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 …
Fortune is like glass – the brighter the glitter, the more easily broken.
– Publilius Syrus
Credits and Debits
Debit: Did you see this? The results of a Universal Basic Income (UBI) experiment was completed and the results aren’t surprising. It turns out that 1000 low-income individuals were randomized into receiving $1000 per month unconditionally for three years – and, ironically, the recipients became poorer. In fact, the transfers led to an overall reduction in annual total individual income of about $1500 compared to the control group. Imagine that.
Debit: Not surprisingly, UBI recipients worked 1.3 hours per week less, and stayed unemployed for longer. Even worse, the free cash also led to other adult members of the household working fewer hours as well. No, really. Unemployment duration increased by more than a month for those who received free government income. Imagine that. So there you have it: Yet another socialist economic program that ends up making the lives subjected to it worse off, not better. Kind of like other universal solutions …
Debit: In other news, we see that sales of existing homes fell in September to the their lowest level in 14 years as house hunters remained on the sidelines despite mortgage rates easing during the month. Yes, that sounds just a wee bit confusing to us. Then again, we’re clearly not the only ones who seem to be a bit mixed up …
Credit: On a related note, traditional homes may be languishing on the market at the moment. So maybe that explains why Walmart has become the latest retailer selling tiny homes. For those who don’t make a habit of visiting the low-price retail giant, Walmart is currently offering a towable 75-square-foot tiny home for “only” $21,888. And for those who want something more spacious, the company is also selling a 19-by-20-foot “expandable prefab house” – delivered by flatbed truck – for $15,900. Just keep in mind that the cost of water and power hook-ups are not included. Meanwhile, in other markets …
Debit: Speaking of the stock market … the so-called Buffett Indicator is now at 201%; this indicator, named after renowned investor Warren Buffett, gauges whether the stock market is under- or over-valued, with a ratio above 100% generally indicating that stocks are valued higher than the economy’s economic output. For those not counting at home, this is only the second time the indicator has surpassed 200%, bested only by its all-time high of 206% reached in 2022. For perspective, the indicator peaked at 159% during the infamous Dot-com Bubble, and 183% during the 2008 financial crisis. Perhaps that explains this:
(h/t: @bravosresearch)
Debit: Meanwhile, America’s debt-to-GDP ratio is pushing more than 124%. We can all thank the Fed’s powerful money printers for that dubious achievement. This begs the question: Is the Fed throwing money into a debt chasm they can no longer fill? For the answer, let’s go to this very short film by macroeconomic expert Peter Schiff:
Credit: As macro-analyst Jim Rickards notes, when the debt-to-GDP ratio passes 90%, “the return of each dollar borrowed and spent is less than $1. This means that … you add more to the numerator (debt) than you do to the denominator (GDP) – which makes the ratio even worse and lowers the return on the next dollar borrowed and spent. That’s a mathematical way of saying you can’t borrow your way out of a debt trap.” Well, more to the point … we can’t borrow our way out – but the government can at our expense through inflation.
(h/t: @Quantum_Dine)
Credit: Of course, that debt trap is another reason why US Treasury yields have climbed from 3.7% on September 18th to more than 4.2% now – despite the Fed’s latest 50 basis point (bp) rate cut. What to make of this? Well … as the inimitable MN Gordon points out, “if the goal was to allow the Treasury to finance the debt at lower rates, the Fed’s actions appear to have backfired. What this means is that the Fed will not be able to substantially lower financing costs for the Treasury using traditional monetary policy.” Which is very bad news for a federal government that has proven itself to be thoroughly unable to control its spending.
(h/t: @texasrunnerDFW)
Debit: By the way, Mr. Gordon predicts that in order to ensure America’s credit card bill remains relatively affordable, “the Fed will return to quantitative easing (QE), where the Fed creates credit from thin air and then uses this credit to buy Treasuries at much lower rates than the market would otherwise demand.” He also correctly points out that, “previous QE operations have resulted in all sorts of wild bubbles in stocks, real estate, and bonds. They’ve also presaged rampant consumer price inflation and the dollar’s relentless loss of value.” Uh huh. Just don’t expect them to be honest about it. Or anything else for that matter …
Credit: Meanwhile, the always-sagacious Franklin Sanders observes that “the long-established correlations between gold and other markets have broken down. I have an explanation that I mention only with the most humble trepidation, but with an unquenchable certainty: It’s different this time.” It sure seems that way. In fact, Sprott is reporting that, after more than a decade of little or no interest, the investing community still isn’t jumping on the gold bandwagon. If that’s true – and we have no reason to doubt Sprott’s reporting – how will gold perform when the average investor does begin to show interest in the yellow metal?
(h/t: @NewEcclesiastes)
Credit: We’ll end this week with one final observation from Mr. Sanders. He say that “What’s happening is not a mere gold rally. I believe we are watching gold reclaim its monetary role as it replaces the US dollar. This is what all critics of fiat money have been longing and expecting to see for many decades: the worldwide fiat money system is breaking down, and when the dust clears from that long process, gold will have been revalued upwards by multiples hardly anyone today can conceive. This explains gold’s relentless drive, and why even a rising price simply cannot choke off the demand driving gold higher.” In the meantime, hold on and enjoy the ride.
By the Numbers
The average American can expect to pay more than $32,000 for their wedding in 2024. A recent study analyzed the wedding-related costs to determine the most expensive US cities for weddings with between 100 and 200 guests. Here are the ten most expensive wedding destinations, based on the cost of venue rentals, catering, attire, photography, flowers, entertainment, and other wedding & reception costs:
$48,110 San Diego, CA
$55,112 Providence, RI
$55,143 Dallas, TX
$56,538 Philadelphia, PA
$57,792 Buffalo, NY
$57,874 Newport, RI
$58,550 Denver, CO
$66,499 San Francisco, CA
$73,993 Seattle, WA
$75,859 Napa, CA
Source: JJ’s House
The Question of the Week
Last Week’s Poll Results
What is your favorite type of chocolate?
- Dark chocolate 56%
- Milk chocolate 32%
- White chocolate 8%
- I don’t like chocolate! 4%
More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that 1 in 25 say they don’t like chocolate. What? What? Frankly, I had no idea that you folks even existed! 😉
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: Tennis Anyone?
While in the park one morning, a handsome jogger found a brand new tennis ball laying on the ground. So he stopped and, seeing nobody nearby who it might belong to, decided to slip it into the pocket of his shorts.
Later on, near the end of his run, he stopped at a pedestrian crossing, waiting for the light to change. A blonde woman standing next to him eyed the large bulge in his shorts.
“What’s that?” she asked, her eyes gleaming with lust.
“Tennis ball,” came the breathless reply.
“Oh,” said the blonde sympathetically, “that must be painful. I had tennis elbow once.”
(h/t: Cowpoke)
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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 my article highlighting 36 amazing uses for plastic grocery bags, B had a suggestion of her own:
Your list should be preceded with the following: 1. Reuse it next time at a store.
Now why would I ever do that when I can use it to pick up dog poop?
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