{"id":58851,"date":"2020-01-11T02:15:30","date_gmt":"2020-01-11T10:15:30","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=58851"},"modified":"2024-04-11T07:22:04","modified_gmt":"2024-04-11T14:22:04","slug":"black-coffee-11-jan-2020","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id58851-black-coffee-11-jan-2020.html","title":{"rendered":"Black Coffee: Here Are 6 Burning Questions to Think About"},"content":{"rendered":"

\"black<\/a>It’s time to sit back, relax and enjoy a little joe …<\/em><\/p>\n

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.<\/p>\n

I hope everyone is enjoying their weekend! In the meantime, why don’t we get this show on the road? Then I can start mine …<\/p>\n

He who questions much, shall learn much.<\/em><\/p><\/blockquote>\n

— Francis Bacon<\/strong><\/p>\n

You have to ask these questions: Who pays the piper? And what is valuable in this life?<\/em><\/p><\/blockquote>\n

— Robert Plant<\/strong><\/p>\n

Credits and Debits<\/strong><\/p>\n

Credit:<\/strong><\/span> Did you see this? The US economic recovery that began in June 2009 is now in its 127th month, which is a record. Even more impressive is that for the first time since the signing of the Declaration of Independence in 1776, the US just completed the first calendar decade without a recession<\/a>. Hooray!<\/p>\n

Debit:<\/strong><\/span> Ironically, last week’s ISM manufacturing index was extremely<\/strong><\/em> poor. How poor was it, you ask? Good question! It was so<\/strong><\/em> terrible that, to see another print that low, one has to go all the way back to June … of 2009<\/a>. Just don’t tell that to the stock market, which is continuing its amazing — and seemingly improbable — flight to the sun.<\/p>\n

Debit:<\/strong><\/span> With that in mind, you can’t be blamed for also asking about the reason behind the stock indexes’ steady run of all-time highs<\/a>; it’s another good question. Well … this chart tells you all you need to know:<\/p>\n

\"\"<\/p>\n

Debit:<\/strong><\/span> Meanwhile, on Tuesday the Fed injected another $99 billion<\/a> to keep the financial system afloat, confirming that the repo market remains paralyzed — and further trapping the Fed into a currency-printing regime it can clearly no longer stop without imploding the entire financial system. As such, the stock market, fueled purely by financial crack, will continue melting up — courtesy of those monthly $100 billion injections from the Fed.<\/p>\n

Debit:<\/strong><\/span> During the past six weeks, the Fed has doled out<\/a> approximately $6.2 trillion in cumulative loans to Wall St. trading houses. As a point of reference, during the Great Financial Crisis, the Fed funneled a total of $29 trillion in cumulative loans to Wall St. and their foreign counterparties between 2008 and 2010. At the current pace, that dubious figure will be eclipsed by July. Hey … relax! I’m sure the Fed has this under control.<\/p>\n

Debit:<\/strong><\/span> With the Fed’s printing presses in overdrive, it should be no surprise that the year-over-year US money supply growth (M2<\/a>), which was growing at 3.2% in November 2018, is now growing at an annual rate of 7.6%<\/a>. Unfortunately, the economy isn’t growing fast enough to absorb the extra currency being generated — and that means one thing: inflation is coming. Only this<\/strong><\/em> time, it’s going to be much tougher to hide.<\/p>\n

Credit:<\/strong><\/span> As asset manager Sven Henrich notes, the fear of missing out on the relentless, seemingly risk-free, run up in stocks is “a mockery of capitalism<\/a> and the markets. It’s made people reckless by force. And I won’t even bother making a point about valuations; nobody cares. You can’t argue with drunks at the bar, or desperate people wanting to jump on a wagon, even if that wagon is heading toward a cliff.” You’re right, Sven … you certainly can’t:<\/p>\n