Black Coffee: Exceptions to the Rule

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 an upside down world, with all the rules being rewritten as the game goes on, it’s good to feel that some things seem to stay as they always were.

– Kenneth More

The Golden Rule: He who has the gold makes the rules.

– Ancient proverb

Credits and Debits

Debit: Did you see this? Disney CFO Hugh Johnston announced this week that their theme parks may be in for a rough patch during the next couple of quarters because, “Lower income consumers are … stressed and shaving a little bit off their time at the parks, and higher income consumers are traveling overseas.” Then again, that’s perfectly understandable when it takes upwards of $500 just to get a family of four through the entry gate. Yeah, I know … but at least Disney shareholders are making out like bandits. Oh, wait …

Debit: On a related note, a recent survey found that three in four Americans say they’re not financially secure. The average American requires a much larger income to live comfortably, the report found. Currently, the average full-time worker makes about $79,000, according to the US Census Bureau. Meanwhile the survey found the average American needs an income of $186,000 to live comfortably.

Debit: By the way, manufacturing jobs are now lower than they were not only during the pandemic, but also the depths of the Great Financial Crisis in 2008. See for yourself …

Debit: Meanwhile, the latest job data is out and it is so bad that it triggered the so-called Sahm Rule. This controversial rule was cited by the current administration to refute the historical recession definition of two consecutive quarterly GDP contractions – which happened in the first two quarters of 2022. Then again, periods of rising unemployment have been a problem for empires since time immemorial …

Debit: Okay … so what, exactly, is the Sahm Rule? (Besides being a new data point devised by socialist economist Claudia Sahm that allows government officials to buy time by denying that a recession is actually underway?) Well … the rule says a recession is occurring whenever the unemployment rate rises by half a percentage point from its previous-year low. And that’s what happened; the latest unemployment rate surged 0.6% from the year’s low. That being said, we’re sure the government is working on yet another definition that will allow it to claim the economy is not in a recession.

Debit: Oh, wait … Sahm is already on record saying that her recession-trigger rule doesn’t apply this time because the unemployment rate is artificially high due to an unusually high number of unemployed illegal immigrants. Maybe so … but something’s definitely not right with the economy. You’d probably agree with us too, if you saw what our neighbor was grilling at last week’s neighborhood block party:

Credit: According to RBC analyst Janet Mui, a 50-basis-point rate cut is now in play: “Taken together with the higher jobless claims, contraction in the manufacturing hiring survey and July’s jobs report, it is likely that the Fed will start cutting interest rates next month and there is expectation that it may need to cut more aggressively than previously penciled in.” If true, look for inflation to pick back up – and savvy investors to reignite another rush into gold.

Credit: As it is, macro analyst Alasdair Macleod warned this week that, “Poor earnings from top tech stocks and growing evidence of a faltering US economy are reducing the valuation gap between bonds and equities. This is probably the most excessive relative overvaluation of equities in US financial history. Even greater than during the dot-com bubble, following which the S&P halved.” Yep. So keep a close eye on your portfolio over the coming days and weeks. Or else …

Debit: Stock markets in the US were down this week with most of the damage being done on Monday – the good news is late-stage gains in the major indices on Tuesday and Thursday largely wiped away all of Monday’s heavy losses and ended the week only down about 1%. That being said, please don’t ask us for any hot tips on the best stock market bargains out there. On the other hand, here’s a hot tip you can use outside the markets …

Credit: Legendary market commentator Jim Grant: “The breakdown of American fiscal discipline and the explosion of the US public debt didn’t occur during the first quarter century of the Bretton Woods system,” when the USD was actually anchored to gold. That’s because that anchor to the yellow metal acted as a de facto credit limit on Congress, which in turn forced America’s politicians to tone down their appetite for spending. Needless to say, we all know how that turned out …

Credit: This all has let Mr. Grant to proclaim that, “The sextant sailed us around the world and the slide rule got us up to the moon, but neither beats your pocket-sized GPS-cum-high-speed-computer. Even so, I stand with anachronism. I like the low hum of cultured voices, great books, and the dead authors who wrote them. I believe in the fedora hat, which should be tipped in the open air and doffed in an elevator. And I support the gold standard.” As do we, Jim. As do we.

By the Numbers

A recent data analysis of the 100 largest US cities revealed where credit card, auto loan, and personal loan debt increased the most from Q1 2024 to Q2 2024. Here are the 10 American cities where people are adding the most debt to their balance sheets:

10 Los Angeles, CA

9 Albuquerque, NM

8 Aurora, CO

7 Greensboro, NC

6 St. Louis, MO

5 Gilbert, AZ

4 Lubbock, TX

3 Madison, WI

2 North Las Vegas, NV

1 Boston, MA

Source: Wallet Hub

The Question of the Week

[poll id=”548″]

Last Week’s Poll Result

Which continents have you been to?

• North America (83%)
• Europe (7%)
• Asia (4%)
• Australia (3%)
• South America (2%)
• Africa (1%)

More than 1800 Len Penzo dot Com readers answered last week’s question and it turns out that, aside from North America, more readers have stepped on the European continent than any other.

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: Good Question

Growing up as a kid, I learned all about capitalism through the board game Monopoly. I mean, what better way to teach a young mind about how our economy functions. I loved this game as a kid — and still do! Only now, as an adult I have some questions that remain unanswered. For instance, if I have all this money and own all this real estate, then why am I still driving around in a thimble?

(h/t: Cowpoke)

Buy me a coffee? Thank you so much!

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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:

1. Kentucky (2.51 pages/visit)
2. Montana (2.50)
3. Maine (2.39)
4. Nebraska (2.26)
5. Connecticut (2.24)

46. Nevada (1.45)
47. Iowa (1.43)
48. Oregon (1.42)
49. Virginia (1.35)
50. North Carolina (1.29)

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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 recent article here on how to prepare your kids for the real world, Roger left this note:

Unless we’re discussing a reasonable mortgage to purchase a home, I’m teaching my kids to avoid debt at all costs (pun intended).

Easy there, Roger … I’m the guy who is supposed to do all of the jokes around here.

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.