{"id":77985,"date":"2023-04-08T01:15:22","date_gmt":"2023-04-08T08:15:22","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=77985"},"modified":"2023-04-10T16:20:26","modified_gmt":"2023-04-10T23:20:26","slug":"black-coffee-8-april-2023","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id77985-black-coffee-8-april-2023.html","title":{"rendered":"Black Coffee: Down the Rabbit Hole"},"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

Nothing would be what it is because everything would be what it isn’t. And contrariwise, what it is, it wouldn’t be, and what it wouldn’t be, it would. You see?<\/em><\/p><\/blockquote>\n

– Lewis Caroll, Alice In Wonderland<\/em><\/strong><\/p>\n

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

Debit: <\/strong><\/span>Did you see this? Inflation may be cooling a bit, but by any historic measure it remains high<\/a>. Even so, the market is not convinced the Fed will raise rates next month when it is scheduled to decide whether to increase, drop, or leave rates unchanged. One thing is certain: Whatever decision the Fed makes will be the wrong one. Now who wants a marshmallow peep?<\/div>\n
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(h\/t: @LawrenceLepard)<\/p><\/div>\n<\/div>\n

Credit: <\/strong><\/span>Meanwhile, last quarter saw the Nasdaq’s best quarterly performance since the second quarter of 2020 – and before that, the first quarter of 2012 – aided by its 8% gain last month. That<\/strong><\/em> was the Nasdaq’s biggest March advance<\/a> since 2010. The S&P 500 ended the same quarter up 4%; although just eight companies – Meta, Apple, Amazon, Netflix, Alphabet, Microsoft, Nvidia, and Tesla – account for all<\/strong><\/em> of the S&P’s return for this year. As for the other 492 stocks,\u00a0 collectively they’re down 1% for the year. Yeah; that’s totally healthy.<\/div>\n<\/div>\n
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Credit: <\/strong><\/span>Somewhat curiously, stocks are rising while the US money supply – which includes the nation’s overall stash of cash, coins, bills, bank deposits, and money market funds – is falling<\/a> at its fastest rate since the 1930s. So how to explain the dichotomy of falling money supply with rising stocks – and<\/strong><\/em> price inflation? Well \u2026 just as there was a time lag in the appearance of price inflation after the massive injection of central bank liquidity during the COVID crisis, there will be a similar lag in the appearance of price deflation in the form of crashing asset prices. At least the employment picture looks like it will continue to be stable. Oh, wait …<\/span><\/div>\n
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(h\/t: r\/WallStreetSilver u\/Zootleblob)<\/p><\/div>\n<\/div>\n

\u00a0<\/strong><\/div>\n
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Credit: <\/strong><\/span>Of course, inflation data has been purposely understated by the government for more than 40 years now – a practice that has resulted in more than a decade of monetary policy errors. As macroeconomist Alasdair Macleod notes, “The moves to conceal rising prices<\/a> ended when central banks suppressed official interest rates to zero. Not only did this create the illusion that inflation was not a problem, but it also encouraged policy makers to more aggressively suppress interest rates to get an apparently flatlining CPI to rise to the 2% target.” Mission accomplished – assuming 14% is the new 2%<\/a>.<\/div>\n
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\"\" \"\"Debit: <\/strong><\/span>The truth is, more than a decade of near-zero rates allowed state and local governments to borrow cheaply to fund economically dubious projects<\/a>. For example, San Francisco spent $1.95 trillion on its brand new 1.7-mile Central Subway; the trouble is, it carries fewer than 3000 riders daily. Critics assert the dearth of passengers is a result of the boondoggle’s absurd <\/span>design: Riders have to walk the equivalent of three football fields to connect to companion transit lines, and take three lengthy escalators to reach platforms 12 stories underground. Ironically, follies like this are only possible when currency has little value.\u00a0<\/span><\/div>\n
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Debit: <\/strong><\/span>At the same time, the Fed’s reckless quantitative easing policy has artificially inflated asset values and pushed both private-sector and government pension funds to pile into riskier investments in the hopes of eking out higher returns. But now the music has stopped and the bills are coming due, as the balance-sheet risks for mismanaged states and municipalities that were hiding in plain sight<\/a> just as they were at Silicon Valley Bank are becoming painfully apparent. Imagine that.<\/div>\n
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(h\/t: r\/WallStreetSilver u\/BoatSurfer600)<\/p><\/div>\n<\/div>\n

Debit:<\/strong><\/span> Unfortunately, the continued Fed-induced financial-market turmoil and a prolonged economic downturn will continue to put increasing pressure on municipal pension funds. Some to the point of collapse, while the affected cities are forced to declare bankruptcy. Needless to say, the taxpayers will invariably get the bill for politicians’ bad financial bets. Frankly, it’s no wonder that the public’s lack of confidence<\/a> in the Fed and the banking system it oversees is now worse than ever. As for me, <\/span>I ain’t gonna worry until I see something like this<\/em><\/strong> outside my window:<\/div>\n