Black Coffee: Creative Accounting

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.

Well … another busy week is behind us. So with that in mind, let’s get this party started!

Fraud is the homage that force pays to reason.

– Charles Curtis

Half-truths are the devil’s IOUs.

– Sarah Ban Breathnach

Credits and Debits

Credit: Did you see this? Annual core prices rose at their slowest pace since March 2021; the March data showed that the Consumer Price Index (CPI) core rate, which is the Fed’s preferred inflation gauge, rose just 2.4% year-over-year. Even so, the stagflationary signs in the manufacturing sector – both higher price forecasts despite a sharp reduction in orders – aren’t abating. That being said, Internet-based consumer inquiries for new products don’t seem to be abating  …

 

Credit: In other news, Elon Musk says that the Department of Government Efficiency (DOGE) is now targeting a $150 billion cut in government waste, fraud and abuse for the 2026 fiscal year. While this is an impressive figure, the bad news is that it hardly makes a dent in the US deficit, which far exceeds $1 trillion. The good news is, we’ve been told a combination of tariffs and higher taxes will fix this – especially after the rich are finally made to pay their “fair share.” So there’s that. In the meantime …

Debit: When DOGE is finished in DC – regardless of how much they ultimately save – they should head to New York, where a recent audit shows the state paid $453 million for 247,343 ventilators, x-ray machines, and other devices during the pandemic. The punchline? Three pieces were used. Since then, state bureaucrats have been content to store the remaining equipment in a warehouse – wasting even more taxpayer dollars. Is anyone surprised by this level of government fiscal malpractice anymore? Curiously, the usual government-run healthcare proponents are the same folks complaining about DOGE. That being said …

Debit: Of course, a big reason for the federal government’s surging deficits – besides the obligatory government waste, fraud and abuse – is the interest payment on the gargantuan $37 trillion National Debt. Since the 2020 pandemic, America’s annual interest payments have more than doubled. In fact, the federal government’s debt service cost now exceeds $1.1 trillion – consuming more than a quarter of all tax revenue. That breathtaking expense is exceeded by only Social Security, which costs roughly $1.5 trillion per year. It’s all so incredible when you understand that all of it is just an enormous mountain of IOUs, all piled atop of each other.

Credit: Speaking of IOUs, James Howard Kunstler pointed out the obvious this week – at least for those who have been paying attention. “Things are breaking out there,” he says. “The financial world’s feedstock is promises. In a trusting world, promises are a splendid technology, allowing you to borrow hamburgers from next Tuesday to have a hamburger today – and all else that follows from that. In a not-so-trusting world, promises go up in a vapor with the morning dew.” True dat. And here we are. Rock … meet hard place. This guy certainly knows:

Credit: Perhaps not coincidentally, we noticed that the Bloomberg Subdial Watch Index – which tracks prices for the 50 most-traded watches by value on the secondary market – shows three gold Rolex models have seen the largest gains in value over the past year. As you might expect, the surge in gold Rolexes comes as the yellow metal’s price has more than doubled from $1600 in late 2022 to over $3300 this week.

Debit: Meanwhile, back on Wall Street, the stock market continued its downward ways. For the week, the S&P 500 lost another 1.5%, the Dow was down 2.7%, and the Nasdaq declined 2.6%. Unfortunately, the indices’ year-to-date performance is even worse; since January 1st, the S&P 500 is now down 10.2%, the Dow is 8% lower, and the Nasdaq is in the red to the tune of 15.7%. Ouch. Let’s just hope that “the big shots” on the corporate top floors are working the long hard hours necessary to increase shareholder value:

Credit: Believe it or not, gold has outperformed the stock market by a factor of two during the past several years. Keep in mind that this was before the recent stock market downtrend – and that two of the last three major market downturns saw the Dow-gold ratio drop to 1 (the other time it fell to roughly 5). This means that with the Dow currently hovering around 40,000 either stocks have a lot further to fall in the next bear market, or gold has to climb significantly higher than its current $3300 market price. Maybe that uncertainty explains why wealthy Americans are rushing to move their cash to the sidelines – even if it is overseas …

Credit: Speaking of ratios … the gold-silver ratio (GSR) is still more than 100 – an absurd level it reached for a mere fleeting moment in 2020. The GSR is simply reflecting silver’s reluctance to keep pace with the surging US dollar (USD) price of gold. Rest assured that silver will catch up … eventually. As for the reason behind yellow metal’s rising popularity, macro analyst Franklin Sanders says it’s because “gold is emerging as the premier safe haven asset. That implies: 1) US treasuries (UST) will sink more often with the USD; 2) Interest rates will rise as bond prices fall; 3) Gold, the king of safe havens, will keep on rallying.” Check. Check. And check.

Debit: As for why gold will continue to rally, it’s because it’s sniffing out that the Fed is just waiting for the right time to begin unleash another tidal wave of USDs into the economy to stave off an economic meltdown. Ironically, that “medicine” will end up being the poison that kills the patient.

Credit: The growing likelihood of another massive Fed currency-printing campaign is the reason for another development underway that market analyst Jesse Columbo calls “unusual and troubling:”  USTs that are normally considered safe-haven assets – and whose value typically rises during economic upheavals – have been falling alongside stocks. Not surprisingly, Columbo agrees that, “With the safe-haven status of USTs increasingly in doubt, (physical) gold is looking far more attractive by comparison – helping to drive a surge in investor demand.” Not that it hasn’t been attracting demand already …

Credit: So where do we go from here? Well … we’ll let market analyst Michael Lynch shared his opinion this week. He says the latest evidence is that buyers are clamoring for “physical metal regardless of price slams or spikes. So if you have your gold … all you need is popcorn.” We think the same advice applies to those who hold silver too. Just remember …

 

By the Numbers

A recent study compared more than 150 countries to identify the most financially healthy nations of 2025. The study calculated the time required for an average citizen to cover their country’s national debt. Here were the ten nations whose inhabitants could cover their national debt the fastest (by dividing their per capita debt by the nation’s average annual salary). Figures are in fractions of a year:

1.03 Belgium

1.01 Qatar

0.92 Bahamas

0.87 Brunei

0.82 Japan

0.81 New Zealand

0.80 Ireland

0.79 Austria

0.71 Finland

0.23 San Marino

Sources: Atmos

The Question of the Week

Last Week’s Poll Result

Did you get a refund or owe money to the taxman this year?

• I got a refund  45%
• I cut a check  41%
• I broke even  14%

More than 1800 Len Penzo dot Com readers answered last week’s poll question and it turns out that 5 in 9 of you either broke even or ended up writing a check to the tax man this year. As for yours truly, I ended up sending the IRS about $150. I won’t complain; it could have been a lot worse.

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: At Your Service

I had just pulled into a parking spot at the home improvement store when smoke and flames began pouring from under the hood of my car.

Frantic, I bolted into the store and ran up to the first clerk I saw. As luck would have it, he was standing behind the customer service counter, entering data into a computer.

“Please help!” I gasped. “My car’s on fire! I need a fire extinguisher!”

Without even looking up, the store clerk replied, “Aisle 12.”

(h/t: Clyde J.)

Squirrel Cam (After Dark)

Happy Easter, folks!

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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 — and bottom — five Canadian provinces and territories in terms of the average number of pages viewed per visit here at Len Penzo dot Com over the past 30 days:

1. Yukon Territory (2.25 pages/visit)
2. Ontario (2.06)
3. Saskatchewan (2.00)
4. British Columbia (1.77)
5. Alberta (1.74)

9. Manitoba (1.46)
10. New Brunswick (1.41)
11. Northwest Territories (1.33)
12. Newfoundland & Labrador (1.29)
13. Prince Edward Island (1.25)

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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

Jeremy left this comment after reading my taste test experiment on six different varieties of kid cereal that suggested the little ones could be easily fooled by putting low-cost generic knockoffs in name-brand boxes:

You’re a wise man, Len. I think everything you say makes a lot of sense!

I’ve been telling the Honeybee that for 30 years, Jeremy — and she still doesn’t believe me.

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: stock photo