Black Coffee: Fake It ‘Til You Make It

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?

Never spend your money before you’ve earned it.

— Thomas Jefferson

To contract new debts is not the way to pay old ones.

— George Washington

Credits and Debits

Debit: Did you see this? A recent survey has found that 59% of millennials say it’s important to have visible signs of wealth, such as a luxury vehicle, designer clothing, or a home in a tawny neighborhood. By comparison, just 21% of Gen Xers, 8% of baby boomers, and 7% of the silent generation have the same opinion. Apparently, handing out participation trophies has done more damage than we initially thought.

Debit: Now for the punchline: Even though 3 in 5 millennials believe that displaying wealth is important, the same survey also discovered that 40% of the very same millennials admit to relying on credit cards and loans to fund their showy lifestyle – despite the steady accumulation of debt. Heh. Now … who is going to remind these delusional people that there is a tremendous difference between wealth and “wealth”?

Debit: In yet another generational survey, 56% of Gen X investors say they currently provide financial support to their parents and/or children. Sadly, more than one in five Gen Xers admit to taking on large levels of debt to manage this responsibility. Among them, 24% are taking on credit card debt, while more than a third are cutting back on non-essential expenses. That being said, it could be worse; there are plenty of others out there saying, “hold my beer” …

Debit: Of course, for most people, putting a little aside for retirement is tougher than ever – regardless of the generation. That’s because, stocks have never been more expensive relative to worker wages. In fact, today’s workers must put in over 200 hours to afford one unit of the S&P 500; compare that to the 75-year median price of just 33 hours of work.

Debit: On a related note, new data from the Bureau of Labor Statistics is out that shows home healthcare for elderly or disabled family members is nearly 10% higher than it was a year ago. Not surprisingly, nursing home care is also up more than 5%, while hospital cost are 4% higher. And if that wasn’t depressing enough, the cost of health insurance and prescription drugs are also 5% higher than they were in December 2023. Now for the really bad news: Since this is government data, you can bet that all of these healthcare price increases are grossly understated.

Credit: Perhaps Americans’ financial struggles is one reason why the size of tips left by American restaurant-goers has shrunk in recent years. Point-of sale data from Toast shows that the overall restaurant tipping average was 18.8% in the third quarter of 2024, based on US restaurants. That’s down from 19.2% during the same period in 2021. Perhaps this wouldn’t be an issue if there was a generally accepted tipping standard out there that everyone could agree on. Um … or not:

Credit: Meanwhile, another survey found that the share of Americans giving tips every time to hairstylists, food delivery people, baristas and certain other service workers has declined between 2021 and 2024. For example, only 20% of respondents say they regularly leave a tip for baristas – that’s down from 23% in 2021. And only 41% of those surveyed said they “always” tipped their taxi or ride share drivers; a decrease from 48% in 2021. The survey also found the share of people tipping hairstyles every time dropped 8% since 2021. As for retail outlets, well …

Debit: In other news, as her last official act, outgoing US Treasury Secretary Janet Yellen warned that the US would hit its debt ceiling the day after the incoming administration took office. So on Monday the US Treasury began taking “extraordinary measures” to avoid defaulting on the National Debt, which is currently $36.4 trillion – and growing rapidly. In case you’re wondering, those first moves included redeeming a portion of the Civil Service Retirement & Disability Fund and suspending investments to the Postal Service Retiree Health Benefits Fund. Frankly, we wonder if this guy would have done a better job …

Credit: Among other issues, you can thank the enduring US trade deficit for much of the National Debt. According to economist Judy Shelton, “When a nation deliberately cheapens its currency relative to the currency of its target market, its exported goods are priced lower than domestic producers. Without a level international monetary playing field, the rationale for free trade … loses its moral underpinning.” Uh huh. Now you know why the currencies of America’s biggest trade partners – Mexico, Canada, and China – are significantly cheaper than the US dollar. It’s also why America’s once-enormous manufacturing base continues to wither.

Credit: To restore some order, Shelton is once again proposing a long-term Treasury bond redeemable in gold. She says that doing so would “end up illuminating a path away from fiat money and toward an honest dollar. It would showcase the importance of monetary integrity for America – and the world.” Okay. But we’re not holding our breath. Besides, we would rather see the reintroduction of circulating gold and silver specie into the US monetary system. (Of course, we’re not holding our breath for that either.)

h/t: @PinellasLP

Credit: Not surprisingly, aggressive gold buying by central banks resulted in an impressive 27% price surge in 2024. That was the yellow metal’s best performance since 2010 and third best since 1980. In fact, market analysts point out that gold has decisively broken out of a multi-year consolidation, which typically signals the start of a fresh long-term bullish trend. This is confirmed by Sprott, which is predicting robust demand from both central banks and sovereigns to continue to drive gold prices in 2025. That’s great news for those who own wealth insurance. After all, who doesn’t love good annual returns with zero counterparty risk?

By the Numbers

In 1998 legendary Merrill Lynch market strategist Bob Farrell shared his top 10 investing rules for the first time. They are widely considered to be Wall Street trading gospel. Ignore them at your peril.

10 All markets tend to return to the mean over time.

9 Excesses in one direction will lead to an opposite excess in the other direction.

8 There are no new eras. Excesses are never permanent.

7 Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

6 The public buys the most at the top and the least at the bottom.

5 Fear and greed are stronger than long-term resolve.

4 Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

3 Bear markets have three stages: 1) sharp down; 2) reflexive rebound; and 3) a drawn-out fundamental downtrend.

2 When all the experts and forecasts agree, something else is going to happen.

1 Bull markets are more fun than bear markets.

Source: Bob Farrell

The Question of the Week

Last Week’s Poll Results

What are your three favorite cuisines?

• American 23%
• Mexican 22%
• Italian  21%
• Chinese 14%
• Thai  6%
• Something else 5%
• Japanese 4%
• Indian 3%
• French  2%

More than 2000 Len Penzo dot Com readers responded to last week’s question and I guess we shouldn’t be surprised – since most of my readers are in the US – that when it comes to favorite cuisines, a very narrow plurality preferred American. As expected Mexican, Italian and Chinese were also among the food favorites. As for yours truly, I agreed with the survey’s top three choices, although Italian is always my first pick, when given the choice (naturally!).

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.

Useless News: Old Soviet Union Joke

A man goes into the Soviet car showroom and asks to buy a car. The disinterested salesman doesn’t even put out his cigarette and says, “We only take 100% cash payments.”

Undeterred, the man puts down a bag full of rubles on the table, and the salesman then sits up and proceeds to greedily count the cash. After counting the money and finding it all there, he says to the customer, “The only color is grey.”

“No problem,” the man replies. “When will my car arrive?”

The salesman grabs a dog-eared book and slowly looks through it. After a few moments, he says, “Mmm … five years from today.”

The customer nods sagely, and then asks: “Morning or afternoon?”

“What do you care morning or afternoon?” asks the salesman. “It’s five years from now!”

“Well,” says the customer, “Because I’m getting my new refrigerator in the morning.”

(h/t: Michael Every)

Squirrel Cam

This baby ground squirrel brought a friend with her:

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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 50,303 RSS feed, weekly email subscribers, and other followers over the past 30 days (excluding Black Coffee posts):

1. The 7 Deadly Sins of Personal Finance
2. 8 Practical Mindful Money Management Strategies
3. The Only New Year Resolution That Really Matters
4. 6 Ways to Stop Stressing Over Money
5. 11 Ways to Make Your Retirement Savings Grow Faster

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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 article on lousy customer rewards programs, Bridget shared her experience:

I remember the time I got a Keurig coffee maker with my Coke points. It was well worth it!

Well, Bridget … I’m guessing that sleep isn’t too high on your priority list.

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