Black Coffee: Whatever It Takes

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’ve got another busy weekend ahead of me, so let’s get right to this week’s commentary …

In the absence of the gold standard, there is no way to protect savings through inflation; there is no safe store of value. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process; a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

– Alan Greenspan

Credits and Debits

Credit: Did you see this? US stocks bid farewell to the month and the quarter with fresh records Both the S&P 500 and the Dow Jones Industrial Average ended September at all-time-highs. Typically the cruelest month for stocks, the S&P, Dow and Nasdaq indices all recorded monthly wins for September. In fact, the S&P 500 notched its best year-to-date performance at September’s end since 1997. Hooray! That being said, it’s been a long long time since the stock market has had even a modest correction, let alone a major crash. So here’s a little reminder …

Debit: Ironically, although the stock market is at record highs, the US manufacturing sector moved deeper into contraction territory in September, marking the third consecutive monthly contraction. At the same time, employment tumbled back near post-COVID-lockdown lows. With all that in mind, you’d be forgiven for wondering how all of this is affecting the banking system. However, we’re pretty sure there’s absolutely nothing to worry about there, as the Fed will always be there to stop any potential calamity. At least, that’s what the “experts” say. Then again … maybe not:

Debit: On a related note, last week we noted that consumer confidence is at its lowest point since the pandemic. Perhaps declining consumer confidence is the reason why cash-strapped Americans are using their homes to keep up with the rising cost of living, as evidenced by the increasing use of home equity lines of credit (HELOCs). It used to be that HELOCs were primarily used to finance home renovations and household splurging. However, mortgage lenders are reporting that a majority of applicants say they’re intending to use them for debt consolidation. Well … at least for Americans who can afford a home …

Debit: Meanwhile, the Fed’s favorite inflation indicator came out last week and it shows that on a year-over-year (YoY) basis, the so-called “core PCE” figure rose to 2.7% – that’s the highest level since April. It also means the true inflation rate that everyone experiences on a daily basis is probably running somewhere in the neighborhood of 9%. In fact, things are so bad out there that even the dogs are starting to sing the blues …

Debit: Somewhat ironically, deep discount chain Big Lots announced they are on track to officially close 10% of their stores – that’s 140 in total – by the end of this year. This isn’t the kind of news that suggests we’re in the midst of a booming economy. And, frankly, neither is this …

Debit: It’s just too bad that corporations can’t make reality disappear by simply manipulating their financial data spreadsheets – unlike the government. In fact, the US government was caught yet again this week clumsily manipulating economic data so that US personal savings are suddenly the highest in three years. This, after the initial government report came out indicating that personal savings were at the lowest point on record. It doesn’t make much sense … but when it comes to the government bureaucrats responsible for this stuff, neither does this:

Debit: Unfortunately, the US is now increasing the debt at a rate of $1 trillion every 100 days – and that rate is increasing exponentially, with trillion-dollar deficits as far as the eye can see. In fact, even the Congressional Budget Office is admitting that the deficit will continue to exceed 5% of GDP over the next ten years. And that’s assuming the US economy can avoid a major depression – or worse. Otherwise, all bets are off.

Credit: Of course, most people these days have become addicted to their smartphones. So perhaps it’s not a coincidence that the price of an iPhone has increased 150% since 2008. With that in mind, the latest iPhone 16 Pro can now be purchased for just 0.60 ounces of gold – that’s 23% less than an iPhone 15 Pro, which costs roughly 0.78 ounces of the yellow metal. GoldSilver points out that “This disparity underscores the impact of currency devaluation and the preservation of purchasing power offered by gold.” That it does. And not just for iPhones either.

Credit: Last week, gold ended a run of six consecutive all-time closing highs. Meanwhile the yellow metal has outperformed the S&P 500 during the most recent one- and three-year time spans. As Barrons macro analyst Randall Forsythe notes,: “Whatever bullishness the equity returns reflect, gold’s performance suggests expectations that politicians will do whatever it takes to deal with the budget, inflation being the most expedient means by which to reduce the debt burden.” Yep. And on a related note …

Credit: By the way, Mr. Forsythe also points out another inconvenient truth for the “this is fine” crowd: “Suppressing real interest rates further helps make the debt less burdensome. The combination is referred to as financial repression, which is essentially a polite term for screwing bond investors who get stuck with negative returns. That may be what gold is sussing out.” Folks, there is no “may be” about it – that’s exactly what gold is telling us.

By the Numbers

The third quarter of 2024 ended on Monday. With that in mind, here are the year-to-date returns for some select assets:

+9% Russell 2000

+12% Dow Jones Industrials

+21% S&P 500

+23% Nasdaq

+28% Gold

+31% Silver

+36% GDX (Gold Miners Index)

+44% Bonus: Gold’s year-over-year return since 30 Sept 2023.

Source: Yahoo!Finance

The Question of the Week

[poll id="556"]

Last Week’s Poll Results

What is the most you’ve paid for a ticket to attend any kind of live event?

• $100 to $250 (44%)
• $251 to $500 (24%)
• Less than $100 (22%)
• $501 to $1000 (9%)
• More than $1000 (1%)

More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that, when it comes to live events like concerts and sporting events 2 in 3 of you keep your budget to $250 or less. As for yours truly, in 2012 I spent $2462 for a pair of tickets (so $1231 each) to the see my Los Angeles Kings play the New Jersey Devils in Game 4 of the Stanley Cup Final. For those who are wondering what on Earth was I thinking when I pulled the trigger, I wrote about my purchase here. Unfortunately, the Kings lost that game 3-1. But I take solace in the fact that they ultimately won the series in six games. Oh … and for those of you not counting at home, the inflation-adjusted price is equivalent to $1688 per ticket in today’s dollars.

This week’s question was once again submitted by reader Frank. Thanks again, 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: Reminiscing

A woman became impatient while sitting in the car waiting for her husband to collect his tuba from a storage locker. Eventually, she decided to go in and find out what was taking so long.

Inside the locker she found her hubby sitting on an old sofa, deep in thought, with his head down, staring at an old photo of his first car.

Then she saw him wipe a tear from his eye.

“What’s the matter, Honey?” she asked.

He said, “Do you remember 20 years ago when we were dating and you were only 16?”

“Of course.”

“And do you remember when your father caught us in the back seat of my car?”

“I do.”

“Do you also remember how your father shoved that shotgun in my face and told me, ‘You’re either going to marry my daughter or spend the next 20 years in prison!’”

“Yes.”

Her husband then looked up before wiping another tear from his eye. “Well … I would have gotten out today.”

(h/t: Sam I Am)

Buy Me a Coffee? Thank You!

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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 all of these years, my article, 19 Things Your Millionaire Neighbor Won’t Tell You, is still eliciting feedback. In fact, it inspired The Money Babe to share a tip of her own:

I believe in pretending you’re poor so no one will ask you for money or sue you.

Wait a minute … Who’s pretending?

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.

Photo Credit: public domain