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 …
Trust, but verify.
– Ronald Reagan
The lady across the hall tried to rob a department store – with a pricing gun. She said, ‘Give me all of the money in the vault, or I’m marking down everything in the store.’
– Steven Wright
Credits and Debits
Debit: Did you see this? Existing home sales data for January revealed that a resurgence in mortgage rates is finally starting to take its toll, as evidenced by a 4.9% decline month-over-month (MoM). That’s the biggest drop in 26 months. Now for the punchline: Prices are still climbing, despite the decline in sales. In fact, the housing market is so broken that the median debt-to-income (DTI) ratio to buy the median home is now a jaw-dropping 47%. With that in mind, it shouldn’t be surprising that only 24% of all US home sales in 2024 went to first-time home buyers – that’s the lowest share in history.
Debit: On a related note, US retail sales fell 0.9% last month. That marks the steepest monthly decline in 12 months. For those not counting at home, the downturn was spread across the sales spectrum, affecting everything from sporting goods to auto sales. As a result, economists are saying that this yet another sign that stagflation is taking root, which could delay Fed rate cuts. Let’s just hope it doesn’t delay any of those tax cuts that are supposedly in the pipeline …
h/t: @Kyle_C137
Debit: Needless to say, the retail sales decline has also hit eggs, which are in short supply due to bird flu. As a result, egg prices surged 15% in January – that was the largest increase since June 2015. A chicken breeder in Arkansas says she’s fielding 100 messages per day – double the usual number – from people wanting to buy her hens. And the owner of a company that rents chickens along with all of the necessary supplies – from feed to coops – is reporting that his inquiries are up 500%. On a side note … even if you’re not interested in buying a chicken coop, remember: You can always put four doors on it – then it becomes a chicken sedan.
Debit: By the way, if you’re looking for stagflation’s main culprit, you can blame America’s addiction to the credit card; the National Debt just keeps on climbing. It’s now more than $36 trillion – and rising. Rapidly. Oh … and there’s nothing the Department of Government Efficiency (sic) – a.k.a. “DOGE” – can do about it. It’s nothing personal, Mr. Musk. It’s just math.
Credit: Meanwhile, the extremely-astute macro analyst Daniel Oliver, who runs Myrmikan Research, points out “the inevitable corruption of banking: After its proper function of liquefying gold and monetizing commercial bills – activities that the free market supports – legal tender laws arrive and allow banks to monetize assets, then debt, then debt of ever greater quantity and ever worse quality.” Uh huh. Too bad there isn’t a guaranteed way to solve the problem. Oh, wait …
Source: Myrmikan Research
Credit: Not surprisingly, the recent gold market turmoil has President Trump now promising that a full audit of US gold holdings in Fort Knox is coming soon. Too bad his Treasury Secretary, Scott Bessent, didn’t seem to get the memo. We say that because last week he insisted that he had no plans to visit Fort Knox. He also tried to tamp down any speculation on America’s yellow metal reserves by claiming that “all the gold is there” and any senator is welcome to visit it at any time. Then again, that was news to US Senator Mike Lee who says he has been officially rebuffed by Fort Knox officials in the past. And he’s not the only one …
Credit: In the meantime, precious metals broker and analyst Andrew Maguire reports that the time for London to deliver gold to buyers requesting physical possession has now stretched from 8 weeks to 12 weeks. Despite this, LBMA officials in London insist that the delay has absolutely nothing to do with a lack of yellow metal in their vaults. To prove it, those same London officials presented a photo from deep inside the vault that they claim was taken just last week 😉 …
Debit: As for the Treasury Secretary’s claim that a “report” was issued last year on the status of the gold at Fort Knox, we’re quite certain that said “report” is not a detailed audit complete with bar numbers, vault locations and assay reports sampled from at least 2% of the total hoard. Until we see that data, we’ll continue to not believe him. After all, does he really think we’re that gullible? Then again, maybe he didn’t see the sign on the door …
Credit: Of course, the continuing lack of transparency regarding central bank, sovereign nation, and market-makers’ gold hoards is only causing revaluation speculation to grow with each passing day. So much so that precious metal analyst Vince Lanci remarked last week that, “gold revaluation is no longer fringe speculation. Trump’s sovereign wealth fund, Treasury Secretary Bessent’s monetization comments, economist Jim Grant’s sinking fund proposal, and growing mainstream attention signal that the Overton window has more than shifted – it has been been shattered.” And speaking of shattered proposals …
Debit: One thing is certain, as pointed out by Mr. Oliver: Even at $2900, gold is still cheaper in real terms than it was in 1969. This is based upon the fact that at today’s record nominal prices, the yellow metal currently comprises a paltry 11% of the Fed’s balance sheet. Maybe that’s why there are now reports out that say more than 2000 tons of gold has been transferred to the US over the past several weeks. By any measure, that’s a staggering amount of yellow metal. And, no; that’s not a typo. We just wish this so-called flex was:
Source: Myrmikan Research
h/t: @PinellasLP
Credit: We’ll let macro analyst Jesse Columbo wrap things up this week with this observation: “While revaluing America’s gold to $2900 would benefit the country, the resulting $749 billion windfall wouldn’t put a dent in the $36.5 trillion National Debt, which is growing by roughly $1 trillion every 100 days. And with unfunded obligations of (at least) $73 trillion, the measure would be a mere drop in the bucket.” In other words: If gold is going to rescue the US from its seemingly fast-approaching date with financial Armageddon, the yellow metal will have to be officially revalued at a price that’s far far higher than $2900. Got gold?
Last Week’s Poll Results
Does the US have all of the gold it claims to have?
- Some, but not all. 58%
- Nope! There’s very little left. 25%
- Yes; all of it. 17%
More than 1500 Len Penzo dot Com readers responded to last week’s question and it turns out that 5 in 6 believe the US doesn’t have all 8133 tons of the yellow metal it claims to have in the vaults at Fort Knox, West Point, and Denver. Well … it’s hard to blame anyone for thinking that way when the US hasn’t had a full audit of its gold hoard in more seven decades.
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.
The Question of the Week
By the Numbers
15% Pork chops
22% Chicken
25% Bread
27% Rice
29% Ice cream
35% Butter
40% Ground beef
48% Sugar
53% Coffee
238% Eggs
Source: Statista via Zero Hedge
Useless News:
(h/t: Sally)
Squirrel Cam
The other day we caught Rita waiting patiently for the breakfast bowl to be put out. Before you hit play on this quick clip, see if you can find her in the still shot. I certainly didn’t see her until we saw the video!
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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 34 tricks for achieving early retirement, JD had this to say regarding my repeated references to the high cost of kids:
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Good morning Len, and thanks for another informative cuppa. I’ve been pondering what would happen if the U.S. gold reserves DO get audited and are found seriously depleted from what’s supposed to be there. Seems like market chaos, blame game, calls for heads to roll, etc. would result. If that happens what could the Administration’s next steps be?
Meanwhile, in 1 week, clocks spring forward; I’m considering chickens in the Easter baskets instead of eggs this year… 😉
Lauren – I think we spring forward on March 9th this year? Either way it’s a PITA. I was hoping Trump was going to put an end to daylight savings time once and for all before I had to change all my clocks again. Maybe he’ll stop it in time for the fall back.
Susan, I know lots of folks who agree with you re: stopping the time changes twice a year, but here in the northern latitudes where the daylight hours change more significantly from summer to winter, we appreciate the time changes. Otherwise, sunrise would be close to 8:30a.m. in December or about 4:13 a.m. in June, depending on if Standard or Daylight time were chosen! I think states should do like Arizona does and decide this for themselves. Either way, we’re looking forward to “springing forward” in a week! 🙂
Hi Lauren! The only thing I know for certain if the US doesn’t have all the gold it claims to have is this: gold will have to be revalued even higher. As for DST, I’m an early bird, so I would prefer they keep the clocks set to Standard time all year long. But, hey … I’d just be happy if the clocks stayed at one time all year long, regardless of whether it was Standard Time or Daylight Savings Time! 🙂
Good roundup this week. Retail sales were down in January, but I am pretty sure they are almost always down during the first month of the year as people are in recovery mode from the holidays.
Thanks, Sam. You may be right.
Thanks Len. Times are interesting indeed. I feel for young folks buying their first home and stretching their finances. Makes them prisoners to their jobs. I still believe living full time in your travel trailer or 5th wheel is the best choice. Drastically reducing your # 1 housing cost. Not for everyone, but works for some of us. Spring is here.
I agree, CO2, the housing situation is untenable and needs to change so the younger generations can reasonably expect to be able to own a home before they reach their 30s. My kids are in their mid 20s and homeownership isn’t even a dream for them at this point. That’s why I’m all for a significant housing crash of 50% to 60%.
I’m old enough to remember a time when the recommended DTI for a home buyer was 33%. Then they jacked it up to 36%. Then 40%. Hard to believe anyone would buy a new home when the payment consumes 47% of their take home pay.
Very true. Those numbers are proof positive that the housing market is completely broken. We can thank almost 30 years of the Fed’s easy money-policies for that (artificially-low interest rates, buying up mortgage-backed securities, and QE).
These problems are disturbing, but not surprising if you have paid attention for the last couple decades.
Yep.
While not a fan of gold, it is easier to keep than eggs. Guns and alcohol for the win….
Regarding the marriage proposal, was the choice of location an indicator of his intelligence/maturity? She might have dodged a bullet….
The level of secrecy surrounding Fort Knox is really over the top an unnecessary (it would literally take many large truck to haul away the gold [or gold painted lead ingots] if anyone ever broke in). Having an annual visit would dispel the rumors and a great publicity move for the Fed. So why not? Because it makes too much sense. I suspect that the gold is still there. “Never attribute to malice that which is adequately explained by incompetence”. Anyway, I understand that the NY Fed actually has more gold [or gold painted lead ingots]…. Apparently they do offer daily tours! So much for security concerns….
Gold doesn’t break or spoil, that’s for sure!
As for whether or not all the gold is there … it just boggles the mind that they refuse to perform a proper audit (assay & bar number count) at least once a decade, let alone annually. The Treasury once absurdly claimed it wasn’t done regularly because the cost (several million bucks) was prohibitive!