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…
The man who invented the hamburger was smart; the man who invented the cheeseburger was a genius.
Matthew McConaughey
It’s no small thing for an American to buy a double cheeseburger, fries, and a large Coke for less than an hour of labor at the minimum wage. Indeed, through the long sweep of history, this represents a remarkable achievement.
Michael Pollan
Before you order that cheeseburger, you might want to haul out the psychic calculator and start tinkering with your budget.
Caroline Knapp
Credits and Debits
Debit: Did you see this? A new study from Door Dash has found that the average price of a cheeseburger, fries and a Coke varies wildly in the US, ranging from a low of $12.94 on average in Austin, Texas, to as much as $28.28 in Anchorage, Alaska. And while rising beef prices continue to plague most Americans this year, researchers concluded that higher restaurant prices reflect broader operating costs — including labor, rent and energy — rather than food costs alone. What they didn’t mention – to nobody’s surprise – was how much more consumers pay to have their favorite fast-food burger meal delivered to their front door. Er… plus the tip:
Debit: Then again, that doesn’t stop a lot of people – millennials and Gen Z, in particular – from splurging on home delivery service anyway. Then there’s this: The biggest consumers of home delivery food service comes from people earning less than $50,000 annually. Why is this, too, not surprising to us? On the other hand, try explaining this to the delivery guy…
Debit: On a related note, credit card delinquencies and car-loan repossessions are higher now than they were during the Great Financial Crisis of 2008. As for the reason? Well… it isn’t rocket surgery. History shows us that when individuals, organization, and nations spend more than they earn, misery and turbulence tend to follow. The trouble is, too many people fail to pay attention:
Credit: Of course, if you feel like wages don’t seem to go as far as they used to, there’s nothing wrong with your intuition. After all, the $100,000 salary benchmark used to be impressive. But not anymore. Likewise, ’twas a time when a $100,000 balance in retirement savings was considered a tipping point for wealth because, at that point, your accumulated capital could earn a return that exceeded your savings and contributions, thanks to compound interest. Back in the ’90s, that $100,000 likely made a huge difference. For context, median household income was roughly $42,000 in 1999. So with an 8% return, earning nearly one-fifth of your regular income passively from the stock market was a big milestone for many people back then.
Debit: Now for the punchline: In 2024, median household income in the US was $83,730. To earn a similar proportion of growth from the market, you’d need roughly $20,000 in passive income from the market. And assuming the long-term return of the S&P 500 remains 10%, the magic number to hit this target is now $200,000. In other words: Americans are actually getting poorer because US consumer prices are rising faster than any gains in nominal income. And after two decades of this, it appears the general public is finally figuring out that there really is no such thing as a “free lunch” – just like they eventually realized back in 1970s:
Credit: Here’s something else to keep in mind: The median 401(k) balance for someone in their 20s is currently $44,627, while the median for those in their 30s is $81,314. Because we are using the median instead of the average, that means 20- and 30-somethings whose 401(k) balance is above six figures are doing better than half of their peers. Apparently, the other half prefer to enjoy Door Dash on a regular basis. As for the older crowd, the median 401(k) balance is $160,899 for people in their 40s, and $252,501 for 50-somethings, and $191,373 for people 60 and over.
Debit: By the way, even the average 401(k) balance for someone in their 60s – which is skewed higher by those with large nest eggs – is only $582,546. That may not be enough for somebody who wants to retire comfortably at age 60. Applying the rule of 4% to $582,546 delivers just $23,301 in annual cash flow – which means Social Security will have to make up the difference, assuming that is even possible. As for the younger generations, let’s see how many begin imitating Gen Z. How, you ask? Well… over the past year, more than half of Americans between 18 and 29 put money had intended for retirement into sports betting. And now that Treasury Secretary Scott Bessent has announced a massive increase in US Treasury (UST) purchases this week, they may be on to something (in more ways than one):
Debit: Speaking of the stock market… Wall Street asset managers went home on Friday with a small bounce in their step as the Dow Industrials finished the day 1.0% higher, while the S&P 500 gained 0.4% and the Nasdaq Composite also picked up 0.4%. Even so, those same asset managers know that Friday’s gain wasn’t enough to offset the market weakness that occurred earlier in the week. The S&P closed the week with a 1.4% loss, while the Dow shed 0.8% and the Nasdaq Composite dropped 2.0%. Oh, well.
Scott Adams – Dilbert
Debit: Meanwhile, the US government ran a deficit of $432 billion in July. Yes; nearly a half-trillion bucks in just a single month. For the year, the US is spending $7.3 trillion versus tax revenue $5.4 trillion. That seems sustainable, doesn’t it? What do you think that is going to do the long-term purchasing power of the US dollar (USD)? Believe it or not, it appears as if the bond market is finally sniffing this out – the 30-year UST yield is at its highest point in almost 20 years. And we’re not the only ones wondering if new Fed Chair, Kevin Warsh, is aware of this:
Nothing to see here… (h/t: thebubblebubble.substack.com)
…or here.
Debit: Here’s more bad news: With the federal deficit poised to end the fiscal year on September 30th at more than $2 trillion, the rapidly ballooning annual cost just to service the debt is now topping $1.2 trillion – that’s more than the entire annual defense budget. Alas, all of this is just more proof that the USD is on its last legs as a functioning global reserve currency and long-term store of value. Got gold?
Unfortunately for the world’s woefully-indebted governments, they can’t print gold (or silver).
By the Numbers
Unless you’re a baldy like me, keeping your hair looking its best has become increasingly expensive. In fact, the cost of a haircut has risen nearly 79% since 2006. With that in mind, a recent study determined where people spend the most – and least – on hair care. Among the 50 US states, here is where hair care is the most and least affordable, based upon the cost of men’s barbershop haircuts and women’s beauty salon visits in every state relative to each state’s median household income.
50 Virginia (0.89% of income)
49 New Jersey (0.97%)
48 Minnesota (0.98%)
47 Utah (1.00%)
46 Nebraska (1.05%)
5 Florida (1.51%)
4 New Mexico (1.55%)
3 Mississippi (1.58%)
2 North Carolina (1.61%)
1 Arkansas (1.63%)
Source: WalletHub
Last Week’s Poll Results
Is your auto and home or renter insurance with the same company?
- Yes 79%
- No 21%
More than 2500 Len Penzo dot Com readers responded to last week’s question and it turns out that almost 4 in 5 of you bundle your auto and home (or renter) insurance. Quite frankly, folks, I expected that number to be a bit higher since almost every insurance company offers a bundling discount.
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: Meet the New Boss
On his first day in the office, a new CEO who was hired to turn a struggling company around was determined to let the workers know that he meant business. So, after doing a quick review of the company’s dreadful financial position, he decided his first act would be to reduce costs by getting rid of every employee who wasn’t adding value to the business.
Later that day, while he was taking a tour of the company’s facilities, there were workers everywhere — but his eyes were immediately drawn to a young man leaning against a wall, apparently doing nothing in particular.
Seeing this as his chance to make an immediate impact, the CEO walked over to the guy and asked, “How much money do you earn each week, son?”
The guy was immediately taken aback by the question, but he politely responded to the CEO anyway: “Sir, I make around $400 per week. Why do you ask?”
“Four hundred a week? Is that so?” the CEO asked in a slightly mocking tone. Then the CEO said to the young man, “You just wait right here!”
The CEO then disappeared into the Finance Department. Five minutes later the company chief reappeared with a bundle of cash. He then handed the young man $1600 and said, “Take it! That’s four weeks’ pay. Now get out! You’re time with us is done; don’t let me see you here ever again!”
Shocked at what had just happened, the guy took the money from the CEO and then ran out of the building as fast as he could.
Feeling like a real power boss, the CEO looked around at the rest of his workers and said to no one in particular, “So! Does anyone want to tell me what that sorry slacker did around here?”
A couple of seconds later a loud voice from the back of the room responded, “He was the pizza delivery guy!”
(h/t: Roy)
Squirrel Cam
Presented without comment….
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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
This week Jonah took some time out of his busy day to send me this:
Greetings from South Carolina, Len! I just wanted to let you know I was reading your blog because I was bored to death at work.
Thank you, Jonah! (Wait … that was a compliment, right?)
If you enjoyed this edition of Black Coffee and found it to be informative, please forward it to your friends and family. Thank you! 😀
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Photo Credit: public domain