Welcome to another exciting edition of Black Coffee, your unique weekly look at what’s happening in the world of money and personal finance.
Another busy week crossed off the list. So, without further ado, let’s get to the commentary…
Don’t you see that the main purpose of the new language is to narrow the range of thought? Eventually we will make thoughtcrime literally impossible because there will be no words to express it.
– George Orwell, 1984 year
In our country, lying has become not just a moral category, but a pillar of the state.
— Alexander Solzhenitsyn
Credits and debits
Debit: Have you seen this? According to a new survey, the average American says he needs to earn at least $128,000 a year feel financially secure. Wow. When you consider that this is almost double the median household income in the US, this six-figure income threshold is more than problematic. Then again…
Debit: In other news, it turns out there’s never been a worse time to buy a car in the last 30 years, as cars have gone from being the biggest depreciating asset you can own to one that outperformed most stock portfolios in the last two years. Good news? By 2020, when the auto market was healthy, auto loan delinquencies hovered around 2.5%; but today it’s 8.7% in California, 10% in Texas, and 23% in Washington, DC, which means if we continue on the same trajectory, we could see a decrease of 18%. used car prices next year. And a lot of crying from those who shouldn’t have taken out a car loan at all…
Debit: If we talk about the growth of arrears on car loans, then Los Angeles Times reports that nationwide the number of auto loans that are more than 60 days delinquent increased by 30% in May compared to a year earlier. Even more shocking: the car market is now so twisted that there are cars re-recorded and immediately resold – more than the balance of the previous loan. Wait… what?
Debit: Meanwhile, the U.S. Commerce Department announced on Thursday that U.S. GDP contracted for the second consecutive quarter in 2022, signaling that the country is in its second economic recession in two years. More precisely, the data showed a decrease of 0.9% year-on-year in economic growth for the three-month period ended June 30. If this has depressed you, you’ll be happy to know that my local realtor assured me that it yet best time ever buy a new house! And, apparently, not the only one like that…
Debit: By the way, the generally accepted definition of an economic recession has been hammered out for decades. This is the definition: A period of temporary economic downturn during which trade and industrial activity declines, usually defined by a fall in GDP for two consecutive quarters. Well … at least it was until this week, when the White House announced what definition of being an officer worthless. And so, just like that, the economic recession was avoided. Hooray! Heck…it was so easy, I don’t see why the national debt can’t be “liquidated” in the short term either. Now where? there is those ruby slippers?
credit: For his part, the famous economist Nouriel Roubini said that we are not the only ones Art recession, but also those who think there will be a recession soft guilty – to put it nicely – in desired for real. why? Because, according to Roubini, the Fed’s current policy of tightening monetary policy amid a slowing U.S. economy makes a hard landing inevitable. “We don’t have the fiscal space,” he warned, “so the idea that it’s going to be short and shallow is completely false.” Maybe so, but that doesn’t mean you can’t be creative if space is tight…
Debit: The only reason the US dollar is the best currency fiat international glue factory because the Fed is in the middle of a campaign of deliberate rate hikes. And while the stock and bond markets can’t tolerate rising rates for a long period of time, it’s not the early 1980s when the debt-to-GDP ratio was a manageable 30% – in fact, it’s higher than today’s 125%. Don’t think Wall Street investors aren’t aware of this, so the markets haven’t capitulated yet. Here’s the irony: The Fed will be keep raising rates until the markets decide to raise the white flag. Only then will the money taps be turned on again.
credit: Of course, as economist Daniel Lacalle reminds us, whether in stocks, bonds, real estate—or any other market—“when bubbles burst, interventionists never blame artificial interest rate cuts or money printing— they blame the market.” Then again, losers always blame someone else when eager buyers suddenly become hard to find – especially when it comes to real estate…
credit: While the Fed has become a popular punching bag for a failing monetary system, the inimitable MN Gordon points out that ultimately it is “the government sowing the seeds of economic ruin. Economies cannot grow when they are stifled by the weeds of regulations and confiscatory taxes, (or) when property rights are not protected by the rule of law. Therefore, the economy also cannot function effectively if the printing presses sow money into wasteful activities by central planning authorities. The point is, any prosperity you’ve enjoyed isn’t because of the government—it’s in spite of it.” Uh-huh. Just don’t tell that to the academics in the ivory tower.
credit: Today, America’s debt-to-GDP ratio is 125%, and its budget deficit is projected to be 7% of GDP in 2022; and the Fed raising short-term rates to 3% should increase the deficit to 11% of GDP. With that in mind, fund manager Brian Hirshman warns that since 1991, all 18 governments that have had deficits exceeding 11% of GDP and debt-to-GDP ratios exceeding 110% have defaulted within two years. So he says the Fed is in dire straits. why? Because “raising rates may cause default – but no increasing them allows worsening inflation. Similar dilemmas in Argentina, Brazil and Venezuela have caused major crises; and the US may soon join the club.” Tick tock, folks.
credit: Unfortunately, since the Great Financial Crisis of 2008, the Fed has used artificially low interest rates and unlimited money printing to maintain the charade of “prosperity” rather than allow the system to fail. But the chickens are finally coming home to roost. As asset manager Marcel Kasumovich notes, “Cheap financing is now a curse. Globalization is now working in the opposite direction with an emphasis on food, energy and technology security. Monetary regimes change under stress – and inflation sends the world racing towards a new system unknown finish.” What there is it is certain that for most people the race will end in a flood of lost fortunes.
credit: For those wondering what lies ahead at the finish line, macroeconomist Alasdair McLeod says that when the next crisis hits, “central banks will guarantee the entire commercial banking system. The consequences of Lehman’s bankruptcy in 2008 shocked the whole world system abyss – and this mistake will not be repeated. But this time it will take an unprecedented creation of currency and credit to ‘save’ the financial world – and this humiliation will lead to the collapse of fiat currencies.” Ok…then let’s get this over with because the shameless lies and fire won’t stop until we get back to a monetary system based on honest money.
By the numbers
The first half of 2022 was tough for investors, with the S&P 500 falling more than 20% to its worst performance since 1970. With that in mind, here are the 10 worst-performing S&P 500 stocks for the first half of the year. . How many of these are in your portfolio?
– 54.6% Royal Caribbean Cruises
– 54.9% Ceridian HCM Holding Company
– 55.9% EPAM Information Systems
– 57.0% Carnival cruise lines
– 59.0% Caesar’s entertainment
– 61.1% Works for baths and body
– 63.0% PayPal
– 64.0% Align Dental Technology
– 66.6% Etsy
– 71.0% Netflix
Source: Business Insider
Question of the week
Last week’s poll results
How long have you lived at your current address?
- 1 to 10 years (40%)
- from 11 to 20 years (25%)
- 21 to 30 years old (19%)
- Over 30 years (12%)
- Less than a year (4%)
More than 2,000 readers of Len Penzo dot Com responded to a survey this week, and it was found that almost one in three of them have lived in the same house for more than 20 years. That includes you who bought our home when it was brand new back in 1997. Time flies fast!
If you have a question you’d like to ask the readers here, send it to me Len@LenPenzo.com — and be sure to put “Question of the week” in the subject of the letter.
Useless news: a drunken family
A cowboy who has just moved to Montana from Texas walks into a bar and orders three Buds. Then he sits down in the back of the room, taking a sip from each in turn.
When he finishes them, he goes back to the bar and orders three more.
The bartender comes over and says to the cowboy, “You know, the mug flies after I draw it. It would be tastier if you bought one at a time.”
The cowboy replies, “Well, you see, I have two brothers. One in Arizona, the other in Colorado. As we all left our home in Texas, we promised that we would drink in a way that would remind us of the days we drank together. So I drink one beer for each of my brothers and one for myself.’
The bartender admits it’s a good custom and leaves it at that.
The cowboy becomes a regular at the bar and always drinks the same.
He orders three cups and drinks them in turn.
One day he comes in and orders just two mugs.
All the regulars notice and shut up.
As he returns to the bar for round two, the bartender says, “I don’t want to intrude on your grief, but I would like to offer my condolences on your loss.”
The cowboy looked very surprised for a moment, then a light came on in his eyes and he laughed.
“Oh, no, it’s all right,” he explains. “It’s just that my wife and I went to the Baptist church and I had to stop drinking. However, it did not affect my brothers.’
More useless news
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Letters, I receive letters
Each week I post the most interesting question or comment – assuming I get one. And people who are lucky enough to have a single question in their mail bag get their letter here, whether it’s interesting or not! You can contact me at: Len@LenPenzo.com
After reading my proposal regarding the smartest way to get rid of credit card debt, Walt shared a long list of his personal financial tips and observations, including this one:
The evil cable company has lost power over me.
Me too, Walt. Unfortunately, I am now in the clutches of a satellite company.
If you liked it, please forward it to your friends and family. I’m Len Penzo and I approved this post.
Photo credit: stock photo