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 …
If stocks double but the dollar loses half its value, who beyond Wall Street are the winners and losers?
– David Malpass
Credits and Debits
Debit: Did you see this? A new survey of 1000 American parents with adult children revealed that they were doling out an average of $1474 a month to their kids every month for things like groceries, cell phone bills, rent, health insurance and even vaccinations. On average, Gen Zers were receiving $1800 every 30 days from mom and dad, while millennials were collecting $900. It’s just more proof that the American Dream died after Gen X became adults. The good news is: There’s still hope! At least as long as they don’t outlaw the state lotteries …
Debit: On a related note, US government data released this week showed a combination of a continued slow-down in manufacturing couple with higher prices. In other words: stagflationary pressures are continuing to build up in the economy. And the odds are those pressures almost certainly going to continue to increase for the foreseeable future, so buckle-up buttercups. Now for the punchline: And this before the Fed has even kicked off its next round of currency printing to stave off the next market collapse …
Debit: Meanwhile, this week the Department of Government Efficiency (DOGE) uncovered more shenanigans – this time relating to Social Security (SS). To wit: 270,000 Social Security numbers (SSN) issued to non-citizens in 2021 – a figure that’s disturbing on its own. But the situation has only gotten worse with each passing year since then. In fact, fully 2.4 million SS numbers were allocated to foreigners last year. Then again, that hasn’t stopped people from complaining about DOGE. We suppose that’s because they’re certain all of those new SSNs are perfectly legit – and that they have absolutely zero impact on SS solvency.
Credit: Market analyst Egon VonGreyerz notes that, “global debt grew 75 times from 1971 to 2021. Today, it is around $360 trillion. But if we add unfunded liabilities and derivatives which is a form of debt (when the derivative market implodes), then total debt and liabilities are around $3 quadrillion.” Yes, that’s quadrillion, with a Q. And guess where a big chunk of that “money” – actually, debt – ended up? Hint: Check your 401k valuation. Three-quadrillion US dollars (USD) is rarified air even for the fiscal stimulus world. In fact, it’s so rarified that the letter Q still refuses to sponsor us – unlike the letters M, B, and T.
h/t: @CarlBMenger
Debit: By the way, VonGreyerz also reminded us this week that years of “massive money printing and credit expansion have created the biggest stock market bubble in history.” At the 2000 stock market bubble top, the vaunted Buffett Indicator – which measures the ratio between US stock valuation to GDP – was “only” 145%. Soon after, the Nasdaq fell 80%. Now for the punchline: Today, the US Stock-to-GDP is more than 200%. Which reminds us of the following maxim: If we could create wealth by simply printing currency, then there would be no poverty and everybody would be rich.
h/t: Egon VonGreyerz
Debit: Although the stock market is still in bubble territory, it has clearly been struggling for more than a month, with a series of lower highs and – more importantly – lower lows. Perhaps not surprisingly, this week was no different, capped off by massive sell-offs on Thursday and Friday. Even so, the market arguably seemed to be in the process of a much-needed controlled rapid descent, rather than a panic-generated crash. No matter how you look it, on Friday alone the Dow plunged 2231 points (5.5%), while the S&P 500 and Nasdaq saw 6.0% and 5.8% declines, respectively. Ouch!
h/t: Chris Newhouse via Stacking Benjamins Basement
Credit: Speaking of stock market woes, all 11 S&P sectors are now in a bear market against gold – a rare signal that has preceded massive wealth transfers throughout history. And here’s something else you probably don’t see every day. Well … unless you live in Kansas. Or the American Southwest:
Credit: Of course, it’s not just stocks that are struggling against gold; Treasury bonds are currently failing to keep up with the yellow metal too. And that’s a major problem because, as market analyst Michael Lynch notes, the masters of our debt-based fiat monetary system “need marketplace stability over decades as they issue debt. Why? If swapping (gold for Treasuries) doesn’t achieve a return in gold terms, debt will NOT be bought because investors will be better off just holding gold. Last year’s 27% increase in gold compared to treasuries 4.5% yield is a flag. So if it’s believed that negative return will continue in the future … the fiat game is over.” But is it really? Let’s go to the video:
Credit: For those who are scratching their heads and wondering why the growing interest in precious metals and decline in stocks and other assets, macro analyst Bill Holter offers one possibility. He thinks it’s because “The US was considered for years to be the (global financial) safe haven because of its pristine rule of law. (But) when you pull the curtain back and everything is rotten, confidence breaks. Big money is now looking at the financial system and understanding that it’s a hyper-levered house of cards. It’s game over.” Wait … game over? That’s exactly what Mr. Lynch said. Coincidence? Regardless, they’re both correct.
Debit: Not coincidentally, Germany – which officially holds the world’s second-largest gold reserves – is publicly worrying that the 1236 metric tons of yellow metal being stored in the vaults at the New York Fed might not actually be there. Yes … again. As you can see, German officials already know Fort Knox isn’t worth their time. Gee … it’s almost as if German officials believe the US government has become completely untrustworthy and a cesspool of utter corruption. Hey … I said “almost.”
Credit: So what’s the lesson here? Well … as Mr. Lynch points out, “Gold is the most important metric of fiat’s (true) value. After compounding for decades, printing fiat always catches up with them; thousands of years of history proves that. Regardless, 99.9% of people fall for the money changers’ trick. Charles de Gaulle is a good example of the 0.1% when he demanded gold for his fiat bucks. Soon thereafter, there was a USD devaluation by a factor of 20.” Indeed. After all, if you don’t hold it, you don’t own it – an important lesson in counterparty risk that the Germans apparently seemed to overlook.
By the Numbers
With the first quarter of 2025 completed, let’s take a look at the year-to-date returns for select assets:
-16% The “Magnificent 7”
-11% Bitcoin
-9.5% Russell 2000
-8.1% Nasdaq 100
-4.3% S&P 500
-0.9% Dow Industrials
+18% Silver
+19% Gold
+24% SIL (Silver mining ETF)
+36% GDX (Gold mining ETF)
Source: Nasdaq.com
Last Week’s Poll Results
What will the gold price be at the end of this year?
- More than $3500 47%
- $3000 – $3500 43%
- Less than $3000 10%
More than 1700 Len Penzo dot Com readers responded to last week’s question and it turns out that 9 in 10 of you expect the yellow metal to finish 2025 with a three handle. I agree.
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
Useless News: Slow Driver
A state trooper spied a car puttering along on a major highway at a dangerously slow pace. So he turned on his lights and pulled the driver over to see if there was a problem with the vehicle.
Approaching the car, the trooper noticed that there were five old guys inside, and all of them except for the driver looked wide-eyed and terribly pale.
The officer then tapped on the window and the driver rolled it down. The old man then began pleading with the cop, “Officer, I don’t understand. I wasn’t speeding, so what seems to be the problem?”
“Sir, I agree you weren’t speeding,” the officer replied, “but driving slower than the speed limit can also be dangerous.”
“I beg to differ, Officer,” said the old driver. “I was doing the exact speed limit: 22 miles an hour.”
The trooper, chuckling, explained to him that ’22’ was the route number, not the speed limit.
A bit embarrassed, the old driver grinned and thanked the officer for pointing out his error. The trooper then said, “Before I let you go, Sir, I have to ask … Is everyone in this car okay? Your passengers seem awfully shaken.”
“Oh, they’ll be all right in a minute,” the old man said. “We just got off Route 119.”
(h/t: Cowpoke)
Squirrel Cam
Here’s looking at you, kid!
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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 an article on my blog that described one key situation where an English degree may be a sound investment – no, really – Diane Roberts Powell had this to say:
Well, I do have an English degree, but I’m a poet, not an engineer. I’d say the major of your undergraduate degree isn’t all that important.
Uh huh. Tell that to the countless people with college degrees who get paid to ask: “Do you want fries with that?”
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Photo Credit: public domain
Hi Len,
Thanks for another great cuppa this week!
That is crazy that parents are supplementing their kids’ income to the tune of almost $1,500 a month! That is a lot of money! But it’s just not as easy today to leave the nest because there aren’t enough good paying jobs out there. Hopefully the tariffs will speed up their return.
Have a great weekend everybody!
Sara
Thank you, Sara. As somebody with two Gen Z kids (who are employed as a software engineer and veterinary technician), I’m not going to pretend that their economic situation was the same as mine when I was a young adult – especially here in my home state of California. The US no longer has the same number of jobs with the purchasing power required to buy a starter home, or even enjoy a comfortable living as a renter. That is thanks to a combination of America’s hollowed out industrial base and the debauched USD.
Stock market really took it on the chin this week. It’s been a long time coming. I say the markets will continue rolling downhill until Jerome comes in and fires up the money printers again. There needs to be a lot more fear first. That’s what the chicken bones I tossed onto the ground told me.
Your chicken bones are as good as my Magic 8 Ball, Cowpoke. That said, I’m guessing you’re probably right.
Great round up this week Len. Always a nice way to start my weekend morning.
Thanks, Nathan!
Man! Silver got its ass kicked this week Len. It lost around 14%. That hurts!
Yep – but only if you bought it last week and sold it on Friday. Silver’s gyrations are not for the faint of heart – which is why I tend to push gold over silver. Both are money, but gold is much more stable. Silver acts as a store of value too, but you definitely have to hold it for longer periods to smooth out the volatility. That said, I feel pretty confident that silver will be leading gold from here and hitting new all-time highs before the end of the year. Well … at least that is what my Magic 8 Ball tells me!