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 …
Please cut that pizza into four pieces because I’m not hungry enough to eat six.
– Yogi Berra
Credits and Debits
Debit: Did you see this? Barbecue joints in Texas are shutting their doors across the Lone Star State as sky-high beef prices are turning brisket into a luxury item that many of their customers can no longer afford. One BBQ joint owner warned that “absolutely insane” brisket prices were making barbecue prohibitively expensive for most middle-class families, adding that, “When consumers pay $36 a pound for barbecue brisket, and then add ribs, sausage, sides and dessert … one can easily spend $70 to $100” for dinner. Uh huh. Then again, it’s not as if the McRib offers a better alternative…
Debit: Of course, it’s not just the price of barbecue cuisine that’s exploding – bad weather, poor crop yields, tariffs and a dwindling cattle herd continue to raise grocery prices at an above-average pace. In fact, last month they rose by the most in nearly four years. Even worse, food inflation is always difficult to reverse quickly because the size of autumn harvests is determined by planting decisions made in the spring. Then again, inflation is not just limited to food – it’s everywhere. Even worse, it’s becoming tougher to keep under control.
Gary Larson – The Far Side
Debit: In case you haven’t already noticed, the national average price of US gasoline is in the same range as it was in 2022; the year gas prices hit their record highs. That’s because crude oil futures have climbed nearly 50% since the start of the Iran war. What is truly alarming is that, despite the pain currently being experienced at the pump, oil prices are still under $100 per barrel. Let’s hope that “black gold” doesn’t return to its inflation-adjusted all-time high price of $224 per barrel that was reached during the Great Financial Crisis of 2008.
Debit: Speaking of high prices, the national median price of all US homes is now $503,000. Ouch. For those not counting at home, that’s 1.7% higher than it was 12 months ago. And buying a new home is nearly out of reach. In New Hampshire, 83% of households are completely priced out of a new median-priced home; in total, 11 states have at least 80% of households locked out. At the other end of the spectrum, there are only three states – Mississippi, Louisiana, and West Virginia – where the median new home price required to qualify for a mortgage is currently under $100,000. So it should be no surprise that 55% of Americans say their financial situation only continues to get worse.
Credit: On the bright side, prospective first-time homebuyers can take heart in knowing that, while the housing market remains hot in much of the country, 17% of active listings carried a price reduction in April – that figure is elevated compared with historical trends. The bulk of those price cuts seem to be occurring in the Mountain West and Sun Belt regions, with Phoenix and Tampa showing the most listings with price cuts in April (31% and 29%, respectively). So… is this a sign of an impending top in the housing market? Perhaps. However, as long as the Fed continues to push its long-running easy-money policy, we sincerely doubt it.
Debit: In case you haven’t noticed, bond yields have been surging over the past four weeks – and all indications are that the bond vigilantes are only going to take them higher from here. Don’t think that won’t stop newly-minted Fed Chair Kevin Warsh from trying to reverse the trend by lowering interest rates at the short end of the yield curve. Never mind that it’s a plan that will ultimately end up as (yet another) exercise in futility …
h/t: reddit/bonds (mafugga77)
Debit: Unfortunately, interest on the federal debt is already more than $1.2 trillion and is the second-largest item in the budget. Now for the punchline: Every 1 basis point (0.01%) increase in the government’s average borrowing cost – that is, rising bond yields – adds roughly $4 billion to its annual interest debt service expense. This is bad news for a federal government whose widening budget deficit is currently on pace to finish the fiscal year near $1.8 trillion. In the meantime, the rapidly-depreciating US dollar (USD) will continue to plague everyone – including the bad guys …
Credit: To help protect the bond investment principle from currency debasement, the financial industry promotes Treasury Inflation-Protected Securities (TIPS) – that is, US Treasury bonds with an inflation escalator to maintain investors’ purchasing power. But their performance as an inflation hedge has been abysmal – especially when compared to precious metals. In fact, the chart below from macro analyst David Jensen shows how TIPS have measured-up relative to silver since 2018. (Spoiler alert: They haven’t.) Jensen also notes that TIPS performance versus gold is similar. There’s a lesson there for those who try to see it. Clearly, many people do…
Percentage return on investment from 2019 – 2026 for TIPS (red) vs. silver (silver). Does the CIA know about this?
Debit: By the way, Mr. Jensen also points out that spiking interest rates coupled with surging physical precious metal demand indicates that the 40-year era of stimulated financial markets underpinned with artificially-suppressed gold and silver prices has ended. As a result, he says we’re heading into a prolonged period of selling both bonds and stocks that “will likely reach a crisis level.” We’ll see. Regardless, there are many investors who refuse to focus on fundamental value because they’re content to believe that the Fed will always be able to boost the markets. In other words: They stopped playing chess in favor of checkers. Why? Well… duh! Because chess is hard…
Credit: We’ll end this week with the following sobering observation: Ten years ago you could buy an ounce of gold was $1200. Five years ago, that same ounce cost $2000. Meanwhile, it takes nearly $5000 to purchase one troy ounce of the yellow metal – which perfectly illustrates just how badly the USD has been devalued over time. And with the National Debt soon to exceed $40 trillion – and, eventually, far beyond – it’s a trend that won’t be reversing any time soon. At least it is if you believe like we do that the number of new USDs needed to service that debt in the future is only going to grow from here. Got gold?
By the Numbers
In 2026, renters in the United States appear to be seeing some relief as rent growth slows and pricing momentum cools across many major markets. However, the affordability picture remains highly uneven, with conditions varying significantly by location depending on local wage growth, supply constraints, and migration trends. With that in mind, here are the states where rents increased – and decreased – the most over the last 12 months:
1 North Dakota (change in rent: 🔺5.1%)
2 West Virginia (🔺4.8%)
3 Delaware (🔺3.8%)
4 Illinois (🔺3.2%)
5 New York (🔺2.9%)
46 Florida (▼3.1%)
47 Texas (▼3.3%)
48 Colorado (▼4.2%)
49 Arizona (▼4.3%)
50 Maryland (▼4.9%)
Source: ApartmentList
Last Week’s Poll Results
In your opinion, having a credit card is…
- Good 84%
- Bad 12%
- I’m not sure 4%
More than 2400 Len Penzo dot Com readers responded to last week’s question and it turns out that only 1 in 6 of you believe you’re probably better off without a credit card in your wallet. I’ll say this: They are an unquestionably terrific resource for those who are able to control their spending.
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
Unfortunately, the designer of my polling software issued an update that is riddled with errors and is not working. The poll question will return to this space as soon as they issue a fix; it could be tomorrow or it could be next week (or later). I apologize for the inconvenience! 🙁
Useless News: Government Contract
The mayor of a large metropolis conducted a public meeting on the steps of the city square after the city council passed a resolution authorizing the painting of its brand new city hall. The meeting was attended by some of the best local painters from many of the city’s different immigrant districts who were asked to offer their best price for the job at hand.
An Italian painter said he could paint the entire city hall for $100,000.
Next up was a Chinese painter who shouted out that he could do the same job for just $50,000.
After several seconds of silence, the Greek painter scoffed and declared to everyone in attendance that it was his professional opinion that such a big job couldn’t possibly be completed for anything less than $150,000.
When the mayor asked the Greek gentleman to further clarify exactly why his bid was so expensive, the painter approached the city official and whispered into his ear: “$50,000 for you, $50,000 for me and we let the Chinese guy do the job.”
(h/t: Peter Pan)
Squirrel Cam
It was raining squirrels last week…
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More Useless News
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Photo Credit: public domain