Monday, August 24, 2015

This Will be Worse Than 2008

I'm usually early with these. I was early in 2000, 2008, and now 2015. But it's better to be early (including early retirement) than too late. The signs were clear that the markets have been artificially propped up by the Fed's monetary interventions for the past six years. The leaks in this bubble were covered in November 2013 and April 2015.

You can't spur demand in an economy by simply issuing more debt. Debt is only productive when it is used to finance an asset that produces more than it costs, including the carrying expense of the debt, and is paid down from the cash flow produced by that asset.

Almost none of the debt issued by corporations and governments over the last eight years has been of that character. It has instead been spent on social programs, sub prime asset purchases, stock buybacks, and other balance sheet games (AKA financial engineering).

Yes, you can levitate markets for a while by doing this, but it's simply leverage expansion and lies that enrich a privileged few, not economic expansion that is behind the alleged "gains" and the "roaring" stock market.

The expansion of debt over the last eight years is unprecedented. It creates a friction in the economy that will be more difficult to overcome than any previous economic downturns. No political party is seriously addressing this. It's not as convenient a wedge issue as immigration, gay marriage, Planned Parenthood, etc.

To view the state of the economy accurately you must remove the new debt issued in a given quarter from the GDP computation. This is first year Algebra (is that still taught in schools?). If you do that, then most of the so-called "growth" since 2009 disappears like the air in Tom Brady's footballs.

How much should you pay for a dollar of corporate earnings when the "growth" is mostly fictional and generated by issuing more and more debt instead of building things because you sent all of your manufacturing to China and Mexico? Those and other governments have been playing the debt-issuance game as well. This is a global trend where governments compete to lie about their economic statistics. We have squandered the last eight years where we could have solved these problems, but instead we drank the koolaid.

We may have some snapback rallies from oversold conditions, but there will be more downside to come. If you are long equities (especially the Nasdaq) and corporate bonds (especially high yield), you should not be sleeping well at night.

Tuesday, August 11, 2015

The Ultimate RV Boondocking Rig

On our drive from the country into the big city (Bonners Ferry, pop. 2,500), we pass by the venerable Park 'n Sell. For the low rate of $30/month, you can park your RV, truck, boat, or trailer in a high visibility spot. Hopefully, it will sell.

We saw this little beauty in the lot the other day. We had to lock up the brakes, make a Tokyo Drift hard right, and take a closer look.

Need to get away from it all? This handy blade will clear the way. No more Canadian tourists and pesky Forest Service or BLM gates to hinder your fun.

I used to think those big International flatbed trucks were hefty. This one looks like a Tonka toy next to the bugout mobile.

Susan thought changing a flat would be tough (check out the bumper sticker).

But that's not a problem when you have a built-in crane to move the spare.

 Instead of hydraulic slide outs that always want to fail, this beauty has "foldouts." 
Keep it simple. Keep it real.

And nice heavy duty ramps to get your extra armoured personnel carrier up into the rig. I suppose you could also hang your $4,000 mountain bikes on them.

And the luxury doesn't stop on the outside. Inside you have wall to wall carpet and neutral tone paint awaiting your personalized touch. What will you add?

Take the handy interior ladder to the roof to tend to your solar panels and adjust the sights on your Browning M2.

Best of all, this baby is an automatic, so Susan could share the driving duties and conduct other basic mop up operations.

It was hard to get her to leave, but when I told her one tire alone probably costs $4,000, she bid a sad farewell.