Black Coffee: Bait and Switch

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 …

We wear the mask that grins and lies, it hides our cheeks and shades our eyes. This debt we pay to human guile; with torn and bleeding hearts we smile.

– Paul Laurence Dunbar

Credits and Debits

Debit: Did you see this? The state of New York signed a contract in June to buy electricity generated by two large wind farms off the Long Island coast at a rate of $155 and $146 per megawatt-hour, respectively. Now for the punchline: that’s more than four times higher than the average grid cost of $36 paid over the past year. Yes; it’s just another green energy scam benefitting political donors at the expense of the public. Even so, there are plenty of people out there who insist that green energy is the future. Probably the same folks who are also suggesting this …

Debit: Speaking of scams, we see one presidential candidate actually announced a plan to tax unrealized gains on investments by 25%. Just how insane is this idea? Let’s say you buy a home for $500,000 and the appraised value rises to $600,000 a year later. You’d then have to pay a $25,000 tax on that $100,000 – and every year thereafter, assuming the price remains steady – even though you never sold your home. I know what you’re thinking: But, Len, what if the housing market crashes after that and my mortgage goes underwater? Well … don’t expect a refund on the taxes you paid when your house was in the black. Utter madness, brought to you by the usual tax-and-spend suspects:

Credit: Of course, we’re not surprised that sagacious macro commenter Franklin Sanders has his own astute observation regarding the unrealized gain tax proposal. He notes that we’re being promised that “this tax will only apply to those with wealth greater than $100 million. (But) when the income tax was imposed in 1913, the promise was that the tax would never be greater than 1% and that only the wealthy would pay. And y’all know how long that lasted. If they get this tax, they’ll expropriate and decapitalize everyone.” Surprising? No; such government duplicity is par for the course. It certainly puts these guys to shame:

Credit: In other news, we see that falling interest rates resulted in an uptick in new home sales last month – although sales are still 30% lower than during the pandemic. The bad news for first-time homebuyers is that the median price of a new home rose once again. However, inventory is still above pre-pandemic levels at 7.5 months. The good news is: There’s always Airbnb. Oh, wait …

Debit: Meanwhile, with rents, the stock market, groceries and home prices still at all-time highs, Fed Chair Jerome Powell is now signaling that the central bank is planning to cut rates soon. What? We can assure you, this isn’t going to end well. After all, it is the monetary system equivalent of pouring gasoline on a house fire.

Credit: Indeed, as Zero Hedge notes, if the Fed follows through on its promise to lower rates, “the S&P is about to enter a full-blown bubble, which in turn will burst in even more spectacular fashion and force the Fed to activate a negative interest rate policy (NIRP) – just as Japan did years ago – while also going back to quantitative easing (QE) and buying bonds.” Imagine that.

Debit: On a related note, a new survey by the Fed has found that more Americans are looking for jobs and unemployment worries are at their highest level in a decade. How worried are they? Well .. the average expected likelihood of becoming unemployed in the next four months is now 4.4%. In the meantime …

Debit: Hey … here’s a fun fact: The US National Debt – which is now north of $35 trillion – will soon be equivalent to all the available currency in the world. Or so we’re told. Not that anybody seems to care …

Debit: Then there’s this: Banks gambling with derivatives was a big reason why we had the Great Financial Crisis in 2008. Unfortunately, a new report notes that as of today only four banks are holding 87% of the $192 trillion in derivatives held at all 4587 federally-insured financial institutions. And as Wall Street on Parade notes, these banks are “creating unfathomable risk transfer vehicles and placing them off its balance sheet. What could possibly go wrong?” Short answer: Everything. So much for learning from the past.

Debit: Meanwhile, we get closer to October’s BRICS currency summit, which is slated to hone its plan to stop member nations’ trade in USDs with each other. They’ll also be announcing new details regarding the introduction of a new BRICS currency, thereby further eroding the USD’s dominance. Not that anyone seems to notice.

Credit: We’ll end the weekly wrap-up with this: If you inflation-adjust gold for the 1980 peak then of $850, today it would be $3400. And if you price the yellow metal off the dramatic expansion in central bank balance sheets over the past 15 years relative to historical relationships, you get a price that would be somewhere north of $10,000. That being said, gold is wealth insurance – not an investment. The purpose of owning it isn’t to get rich – it’s to preserve your net worth in the event of a monetary system meltdown. Hey … I’m not sayin’. I’m just sayin’. Got gold?

By the Numbers

With American auto loan debt totaling more than $1.6 trillion, a new survey compared the median auto-loan balance and income in more than 2500 US cities and ranked the cities based on their debt-to-income ratios. Here are the ten cities where Americans overspend the most on automobiles:

10 Bastrap, LA

9 Willis, TX

8 Brownsville, TX

7 Tolleson, AZ

6 Jacksonville, TX

5 San Benito, TX

4 San Juan, TX

3 Mercedes, TX

2 Donna, TX

1 Rio Grande City, TX

Source: Wallet Hub

The Question of the Week

[poll id="551"]

Last Week’s Poll Results

Do you pay for a housekeeper or maid service to clean your home?

• No (90%)
• Yes (10%)

More than 1900 Len Penzo dot Com readers responded to this week’s poll and it turns out that just 1 in 10 of you have a housekeeper. No doubt, it’s a terrific perk if you can afford one. As for yours truly, we clean our own home.

For the second week in a row, this question was submitted by reader Frank. 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: TV Shopping

A blonde walks into Best Buy looking for a television. While carefully inspecting a floor model that she decided was exactly what she was looking for, a salesman walked up to her and told her that the store didn’t serve blondes.

Undaunted, the next day the blonde walked back into Best Buy; but this time she wore a red wig. She then flagged the same salesman and asked him if she could buy the television. Once again he said, “We don’t serve blondes.”

Disappointed, the blonde took off her wig and asked the salesman how he knew she was a blonde.

The salesman replied, “Because this is a microwave oven.”

(h/t: Cowpoke)

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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

This week, Your [sic] An Idiot left this note in the Len Penzo dot Com complaint box:

Every overly opinionated idiot with enough sense to turn on a computer has the right to publish any amount of worthless, meaningless, biased, thoughtless and useless words that they have time to salvage from the biological landfill they call their brain.

I see what you mean.

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