Get out while the gittin's good!

Mar 30, 2015

- By Bill Bonner

Bill Bonner
Gualfin, Argentina

Dear Diary,

This weekend, we went to the Mars.

But we'll tell you more about that in a minute. First, catching up with the markets, we find that stocks stabilized on Friday. Gold ended the week glued to the bottom of the $2,000 mark.

While gold looks well-supported below $2,000...US stocks are vulnerable to a sharp correction. They are near the top of their range with negative news coming in like drone attacks.

Profits are sagging, though not as badly as we first had thought. GDP growth - stripped of its lipstick and heavy makeup - has been just 1.1% per year since the beginning of the crisis, with no sign of a genuine 'recovery'. World trade relies heavily on China which relies heavily on American consumers. US households might be willing to spend more, but they're unable. Gone on the days when they could 'take out' home equity. That leaves them just with wages - which have gone nowhere - and other assets. Stocks are up substantially, but only the top 10% of US household has benefitted. The other 90% have flat or falling net wealth.

Without the help of the giddy US consumer, China starts to look a little peaked and perhaps nearing a crisis of its own. The Shanghai Index is trading at 44 times earnings - about where the US was when the bottom fell out of the sector.

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Meanwhile, it looks like a replay of crash is coming in the US too - this one centered on biotechs. Prices have risen more than 3 times as fast as prices for the S&P 500. Now, they are up to 5 times what they were at the last peak, just before the sell-off.

IPOs are running ahead of the last record -- again, set just as the market was melting down in 2000. As for earnings, you will have to find them yourself. Two thirds of the companies in the NBI lost money last year.

In the broad market, trailing GAAP earnings put the NYSE on a p/e of 22. That's higher than any time it's been in half a century - including 2000 and 2007.

Best advice: get out while the gittin's good.

Back at the ranch...

The ranch is divided into two parts. One in Salta Province. The other in Catamarca. We have owned it for almost 10 years, but we have never seen the part that is in Catamarca. It is a three-day horse ride. And, we've been told, there is nothing there.

Once, a couple of years ago, we showed the ranch foreman a photo taken by the Mars Rover.

"Looks just like our ranch," said Jorge. "Over on the Catamarca side. In fact, it looks better that our ranch."

That part of the ranch is a high plain between one mountain range and another. It is bone dry and at about 13,000 feet in altitude, an area known as 'the puna.' Millions of years of volcanic eruptions, wind erosion, and seismic shifts have given it look that barely seems earthly. Huge mountains. Vast deserts. Snow capped peaks surrounding gravel pits 30-miles wide. Sand dunes as big as shopping malls. Strange natural sculptures. Hot as Mercury during the day; cold as Saturn at night. Shallow lakes ...with pink flamingos in them, no less. We had never seen anything like it. We had not even imagined that it could exist. Until this weekend.

Rather than take the three days on horseback, we took three days by 4-wheel drive truck. It took one full day to wheel around the mountain range immediately to our west in order to come up in the valley beyond it. It took another day to explore the area, or at least a tiny fraction of it. The third day, we drove home.

There is only one road through this part of the puna. And only one hotel. It is a basic affair owned by the provincial government and operated by a friend of ours. It has no electricity during the day. And no heat in the rooms. Still, the staff serves a hearty meal (no selections available) in a convivial dining hall atmosphere, with a fireplace centered on the main wall. Most of the guests are European, although we saw a recent visitor had come from Washington, DC.

The only paved road runs in front of the hotel. But there is so little traffic you could take a nap in the middle of it without fear of interruption. A police station sits next door. A policeman raises the national flag at 8am. Apart from that, we saw no activity coming from the law. Also on our side of the road were a few houses, and a few lots planted in Lombardy poplar trees. The variety seems to grow well in desert oases and is used here for building and firewood.

We couldn't determine the source of the water. There must have been a spring. It dropped down through a series of canals in order to water every lot and pasture. Horses, goats, sheep and donkeys enjoyed the green grass. All were enclosed behind wire or mud fences, but we couldn't imagine that they would try to escape. No matter what direction they took, there was nothing to eat for hundreds of miles.

The wasteland began on the other side of the road - across from the hotel. There was an area of thousands of square miles with hardly a living thing.

It is almost impossible to explore the puna on your own. You will get lost. And never find what you are looking for. We hired Luis to help us find our way around.

"What we have here is an area that was very geologically active for a very long time," Luis explained as we headed out, apparently to nowhere, toward the west.

"The cordillera of the Andes is in front of us."

We studied the snow-capped peaks in the distance.

"They are mostly volcanic. Over millions of years, they erupted. The ashes fell in this area - again, we're talking about millions of years - and condensed into this pumice that covers the ground. And there, you see the shapes made by the wind eroding these pumice rocks. They look like sculptures, don't they?"

They did. Huge sculptures. As big as battle ships. With bows and windsprits grinded by the air-borne sand. There were mountains of blue-gray pumice stones, too. But these sculptures were white. Nearby were gigantic piles of what looked like sugar - but they were white pumice sand too.

Coming around a hill to get a closer look, we suddenly sank into soft sand. Even with 4 wheel drive, it looked as though we were going to be there for a long time...

"People die out here," said Luis.

More to come...

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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2 Responses to "Get out while the gittin's good!"

Sunil Doshi

Mar 30, 2015

"Two thirds of the companies in the NBI lost money last year. "
What is NBI, Sir ??


Penugonda Prabhakar

Mar 30, 2015

gold all stocks safety now raising price today saw the internet i read some problem server.

yours obediently
Penugonda Prabhakar

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