{"id":74147,"date":"2022-08-13T02:15:44","date_gmt":"2022-08-13T09:15:44","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=74147"},"modified":"2023-06-25T20:27:56","modified_gmt":"2023-06-26T03:27:56","slug":"black-coffee-13-aug-2022","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id74147-black-coffee-13-aug-2022.html","title":{"rendered":"Black Coffee: Squeezing Blood from Turnips"},"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 an enjoyable week. Without further ado, let’s get right to this week’s commentary …<\/p>\n

The only two things that scare me are God and the IRS.<\/em><\/p><\/blockquote>\n

— Dr. Dre<\/strong><\/p>\n

People try to live within their income so they can afford to pay taxes to a government that can’t operate within its income.<\/em><\/p><\/blockquote>\n

— Robert Half<\/strong><\/p>\n

No man’s credit is as good as his money.<\/em><\/p><\/blockquote>\n

— John Dewey<\/strong><\/p>\n

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

Debit:<\/strong><\/span> Did you see this? The recent $1.28 billion Mega Millions lottery winner – that’s the second-largest award ever – will only get that prize if they take it over time. If they want the entire award now<\/strong><\/em>, the payout is $747 million. Now for the punchline: That’s before<\/strong><\/em> taxes. After the federal and state governments get their cut, the Illinois winner’s billion-dollar-plus payday becomes “just” $433 million<\/a>. Yes, yes; I know. The “good” news is those taxes will help pay for the 87,000 new IRS agents<\/a> authorized by Congress this week. Hey … Remember when Americans started a revolution over a tiny tea tax? Pepperidge Farms remembers.<\/p>\n

\"\"<\/p>\n

\"\"
\nDebit:<\/strong><\/span> Frankly, it looks like Americans are going to have to rely on lottery winnings if they want to move up the socio-economic ladder because real average weekly earnings continue to plunge; they’re now down 16 straight months<\/a> as raging inflation – this week’s updated CPI shows it “officially” running at 8.5%, but in reality closer to 18% – continues to eat away at any wage gains. Then again, with real household income falling, middle-class Americans may be less likely to fall under the watchful eye of those 87,000 IRS new-hires. So there’s that.<\/p>\n

\"\"<\/p>\n

\"\"<\/p>\n

\"\"<\/p>\n

Debit:<\/strong><\/span> Perhaps those falling real wages is why American workers now say they will need on average $1.7 million<\/a> to cover expenses throughout their golden years, according to a recent survey on retirement. And while this is down from $1.9 million reported in last year’s survey, only 47% of the workers who participated in the 2022 survey now say they’re still “very likely to meet their retirement goals,” while just 13% report that they’re “not likely” to reach any of their goals. In the meantime, inflation will continue to consume the purchasing power of Americans’ nest eggs; young and old alike.<\/p>\n

\"\"<\/p>\n

Debit:<\/strong><\/span> On a related note, plunging stock and bond prices have left state and local public pension funds with assets to cover only 78%<\/a> of what they will eventually owe. Last year, the funds had 85% of the money needed to meet their obligations – that translates to almost $500 billion less that pension funds have on hand. So to try and make up the difference, pension funds are venturing into riskier investments that offer the chance of high profits, such as junk bonds. And if that doesn’t work, the same fund managers say they plan on taking whatever cash is left to a Vegas roulette table where they’ll put it all on red.<\/p>\n

\"\"<\/p>\n

Credit:<\/strong><\/span> Of course, it’s not just US pension funds that are in danger of being unable to meet their financial obligations; the federal government is too. As macro analyst Matthew Piepenburg notes, “entitlements were 54% of US tax receipts in 2015; today, annual US entitlement payments will soon reach 90% of US tax receipts<\/a>.” In short, Piepenburg warns that the Fed’s policy of raising interest rates “will bankrupt the US government” unless they pivot to cover the growing budget deficit with more currency printing. Uh huh. But maybe, just maybe, there is also another<\/strong><\/em> alternative …<\/p>\n

\"\"<\/p>\n

Debit:<\/strong><\/span> Meanwhile, many small business sectors are continuing to struggle<\/a> with high rents, including trucking companies, car services, restaurants, retail shops, and beauty salons. In fact, continuing rent hikes, rising labor costs, the ongoing labor shortage, high gas prices, and subdued consumer spending are all combining to create economic instability. Aside from those minor inconveniences, small businesses are doing better than ever. At least that’s what the those in charge are telling us:<\/p>\n

\"\"<\/p>\n

Credit:<\/strong><\/span> Speaking of the people in charge, this week financial commentator Franklin Sanders asked a very good question<\/a>: “Honest to goodness, these central banking people couldn’t make a profit with a snow cone stand in New Orleans in July, and they think they’re going to rule the world?” The question was rhetorical, of course. That being said, those same central bankers would simply tell you that it’s us unsophisticated plebes who don’t understand …<\/p>\n