{"id":80786,"date":"2023-11-04T01:15:28","date_gmt":"2023-11-04T08:15:28","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=80786"},"modified":"2023-11-08T08:01:25","modified_gmt":"2023-11-08T16:01:25","slug":"black-coffee-4-nov-2023","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id80786-black-coffee-4-nov-2023.html","title":{"rendered":"Black Coffee: … Fall Back"},"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

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Remember to set your clock back this weekend! I’m setting mine back to 1983.<\/em><\/p><\/blockquote>\n

– Anonymous<\/strong><\/p>\n<\/div>\n

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

Debit:<\/strong><\/span> Did you see this? The nation’s largest drugstore chains – Rite Aid, CVS and Walgreens – will shutter more than 1500 stores<\/a> by the end of 2024. Are people simply getting healthier, thereby reducing the need for pharmacies? Hardly. Instead, the companies cited lower earnings and rampant shoplifting for the closures. In fact, analysts estimate the chains have lost $87 billion to retail theft in 2022 and project that retail theft may cost stores over $115 billion by 2025. Or maybe there’s another<\/strong><\/em> explanation …<\/p>\n

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Credit:<\/strong><\/span> In other news, real GDP growth surged to 4.9%<\/a> in the third quarter. Hooray! However, almost half of that growth came from bloated government spending financed with more debt and inventory accumulation. As economist Daniel Lacalle notes, “Consumption financed by soaring credit card debt and economic growth disguised by enormous government spending and record public debt<\/a> are not<\/strong><\/em> indicators of a strong economy.” In fact, if you remove the smoke and mirrors by excluding public debt accumulation that artificially goosed the latest GDP figure, the US is now experiencing its worst year of growth since the 1930s. Yes, the Depression Era 1930s. That being said …<\/p>\n

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Debit:<\/strong><\/span> You’d be forgiven for thinking the S&P 500 Index is having a good year. After all, it closed at 3839 on December 30, 2022. After the Friday closing bell it now sits at 4358, for a year-to-date gain of 13.5%. But as Wall Street on Parade<\/em> notes, as late as last week, “only three stocks<\/a> represent a large chunk of those gains. Nvidia is up 194% year-to-date on Artificial Intelligence (AI) hype; Meta Platforms (Facebook) has gained 161%; and Tesla has put in a robust share price growth of 72% year-to-date.” As for the Dow, 1 out of every 3 stocks that make up that venerable index is down by double digits<\/strong><\/em>. No, really.<\/p>\n

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Debit:<\/strong><\/span> Then again, not everything<\/strong><\/em> is down. The cost of goods and services<\/a> rose 0.4% for a second consecutive month in September, challenging the view that the Fed’s rate hikes are still bringing down inflation. Orange juice lovers can attest to this. Believe it or not, orange juice concentrate is traded on Wall Street alongside other commodities like pork bellies, cotton, cocoa and sugar – and its price continues to skyrocket. On Monday, OJ concentrate surged 10% and hit yet another all-time high. The price of OJ futures has soared 388% since March 2020 as weather and disease continue to crush citrus supply in Florida. See for yourself:<\/p>\n

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Debit:<\/strong><\/span> The continued inflation pressure is a leading reason why new data shows that consumers are tapping their savings to maintain living standards, with the saving rate dropping by 15% from the prior month. More to the point, discretionary income after accounting for inflation and taxes fell for the third straight month. “That’s not sustainable<\/a>,” said James Knightley, chief economist at ING. “Savings are finite and are being exhausted at a rapid rate, with various estimates suggesting that excess savings could be exhausted in the first half of next year.”<\/p>\n

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Debit:<\/strong><\/span> If you’re looking for the primary culprit behind all of this inflation, be sure to cast an eye toward the usual suspect: the government. The Congressional Budget Office calculated that this year’s budget deficit would be 20% more than last year’s. For those not counting at home, that would be the stunning total of $1.7 trillion. That prompted Fed governor Christopher Waller to remark that – and stop us if you’ve heard this before – “It’s hard to believe<\/a> that [current U.S. fiscal policy] is sustainable.” Uh, maybe that’s because it’s not, Kev.<\/p>\n

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Debit:<\/strong><\/span> Meanwhile, the US federal debt is approaching $34 trillion<\/a> – and that’s not counting more than $200 trillion in unfunded liabilities for things such as Medicare, Social Security and veteran and federal employee pensions. In the meantime …<\/p>\n

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Debit: <\/strong><\/span>By the way, it’s not just US politicians that are guilty of overspending; it’s a common trait of almost every government around the world. Despite this, they’re very good at fooling an ignorant public by deflecting blame onto the producers in the private sector. As just one example, this week the Trade Minister of Turkey called for supermarkets<\/a> to cut prices amid soaring inflation in that country. Instead, grocers around the world need to call for their spendthrift governments to stop debasing their currencies by conjuring it out of thin air as a means of \u201cpaying\u201d for their profligate spending – oh … and meddling in their business affairs too …<\/p>\n

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Debit:<\/strong><\/span> Not surprisingly, bond yields continue their march upward. After all, the reduction in the value of bonds – and hence the corresponding rise in yields – is a feature of every debt death-spiral. As a result, the US will be paying more than $1 trillion in debt service costs in the next few months. But wait, it gets worse: $17 trillion more in low-interest rate debt is scheduled to mature next year – which means the federal government will have to double its current borrowing rate just to get enough face value to keep rolling it over. And this is before they spend a dime funding everything else. Frankly, it’s so obvious<\/a> where the current debt-based monetary system is headed that even a parrot can see it. Well … at least this one:<\/p>\n