{"id":71423,"date":"2022-02-26T02:15:52","date_gmt":"2022-02-26T10:15:52","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=71423"},"modified":"2023-05-12T10:52:10","modified_gmt":"2023-05-12T17:52:10","slug":"black-coffee-26-feb-2022","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id71423-black-coffee-26-feb-2022.html","title":{"rendered":"Black Coffee: All That Glitters"},"content":{"rendered":"

\"\"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 everybody had a wonderful week. And with that, let’s get right to this week’s commentary, shall we?<\/p>\n

Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort.<\/em><\/p><\/blockquote>\n

— Antony C. Sutton<\/strong><\/p>\n

If you don’t trust gold, do you trust the logic of taking a beautiful pine tree, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?<\/em><\/p><\/blockquote>\n

— Kenneth J. Gerbino<\/strong><\/p>\n

Eventually, fiat currency always returns to its intrinsic value: zero.<\/em><\/p><\/blockquote>\n

— Voltaire<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? While nominal wages are on the rise, they aren’t keeping up with higher living costs<\/a> due to rampant inflation, which is growing at the fastest annual pace in more than 40 years. How pinched are American households today? Well … a new survey found that 61% of Americans are still living paycheck to paycheck. Perhaps even more astounding, among households with six-figure incomes, 42% said they too are currently living paycheck to paycheck. Yikes.<\/p>\n

\"\"<\/a> \"\"<\/a><\/p>\n

Credit:<\/strong><\/span> In other news, Michael Maharrey observed this week that “in 2006, the Fed owned zero mortgages. Today, the central bank holds $2.6 trillion<\/a> in mortgage-backed securities (MBSs) – that means 24% of all outstanding residential mortgages in the US reside with the central bank, making the Fed, by far, the largest savings and loan institution in the world. And the result was entirely predictable: skyrocketing prices.” No kidding. In fact, for the last two years the Fed has continued to foolishly ramp up its MBS purchases, despite runaway housing prices. See for yourself:<\/p>\n

\"\"<\/a><\/p>\n

Debit:<\/strong><\/span> Just how crazy is the housing market right now? At the end of 2021, the average sales price of a US home was $477,900; compare that to $403,900 at the end of 2020 and $384,600 in 2019. In other words: The average sale price increased by $93,300<\/a> in just two years – which is the biggest increase ever recorded in a 24-month period. Even so, realtors are still<\/strong><\/em> saying now is still a great time to buy. After all, why would they make such a claim if it wasn’t true? Oh, wait …<\/p>\n

Debit:<\/strong><\/span> According to the Federalist<\/em>, the housing bubble that developed from 2002 to 2007 peaked at a 47% price increase before plummeting 20% over the next two years. They estimate that if a similar pattern emerges for the current bubble, we could see housing prices drop 40% over a similar two-year period. The Federalist<\/em> goes on to conclude that, “Whatever the final numbers end up being, the evidence is clear: Based on six decades of data, America appears to be on the verge of an epic real estate crash<\/a>.” For new homeowners, the actionable advice can be summed up in two words: pucker up.<\/p>\n

\"\"<\/a><\/p>\n

Credit:<\/strong><\/span> Speaking of bubbles, this week macro analyst Tavi Costa noted that, “For the first time in history, the US is experiencing a confluence of three macro extremes<\/a> all at once: the debt problem of the 1940s; the rising inflationary environment of the 1970s; the excessive financial asset valuations of the late 1990s.” Other than that, things are pretty good. Right? Can I get a witness?<\/p>\n