GUALFIN, ARGENTINA – “Damn!”
Ramón had been so absorbed in laying out his plans for our new farm that he forgot to put the truck into 4-wheel drive.
When he finally realized he needed it, it was too late. The water was already up to the doors and the wheels were deep in the mud.
“No problem, Ramón,” we kidded him. “I guess this is new to you.”
Bill’s truck trapped in an Argentine river
Ramón has lived here in northwestern Argentina his entire life. It seems to have shaped him, the way the wind carves the mountains and the water wears down the stones. He is as big and colorful as the valley.
He was born in the house we’re going to see and knows the Calchaquí River better than anyone. But he was distracted. He is advising us on how to clean up our new farm, fix the irrigation canals, and put the fields into production.
He had become so wrapped up in his plans – pointing to where we should put in fences, roads, and drainage ditches – the river surprised him.
The idea behind buying a new farm was simple enough. Our cattle don’t have enough to eat. In a normal year, we get by. But when we have a dry year – which is about every other one – the cattle starve.
The new ranch is about 3,000 feet lower, on both sides of the Calchaquí River. We can irrigate the fields there year-round… and stock up the rollos of hay for when the cattle need them. When all the work is completed, we hope to have about 500 acres in alfalfa.
Then, rather than move the hay, we move the cattle. From our high ranch, it takes two days. It’s an old-fashioned cattle drive, with gauchos (Argentine cowboys) moving the weak and hungry animals up over a mountain pass and down the other side, through the desert, to the lower ranch.
When they did this last year, seven cows died. But at least the others survived. Next time, we’ll have the fields waiting for them; we’ll move them earlier.
More to come…
Meanwhile, investors get distracted too. The subject of greatest interest at the investment conference in London we attended last week was cryptocurrencies.
But when individual investors – even our own dear readers – are interested in a high-risk speculation, it is usually time to put on the 4×4… and get out.
More evidence comes via The Wall Street Journal:
Companies have a long history of juicing their share prices – at least temporarily – by renaming themselves to reflect the latest investment fad. [American economist] Burton Malkiel writes of a company that sold records door-to-door during the height of the Kennedy bull market’s fascination with the Space Race. Its shares rose sevenfold after it changed its name to Space Tone. And there was MIS International which briefly did even better after changing its name to Cosmoz.com in early 1999.
Nasdaq-listed Bioptix, which previously had as its main business the development of a follicle-stimulating hormone for cows, horses, and pigs, took a page out of the same playbook by changing its name to Riot Blockchain. Cryptocurrencies are hot stuff and the company is even investing in a Canadian trading platform for them.
Its shares went as high as $9.50 on Wednesday or more than double their price a week ago. Investors should make hay while the sun shines.
Investors seem to have great confidence in a future made bright by cryptocurrencies and other advances in technology. They expect breakthroughs tomorrow.
And they’re ready to pay for them today…
Tesla, Snap, Uber – along with dozens more – lose billions of dollars, year after year.
But investors see a corner… and they’re sure these techies will turn it.
Netflix, for example, announced in April that it hoped to lose “only” about $2 billion this year.
Investors were satisfied. They bought all year – bidding the company up to $80 billion, twice as much as it was a year ago.
Some of these “new” technology companies are getting long in the tooth. Amazon.com, for example, has been around for more than 20 years.
Finally, it is making money. But investors in Amazon are paying 251 times each dollar of earnings for the company’s shares.
The normal price-to-earnings ratio for a retailer: about 12.
They must be expecting Amazon to turn one helluva corner. Or maybe an act of God that will make the shares worth so much money.
Our son Henry – who now writes a newsletter for our French readers – reports that tech investors seem to have lost their minds in France, too:
French start-ups Criteo (online advertising), BlaBlaCar (ride-sharing app), and Vente-privee.com (online sales) are worth more than $1.2 billion.
Leetchi started in 2009. It’s a service that shares out group payments, such as those for tickets, meals, and birthday presents. In 2015, its creator, Céline Lazorthes, sold the company to Crédit Mutuel Arkéa, a cooperative bank, for €50 billion [$59 billion].
“If new technology was such a success…” we asked investors in London, puckishly… “if it was so powerful that it will put us all out of work… and generate trillions of dollars in profits for its owners… how come growth rates have been going down for the last three decades?
“If technology always makes things better, how come things seem to be getting worse?
“We’ve got more PhDs in the tech sector than ever in history… but we still don’t make enough money to pay our current expenses… let alone our debts. How come?”
We have an answer. Technology doesn’t always make our lives better. Sometimes it makes them worse. And we don’t want to be owed money by someone who depends on a surprise breakthrough to pay his debts.
But the fad may be coming to an end. No obituary is more conclusive… no death certificate more final… and no investment trend more surely at its end than when the government wants to get in on it. Henry:
French president Emmanuel Macron announced a €10 billion [$12 billion] program for “les start-ups.”
That’s right: The French are proposing to invest taxpayers’ money in politically correct start-ups that won’t threaten existing jobs or crony businesses.
We hear the money gods chuckling… and bells ringing.
BY CHRIS LOWE, EDITOR AT LARGE, Bonner & partners
Are we due for a recession?
It’s one of the most important questions for stock market investors right now.
Going back to the end of World War II, there have been 12 recessions –broad-based declines in economic activity – in the U.S.
Ten of those recessions were accompanied by a bear market in stocks, commonly calculated as a fall of 20% or more from a peak.
As you can see above, the average time between recessions has been four years and eight months. And the longest interval was 10 years (from March 1991 to March 2001).
It’s now been eight years and four months since the last recession.
That’s nearly double the average time between recessions.
But it’s still one year and eight months shorter than the longest interval between recessions.
– Chris Lowe
The Looming Savings Crisis
One in five Americans have no savings. And nearly 30% of households headed by someone 55 or older have neither a pension nor any retirement savings. When these people stop working in the next few years, hundreds of thousands of Americans will run out of money.
Will the Stock Market Go Twelve for Twelve?
This year, it seems like U.S. stocks can go nowhere but up. If this continues, 2017 could be the first year with positive returns from the stock market in every month.
America’s New Civil War
Our colleague Nick Giambruno has traveled all over the world and visited some of the most war-torn countries. Now, he sees troubling signs in the U.S. that lead him to one conclusion: A new type of civil war is coming.
In today’s mailbag, readers consider America’s “black hole of debt.”
I am 80 and have watched in disgust as our national debt grew, and grew, and grew over the years.
Democrats and Republicans both are to blame, as well as those who brag about how to profit in a monetary crisis like this.
When is someone going to crunch the numbers for a real and fair disposition of our national debt?
If someone were to break down the net worth of all the mega-millionaires and corporations who have most benefited from our totally unrealistic and borderline insane fiscal policies, I believe the common man’s share just might be manageable. Of course the mega wealthy would owe the lion’s share, but then they have profited most by the current and proposed tax laws.
– Dakin M.
With regard to the dismal financial future likely for the U.S., there is one possible saving grace that was not discussed. President Trump is in a unique position with regard to the Federal Reserve. There are now multiple Federal Reserve governor positions to be filled, along with a new chairman shortly.
When the Federal Reserve was set up, appointment renewals were deliberately staggered to make it very unlikely that a single U.S. president could gain majority control over the Federal Reserve. There is now this opportunity, to rein in the Federal Reserve. If new appointees are picked who are strongly in favor of return to the gold standard to back up the U.S. dollar, this will force a reduction in U.S. government spending. Also a reduction in the U.S. Treasury debt.
If President Trump is not hindered from continuing to grow the U.S. economy, this can accelerate the reduction of the national debt, as well as being able to fund baby boomers’ retirements from increasing Social Security contributions. The U.S. future might not be as bleak as painted.
We have an extraordinarily gifted and able president in Donald Trump.
– Andrew C.
The “Debt” can be dealt with quickly, but at great hazard and cost. We simply inform these holders of our national debt that the debt is fraudulent, accruing as it did through a criminal act. Simultaneously, the criminals in the Federal Reserve banking institutions must be arrested, along with their accomplices in government.
We might need to rent Madagascar as a temporary prison. Meanwhile, back at the Treasury, alternate money is being exchanged for the phony floating rate notes. And forthwith, our economy will be once again constitutional.
The hazard is that the holders of American debt will want to kill the president. And many will lose shirts, pants, and all the rest.
– William P.
Meanwhile, another reader weighs in on the pension crisis in the U.S.
Interesting article this weekend from Nick Giambruno about the increase in property taxes and taxes on marijuana, and how such tax increases are inevitable due to the shortfall in public pension funding.
What your article did not mention, and might well find interesting follow up is the need to fund not only pension shortfalls – but also the larger need to fund government boondoggles that are making a few rich, at the expense of the most. One example is green energy credits. Look at Ontario Canada. Based on an ideologically-based “green energy and economy act,” the province committed to install some 10,000 MW of “renewable energy,” principally wind and solar paid at prices considerably higher than paid to other producers.
When the Ontario average energy price was less than $50 per MWh, solar generators were contracted for 20 years at up to $800 per MWh, and wind generators equally have been given 20 year contracts at $135 per MWh.
Electricity rates in California have increased over 100% in less than 6 years. It’s another tax essentially. And consumers of electricity are moving to jurisdictions with lower cost energy in the USA, Quebec, or Manitoba. Oh yes, there are opportunities to take part in this “win-lose” investment through the wind producers and developers, but even investors need to look at themselves in the mirror periodically. You keep writing on your goal of win-win deals. Yup, there are ways to profit from these win-lose deals, but they surely leave a bad taste in your mouth.
– Bill P.
In early February last year, colleague Jeff Brown went in front of a small audience of multimillion-dollar family offices to present his best recommendation.
The company he named that day, chip-maker Nvidia, went on to become the best-performing stock of 2016. It climbed over 330% in one year.
Now, Jeff is making another bold prediction that he believes will be even more profitable. See it for yourself right here.