. 4 Kias on the most stolen list. What’s up with that?
Maybe Kias don’t come with door locks?
LOL!
Len, I love how you manage to find some GOOD news like Costco’s hot dog & soda deal while sharing how nuts the world has become! The nearest Costco is about 6 hrs away, and we’re considering taking our vacation there! 😉
Meanwhile, I feel for seniors who are struggling financially. Our town churches have begun taking turns offering supper to anyone who needs it. Volunteers do the work, it’s a ‘free will offering’ and it gives folks a good meal among neighbors. Small town life! 🙂
Thank the good Lord for our churches, Lauren! Before the government decided to become a nanny state, our churches and private aid organizations like the Salvation Army handled the job of caring for those who struggled financially. And dare I say they did it a lot more efficiently too.
Folks I know laugh, but having a pizza combo or hot dog combo on Monday/Wed while having Snack Taco Tuesday and Chicken Taco Thursday, allows me and my coworker to splurge for a beer and burger on Friday. Thanks Len, we all made it through another week. Hoping EU elections can bring about peace talks instead of continues escalation. 3 more months until “retirement” for me. Without a paycheck, I might have to skip the Friday splurge. Here is to peace, better health and prosperity.
Amen, CO2. And you’re going to love retirement! It is the best thing I ever did – I know you’ll feel the same way.
The hot dog meal combo reminded me of something. If I eat a hot dog, I only eat kosher franks. Someone asked me why. I told them it was because Jews don’t eat some of the things I don’t eat.
There’s a reason hot dogs are puckered at both ends.
“There’s a reason hot dogs are puckered at both ends.”
For the love of God, Bill … please keep that reason to yourself.
Signed,
A Big Hot Dog Lover
It isn’t because they ate fruitcake. lol
I find the quote by Alan Greenspan nauseating. The quote is true but he engaged in experiments with the US economy and wrecked havoc on us. Shortly before the 2008 presidential election, Congress questioned Greenspan about his financial policies and he admitted that he’d made a mistake. Later, he tried to blame it on others. Sheesh Talking out of something other than his mouth.
What is odd about Greenspan is that he was a mentee of Ayn Rand and knows better than most people that the only honest monetary system is one that is based on precious metals. He simply sold himself out to get the Fed job.