{"id":72640,"date":"2022-05-07T02:15:07","date_gmt":"2022-05-07T09:15:07","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=72640"},"modified":"2022-07-31T08:56:11","modified_gmt":"2022-07-31T15:56:11","slug":"black-coffee-7-may-2022","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id72640-black-coffee-7-may-2022.html","title":{"rendered":"Black Coffee: Are You Not Entertained?"},"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’ve got another busy weekend ahead of me, so let’s get right to this week’s commentary …<\/p>\n

When you put clowns in charge, don’t act surprised when a circus breaks out.<\/em><\/p><\/blockquote>\n

— Anonymous<\/strong><\/p>\n

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

Credit:<\/strong><\/span> Did you see this? For only the fourth time since 1973, this April saw the S&P 500 fall more than 5% and<\/strong><\/em> US Treasuries fall more than 2%, which led Deutsche Bank research head, Jim Reid, to conclude that if inflation carries on for a prolonged period of time we should prepare for more periods when both asset classes are down, which will be the demise of 60-40 portfolios<\/a>. In fact, April was the worst month for this classic bond & stock portfolio since Feb 2009. See for yourself:<\/p>\n

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Debit:<\/strong><\/span> If you think the S&P had a bad month, the NASDAQ was even worse; it plunged 13% in April – that<\/strong><\/em> was its biggest monthly drop<\/a> since Lehman’s collapse in 2008. And making matters worse for wobbling stock prices in all<\/strong><\/em> of the indices is that labor costs surged 11.6% last quarter, while productivity plunged 7.5%<\/a> – which is the largest decline since 1947. For those of you counting at home, that’s 75 years ago. No; I didn’t drop a decimal point. As for the Dow, it gained 900 points on Wednesday before losing more than 1000 points<\/strong><\/em> on Thursday – so if you’re thinking about buying the dip, be careful …<\/p>\n

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Debit:<\/strong><\/span> On a positive note, Americans can take solace that incomes were up 0.5% in March. After all, that’s a solid monthly gain – er … until you factor in rising prices, which were up 0.9%<\/a> over the same period. That means real incomes were down<\/strong><\/em> 0.4%, as price increases ate up income gains – and then some. That also means your standard of living is falling<\/strong><\/em>. Just don’t blame the federal government, which continues to spend like a drunken sailor on shore leave. And don’t blame the Fed either, which enables the spending by keeping its printing presses on overdrive and holding interest rates near the zero bound.<\/p>\n

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Debit:<\/strong><\/span> Think about this: GDP fell 1.9%<\/a> last quarter, while the official inflation rate as measured by the woefully-understated CPI was 8.5%. This amounts to a real loss<\/strong><\/em> of 10.4% in economic activity compared to the first quarter of 2021 when we were still in the midst of a self-imposed economic shutdown. But, hey … nothing to see here. The good news is: the Fed is finally getting serious about putting the inflation genie back in the bottle. Or so they say …<\/p>\n

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Debit:<\/strong><\/span> They also say a 1000-mile journey begins with a single step, and so it is that the Fed raised its Fed Funds Rate<\/a> to 1% this week – which is about 16% below the actual inflation rate. Then again, if the FFR ever got to 10%<\/strong><\/em>, then servicing the National Debt would cost at least<\/strong><\/em> $3.1 trillion annually, which was 76% of federal tax revenue in 2021 – assuming the US doesn’t slip into a recession, in which case servicing costs would exceed<\/strong><\/em> tax revenue. Either way, the welfare-warfare state would disappear overnight. So … do ya think that’s why the Fed was still<\/strong><\/em> buying Treasuries and mortgage backed securities in April, even though they were supposed to have stopped?<\/p>\n

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Credit:<\/strong><\/span> By the way, it’s not just the US that can’t tolerate higher interest rates. Macroeconomist Alasdair Macleod says neither can the Bank of Japan and the ECB, “but when you see Germany’s producer prices rising at over 30% and even Spain’s recorded at 46%, you know the jig is up<\/a>.” Well … he<\/strong><\/em> knows the jig is up. And we<\/strong><\/em> know the jig is up. But until the European public recognizes the jig is up, it really doesn’t matter.<\/p>\n

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Debit:<\/strong><\/span> Meanwhile, real wages are collapsing. But somewhat ironically, personal spending in March was up 1.1%. Now, I know what you’re thinking: So where did that big increase in spending come from?<\/em> Well … rather than coming from higher wages, it turns out that consumers dug into their savings. As a result, the savings rate in March fell to 6.2%; savers haven’t been that stingy since 2013. And thanks to inflation, investment manager Peter Schiff says the savings rate will hit an all-time low by December because “consumers are dipping into a very shallow saving pool<\/a> to keep their economic necks above water.” Imagine that.<\/p>\n

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Debit:<\/strong><\/span> Speaking of wages, I see that Jerome Powell expressed concern<\/a> this week about rising labor costs – which is simply a nice way for the Fed Chair to say that he’s not happy about workers getting larger paychecks from their employers in an effort to keep up with inflation. Uh huh. That should put things into perspective for those of you out there who still believe that the Fed’s first priority is the people living on Main Street.<\/p>\n

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Credit:<\/strong><\/span> For those of you out there who still aren’t paying attention, asset manager Egon VonGreyerz reiterated this week that, “The dollar is a totally failed currency<\/a> reflecting the bankrupt state of the US economy. Future historians will write many books on a system of smoke and mirrors with fake money, fake paper and grossly overvalued assets, all creating the most colossal asset bubble in history.” In other words: we’ve been suckered. (And nobody<\/strong><\/em> likes to be suckered, including man’s best friend …)<\/p>\n

http:\/\/lenpenzo.com\/blog\/wp-content\/uploads\/2022\/05\/Dog-Choice-mp4.mp4<\/a><\/video><\/div>\n

Credit:<\/strong><\/span> Not surprisingly, this week we received yet more evidence that the current USD-centric fiat monetary system is in its death throes, as the Secretary of Russia’s Security Council, Nikolai Patrushev, said that Russian experts are working on a project to back the Russian ruble with gold<\/a> and other commodities. Of course, this should be earth-shaking news for most Americans if only because our artificially-high standard of living depends on the US dollar remaining the world’s premier reserve currency – but you’d never know it if you only followed the mainstream financial media. Sad.<\/p>\n

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Credit:<\/strong><\/span> Unfortunately, as investment researcher, Nick Giambruno, observed this week, “The vast majority of humanity doesn’t understand what makes for good money. Instead, they’ve been hypnotized into believing something inferior – that is, the scraps of paper or digital entries that governments can create with no effort – is good money. It’s a sad state of affairs and one of the biggest swindles<\/a> in human history.” Unlike this much smaller one …<\/p>\n