Black Coffee: Questions Without Answers

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 a wonderful week. And with that, let’s get right to this week’s commentary, shall we?

If money isn’t loosened up, this sucker could go down!

— George W. Bush (25 September 2008)

We can guarantee cash benefits in any size and any duration you want. What we can’t guarantee is the purchasing power of those benefits.

— Alan Greenspan

Credits and Debits

Debit: Did you see this? New data from the US Census Bureau reveals that almost 26% of American renters are spending more than half their income on housing. This really isn’t too surprising when you consider that the average single-family home in the US now costs more than 7 times the median annual household income. For those not counting at home, this ratio is officially above the previous all-time high recorded back in 2022. So it looks like folks are just going to have to work harder. Or not …

Debit: Let’s hope those American renters who are struggling to make ends meet don’t drive an electric vehicle (EV). That’s because a new study has found that driving an electric vehicle is twice as expensive as driving a regular gas powered car. The evidence of this has been around for a long time now, although many people continue to deny this. For example …

Debit: Hours after the Fed cut interest rates Wednesday for the first time since 2020, mortgage rates ticked up by 4 basis points. Why? Because mortgage rates aren’t tied to the Fed’s moves on interest rates; rather, they tend to follow the 10-year Treasury yield. Confused? If so, don’t feel too bad. You’re not the only one who seems to be all mixed up …

Credit: This week, one of our favorite macro commenters – the always sagacious Franklin Sanders – wondered: “If the economy is in such great shape and inflation is nearly under control, as Fed Head criminal Jaybird Powell avers, why on earth try to stimulate the economy with not a 25 but a 50-basis-point (bp) interest rate cut? What does Powell know that we don’t and that he’s not telling us?” Well .. whatever it is, it can’t be good.

Debit: With the Fed hinting at possible further rate cuts – despite the housing and stock markets at or near all-time highs – the stage is set for what could be an extended bull run in gold and silver. That’s something to keep in mind – especially since more Americans are adopting an increasingly negative perceptions of the current and future economy. How negative? Well … this month consumer confidence plunged by the most in three years, as measured by the Consumer Confidence Index. Meanwhile …

Debit: Believe it or not, many people are saying that monetary policy isn’t really all that important now that politicians from both parties seem comfortable running deficits that – until recently – were only seen during times of war. Needless to say, at some point, they will be in for a very big surprise …

Credit: Then again, the Fed’s latest rate cut insanity is only going to further exacerbate the bull run in precious metals; as macro analyst Vince Lanci notes, ” Between 1975 and 1976, Hartnett notes the Fed cut interest rates 5% from approximately 9% to 4%, (but) the cuts went far beyond what was needed and stoked inflation. And the country paid the price over the next five years as the resulting cuts paved away for the biggest reignition of inflation of our generation.” Oh, and speaking of big mistakes …

Debit: By the way, the last two times the Fed led off with a 50 bp cut were 2001 and 2007. Heh. Nothing ominous about that. Or this …

Debit: So … could it be that the Fed knows something we don’t? For instance, a banking crisis that is slowly burning like a coal fire that smolders just beneath the surface? If you’re looking for an answer, perhaps we should ask gold. Or at least you should if you don’t have an inside connection with a Fed banker …

Credit: According to macro analyst Michael Pento, it’s looking increasingly likely that “the US ends up looking like either Japan or Zimbabwe” during the coming years. In other words: The US will either suffer from many economic “lost decades” like Japan, or experience a crushing dose of hyperinflation like Zimbabwe suffered more than a decade ago. We agree. Place your bets, folks. Just remember: Make sure you’re able to pay in real money …

Credit: For what it’s worth, ever since the Wall Street Journal proclaimed gold to be nothing more than “a pet rock” in the summer of 2015, the much-maligned yellow metal has rewarded those who purchased it as wealth insurance with a 140% return – reaffirming its role as the world’s premier long-term store of value. Imagine that.

Credit: Of course, let’s get one thing perfectly clear: Silver and gold have always been a long-term storage of wealth – that is, wealth insurance as opposed to an investment. That being said, every once in a while there are historic periods where both perform over the shorter term as profitable investments too – as those who have been buying gold and silver over the past several years are now happily discovering.

By the Numbers

A new survey of 2000 Gen Zers across the US asked about their preparedness to assume adult responsibilities and become financially independent. Here were some of the results:

50% The share of young adults who say they felt unprepared to manage their finances at age 18.

61% The percentage of Gen Zers who said they learned personal finance management at school.

38% The share of young adults who said they learned personal finance management from their parents.

37% The percentage of Gen Zers who said they learned personal finance management on their own.

3 The number of states whose youth are the most financially prepared for financial independence. (Arizona, Oklahoma, Louisiana)

46% On average, the share of young adults who are financially independent in Arizona, Oklahoma and Louisiana.

34% The national average among all 50 states when it comes to young adults who are currently financially independent.

Source: Preply

Last Week’s Poll Results

Have you provided substantial financial assistance to your adult children (college excluded)?

• No (57%)
• Yes (26%)
• I give hugs in lieu of cash (17%)

More than 1800 Len Penzo dot Com readers responded to last week’s question and it turns out that 3 in 4 of you are not providing substantial financial aid to your adult kids. That’s far more than the results from a more scientific survey that was conducted earlier this year, which found that 53% of parents were not providing significant support to their adult children.

This week’s question was submitted by reader Frank. If you have a question you’d like to see featured here, please 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="555"]

Useless News: Mouthwash Salesman

A neatly dressed salesman stopped a man in the street and asked, “Sir, would you like to buy a a bottle of this mouthwash for $200?”

Aghast, the man said, “Are you nuts? That’s highway robbery!”

The salesman seemed hurt and then tried again. “Sir, since you’re a bit irate, I’ll sell it to you for half-price at $100.”

Again, the man replied bluntly, “You must be crazy pal; now go away!”

The salesman then reached into his briefcase and pulled out two brownies and began munching away on one of them. He then said to the irate guy, “Sir, since I annoyed you so much, I would love it if you’d have one of my brownies.”

After thinking about the salesman’s offer for a few seconds, the man agreed. The man took a big bite of the brownie, only to spit it out almost immediately. “Hey!” the man said to the salesman, “This brownie tastes like crap!”

“That’s because it is!” replied the salesman. “Would you like to buy some mouthwash?”

(h/t: Salamander)

Buy Me a Coffee? Thank You So Much!

For the best reading experience, I present all of my fresh Black Coffee posts without ads. If you enjoyed this week’s column, buy me a coffee! (Dunkin’ Donuts; not Starbucks.) Thank you so much!

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More Useless News

Here are the top five articles viewed by my 49,284 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. Hyperinflation: 18 Strange Things You Didn’t Know
2. Personal Finance Bad Habits: The 33 Biggest Ones to Avoid
3. What Are the Most Common Birthdays?
4. Why Cutting Expenses to the Bone Isn’t Always Enough
5. 4 Traditional Banking Alternatives

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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 me at: Len@LenPenzo.com

After reading my blog post on why some people have such messy finances — and my complaint about my kids’ messy bedrooms — Jennifer Oke had this to say:

Don’t feel bad. My kids never clean their rooms either! Maybe it’s time to change their habit.

Here’s the trouble with that: Whenever they have a clean room they can never find what they’re looking for.

If you enjoyed this, please forward it to your friends and family. 😊

I’m Len Penzo and I approved this message.

Photo Credit: public domain