Weekly Market Update by Retirement Lifestyle Advocates

Is the Penny On Its Way Out?

          The U.S. penny may soon be history if the new ad hoc Department of Government Efficiency has its way.

The penny, the smallest unit of currency, has frequently been the target of reform movements to this point with no success.

Now, DOGE, headed by Elon Musk, is again targeting the penny.  (Source:  https://www.yahoo.com/news/doge-takes-aim-penny-165459679.html)

DOGE, using an X account, noted that in 2023, the US Government spent more than $179 million producing 4.5 billion pennies.  That breaks down to a cost per penny of more than three cents.  The price of the material to make the coin is the cause of the cost.

Originally, the US penny was comprised of pure copper, but that all changed in 1982.  Since then, the penny has been made up of 98% zinc which has been steadily increasing in cost.

Couple this fact with the truth that fewer consumers are using cash when buying and selling, and there may be a good case to be made to get rid of the penny altogether.  In calendar year 2022, 18% of all transactions were made in cash.  That number fell to 16% in 2023.

There is precedent for getting rid of a coin.  The United States quit minting half-cent pieces in 1857, and the countries of Canada and Sweden have recently ceased production of pennies.

A recent survey found that 58% of Americans are in favor of stopping the production of new pennies.

The Gold-to-Silver Ratio Is Now Near a Historic High

         The gold-silver ratio is now over 90.

         With an ounce of gold selling for $2,786.20 and an ounce of silver going for $30.86, a little bit of simple math has the gold-silver ratio at 90.29.

         Since the US Dollar became a fiat currency in 1971, the gold-silver ratio has averaged about 50.  Whenever the ratio has exceeded that level by a wide margin, a return to a more ‘normal’ ratio has occurred.  That’s just one of the reasons that I expect silver to outperform gold over the next one to three years.

         During the 2008 financial crisis, the gold-silver ratio rose to 80 and eventually fell to 30 just three years later, in 2011.  The chart on this page illustrates the gold-silver ratio going back about 100 years.

Insider Stock Selling Accelerates

         According to an article on “Bloomberg,” corporate insiders are selling shares at a much faster rate, a less than bullish sign.  (Source:  https://www.msn.com/en-us/money/markets/corporate-insiders-dump-shares-at-record-pace-amid-s-p-500-rally/ar-AA1xN021)

         The article references a measure of insider sentiment on stocks.  There were 98 companies where at least one insider purchased shares this month compared to 447 companies where at least one insider sold.  With just one week of trading left during the month of January, the buy-sell ratio stands at .22, which means an overwhelming number of insiders are selling.  That is the most sellers the ratio has seen since 1988!

         As a side note, much of the selling occurred in tech companies.

Ways and Means Committee Chair Outlines Tax Priorities

         Jason Smith, the Chair of the House Ways and Means Committee, recently outlined tax priorities and potential tax policies moving ahead.  Mr. Smith stated that one of the first priorities is to extend the 2017 Trump tax cuts set to expire at the end of calendar year 2025.

         Smith stated that extending these cuts as soon as possible was imperative.  Smith commented, “There are 26 million small businesses right now making decisions about how to invest in their companies; worried, do they have a tax rate of 43.4% or a tax rate of 23.4%?  Congress needs to do their job.”

         Smith also reiterated President Trump’s statements this past week of no tax on tips.  Smith noted that “we are the party of the working class.  No tax on tips is the Republican party platform.”

         When asked about Trump’s campaign statements about ending the tax on Social Security, Smith stated that procedural rules in Congress would make it difficult to end taxation of Social Security income but was optimistic that the Republican Party could provide some kind of tax relief for Social Security recipients.

2024 Was the Worst Year for Real Estate Sales Since 1995

         While real estate sales did pick up ever-so-slightly in December 2024 closed as a dismal year for real estate sales.

         Sales of existing single-family houses in December 2024 were up 10.8% from December 2023 but were still down 36% from December 2021.  (Source:  https://wolfstreet.com/2025/01/24/sales-of-existing-homes-finally-begin-to-thaw-just-a-little-amid-highest-supply-for-december-since-2018/)

         For the whole year of 2024, sales fell to 4.06 million homes, which is the lowest level since 1995.  For perspective, that’s even a lower level of sales than during the housing bust at the time of the Great Financial Crisis. 

         This week’s RLA radio program features an interview that I did with Larry Reed, author and chairman emeritus of the Foundation for Economic Education. The program is posted and available now by clicking on the "Podcast" tab at the top of this page.

"Love your enemies, for they shall tell you all your faults.”

                                                      -Benjamin Franklin