Black Coffee: Lying Through Their Teeth

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 …

The first duty of a man is to think for himself.

— Jose Marti

The last duty of a central banker is to tell the public the truth.

— Alan Blinder, former Vice Chairman of the Fed

Credits and Debits

Debit: Did you see this? According to a new survey, 36% of American consumers took on holiday debt in 2024. Those who racked up balances this season took on an average of $1181 in debt, up from $1028 in 2023. However, that is still down from $1549 in 2022. Less than half (44%) of the people who took on debt expected to acquire those balances. And for those not counting at home, more than one third of Americans racked up over $1000 in credit card debt this holiday season. This is all part of sharply rising US credit card debt, which hit a record $1.3 trillion as of the end of September.

Debit: On a related note, the spending boom for the bottom third of US consumers is over, thanks to maxed-out credit cards and depleted personal savings that have pushed credit card loan defaults to their highest level since the Great Financial Crisis in 2008. So, how much has the welching cost credit card companies? Well … they wrote off $46 billion in “seriously delinquent loan” balances during just the first nine months of 2024. That’s a 50% increase from the same period last year and the highest level in 14 years. Did you know that prior to 1980 credit card debt was almost an afterthought for most Americans and seen as financial taboo? It was.

Debit: Making matters worse, annual percentage rates (APRs) on credit card debt have hit record highs, compounding the financial misery for cash-strapped Americans. On the bright side, help may be on the way (just don’t hold your breath) …

Debit: Of course, it’s not just the American consumer who is struggling; retailers are too. In fact, US retail closures have reached the highest level since the pandemic. As of early November, retailers had announced 6481 store closures for the year. For comparison, during the 2020 pandemic, closures affected slightly less than 6000 stores. But, yeah … the economy is doing just fine according to US government bureaucrats. Oh … and speaking of store closures:

Debit: In other news, a group of banks and business groups are suing the Fed over the annual bank stress tests, saying the current process falls short of its goals. Uh huh. We think it’s more likely that they’re getting harder to pass. Then again, we’re not sure what they are worried about when the banks ultimately decide who the winners and losers are when their financial situation is at its most dire. Er … if you know what we mean …

Debit: Speaking of stress tests, perhaps the US Treasury should be subjected to an annual IT security stress test after they reported that Chinese state-sponsored hackers broke into its network this month “in a major incident” that resulted in the theft of critical unclassified documents from Treasury Department workstations. Why are we not surprised? On the other hand, Chinese hackers clearly aren’t the biggest threat we face each and every day:

Debit: Meanwhile, Fed chair, Jerome Powell correctly observed that “people use bitcoin (BTC) as a speculative asset.” But those words of wisdom were then followed by his absurd assertion that bitcoin “is just like gold, only virtual. People aren’t using it as a form of payment or as a store of value. It’s highly volatile. So it’s not a competitor for the US dollar (USD); it’s really a competitor for gold.” Huh? Yes; BTC is “highly volatile” – but gold? No. For 5000 years commodities and wages priced in gold have remained remarkably stable – which is the very definition of a store of value. As for Mr. Powell, well … he’s just doing what central bankers always do …

Credit: In a rare burst of macroeconomic understanding, Fed governor Mary Daly parried her boss’s specious claim this week by saying that BTC “sometimes has properties like gold – but (BTC) should be viewed as its own asset class and not lumped in with gold.” More to the point: BTC is NOT a proven store of value or hedge against a failure of the debt-based fiat monetary system. To be sure, Daly’s remarks, while welcomed, are truly unexpected coming from a Fed official. Although, to be honest, I’m not sure if it’s actually as unexpected as this:

Credit: Now for a reality check: BTC is a derivative of the fiat USD – which therefore also makes it a derivative of debt. That’s bad news for any asset claiming to be a “competitor for gold.” This can be proven with the following simple math problem: If the USD’s purchasing power goes to zero, how many BTC would a loaf of bread cost? The answer is infinity – which is impossible, rendering BTC useless in a world without USDs. Gold doesn’t have this problem because it can – and is – valued in terms of itself: grams, troy ounces, or tonnes. And if that’s too deep for you, then here are two more items that’ll probably make your head explode:

Credit: Remember, while there is an ever-growing body of evidence that a currency crisis may be just around the corner, the good news is that gold and silver are two assets that offer wealth insurance against currency collapse . Got gold?

By the Numbers

Here are the year-end returns for select asset classes in 2024:

-1.9% US Bonds (AGG)

1.2% Jr. Silver Miners (SILJ)

11% Russell 2000

11% Gold Miners (GDX)

14% Silver Miners (SIL)

15% Jr. Gold Miners (GDXJ)

22% Silver

25% S&P 500

26% Nasdaq 100

27% Gold

Source: @charliebilello; Yahoo!Finance

The Question of the Week

Last Week’s Poll Results

Do you think 2025 will be better or worse than 2024?

• Worse 40%
• Better 39%
• About the same 21%

More than 1900 Len Penzo dot Com readers responded to last week’s question and it turns out that the jury is split almost equally between whether 2025 is going to be better – or worse  – than 2024. And that doesn’t bode well for us considering how bad 2024 seemed to be.

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: New Car

Fred was telling his friend how his uncle tried to make a new car for himself … “So he took wheels from a Chevy, a radiator from a Ford, some tires and fenders from a Kia, the sound system from a Lexus …”

“Holy Cow!” interrupted his friend, “What did your uncle finally end up with?”

Fred replied, “Two years.”

(h/t: Jon)

Squirrel Cam

I’m sure many of you have heard me talk about my crazy “Squirrel Cam” and “Squirrel Cam After Dark”  videos when I was a regular member of the Stacking Benjamins podcast roundtable team. Well … I’ll  now be featuring the best Squirrel Cam and Squirrel Cam After Dark videos of the week here on Black Coffee. Here’s this week’s winner: Our favorite squirrel, Rita, who decided to see how many nuts she could stuff in her little mouth one particular morning.

 

Buy Me a Coffee? Thank You!

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

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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

For some reason, Louie felt an overwhelming need to deposit this question in the Len Penzo dot Com mailbox:

Hey, Len! Do you know how many calories there are in a booger?

Heh. You don’t really expect me to bite on that one, do you?

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